General legal statuses
The Russian investment legislation gives to foreign firms ample opportunities for capital investments in the Russian enterprises and creations of own affiliated structures. The foreign companies have the right to create 100% subsidiaries in the territory of Russia and also to get up to 100% of share in the existing state and private enterprises.
For creation of subsidiary the foreign companies have to choose its legal form. As a rule, most often the foreign companies at entry into the market in Russia choose LLC (Limited liability Company) or JSC (Joint-stock Company). Such forms as Limited partnership or Full association are less often used.
Mainly, for creation of the enterprise from 100% of shares of the foreign capital, choose Ltd company as this form the simplest in creation and management in difference from the joint-stock company or Association. The joint-stock company is created in the form of the non-public or public joint-stock company which creation and functioning is complicated by respect for obligatory norms of the Central Bank. However, the non-public joint-stock companies most conveniently for creation of joint ventures as there are certain restrictions on an exit of the participant from society or sale of the share.
For studying of the market, search of partners or implementation of any temporary projects the foreign companies open in Russia also the representations or branches.
Limited liability company
The Ltd company is legal entity, i.e. independently performs the rights and duties, from own name signs contracts and does not answer on debts of the society which founded him or the citizen.
Participants in Ltd company bear limited liability on debts of society within the contributions to society made by them. The number of participants cannot be more than 50. The Ltd company can consist of one participant. The minimum authorized capital is 10.000 rubles (apprx. 100 Euros). Constituent documents is the charter of society.
The supreme body of management is the general meeting of participants of society, the board of directors of society (supervisory board) and also executive bodies is in addition provided: CEO and board.
As a rule, in subsidiaries of the small and medium-sized foreign companies the board of directors is not created, decisions are made directly by participants of society, and operational activity is carried out by the CEO who by the Russian legislation can be only one in society.
The law on Ltd company unlike the joint-stock company grants to participants the right to leave at any time society and at the same time to receive the share which is defined proceeding from the current cost of assets of the company.
Society has the right quarterly, time in half of year or times a year to share net profit among the participants.
Order of registration of the Russian society
Society is capable from the moment of its state registration. Registration of legal entities in Russia is carried out by tax authorities in the society location. Registration term under the Law on registration of legal entities is 5 working days. After registration society has the right to make the press of society and to open bank accounts for business.
The following documents are necessary for registration:
– statement for creation of society
– constituent documents of society
– decision on creation of society
– the copy of an extract from the trade register of the founder – the foreign company
– receipt on payment of the state fee of 4000 rubles.
Documents which were made abroad demand the corresponding apostilization (legalization) in public authorities of the foreign state.
Thus, the procedure of creation of the enterprise in Russia is rather simple and does not demand considerable time and financial expenditure.
Investments into the Russian enterprises
The Russian tax and investment law became much more liberally in relation to foreign investors in recent years. The foreign companies have the right to get shares in the state and municipal enterprises (exceptions make military-industrial, space industries and the enterprises of natural monopolies: power, railroads). Restrictions for foreign investors remain in the field of banking, insurance, aviation, mining industry so far.
In other fields of the industry as mechanical engineering, textile, food, electronics, etc. foreign investments are welcomed.
The tax law allows regional and local authorities to establish tax benefits. They can extend as to all enterprises which are located in the region, and concerning the concrete enterprise which activity falls investment privileges are provided in the list of the most attractive types of the industry for which (for example, electronics or automotive industry).
According to the Federal law “About Foreign Investments in the Russian Federation” of July 9, 1999 N 160-FZ the foreign investor has the right to carry out investments in the territory of the Russian Federation in the way:
– individual share in the organizations created together with the Russian legal entities or citizens;
– creations of the organizations which are completely belonging to foreign investors, branches of foreign legal entities;
– stock acquisition, share, shares and other securities;
– acquisition of other property rights and implementation of other activity which is not forbidden by the current legislation.
The specified Law also defines that the legal regime of activity of foreign investors and use of the profit got from investment cannot be less favorable in comparison with the Russian investors, except for the following withdrawals:
– withdrawals of restrictive character can be established by federal laws only for protection of bases of the constitutional system, morality, health, the rights and legitimate interests of other persons and safety of the state;
– withdrawals of the stimulating character (privileges for foreign investors) can be established only for the benefit of development of the Russian Federation.
The law “About Foreign Investments into the Russian Federation” provided also guarantees which provides the state to foreign investors, for example such as
– the legal regime of activity of foreign investors cannot be less favorable, than a legal regime of activity of the Russian investors if other is not established by laws;
– free use of profit after payment of all necessary taxes for reinvestment;
– free export out of borders of the Russian Federation of property and information which are originally imported into the Russian Federation as foreign investment;
– the ban on compulsory withdrawal of property, including nationalization and requisition, except the cases established by the law;
– protection against unfair actions (inaction) of public authorities;
– acquisition of property, shares or stocks of the state and municipal enterprises according to acts of the Russian Federation;
– participation in privatization of the state and municipal enterprises according to acts of the Russian Federation;
– acquisition of the land plots in Russia according to acts of the Russian Federation;
– protection of investment projects against adverse change of the tax or customs legislation, however not longer than for 7 years from the moment of financing.
Besides, the Russian legislation according to the Law “About Special Economic Zones” provides to certain territorial areas particular tax and customs regulations which work within this area.
Taxation and accounting
The Russian tax law, as a rule, has no distinctions in particular of taxation of society with the foreign capital or purely Russian society. The feature is in the basic that Russia concluded with a number of the countries including with Germany, agreements on avoidance of double taxation. This agreement, as a rule, works for company income tax, the property tax of the enterprise, income tax from natural persons and the property tax of natural persons.
Societies, thus, have to pay the following main taxes:
• Income tax. The profit of society is assessed at the rate of 20%.
• Dividends which society pays to the participant – the foreign company – 15%.
• A tax on property – max. 2.2%. The concrete rate is established by the regional legislation.
• A value added tax – 20%. For a number of food products and children’s goods and literature a VAT rate – 10%.
• Income tax about natural persons and social payments. The society having workers in the state is obliged to levy income tax on the salary of the worker and to transfer into the budget. For the Russian citizens and foreign citizens of residents of the Russian Federation (who are over 183 days in a year in Russia) a rate of 13% for foreign citizens who are less than 183 days in a year in Russia – 30%.
Since 2010 taxpayers employers pay assignments from the salary sum separately to each state non-budgetary fund – the Pension Fund of the Russian Federation, Social Insurance Fund of the Russian Federation and Funds of obligatory medical insurance of the Russian Federation.
Receipts in the Pension fund make 22%, 2.9% in Social insurance fund, 5.1% in Funds of obligatory medical insurance.
• Excises – depending on excise goods. To excise goods belong: alcoholic products, tobacco products, jewelry, cars, gasoline and oil products and also oil and gas.
• Customs duties. Are defined on the basis of the customs tariff.
• Land tax. The tax rate is established by the local legislation.
Society is obliged to provide quarterly tax reports and also upon termination of a year the balance sheet and the profit and loss report.
Accounting of societies is kept according to the Federal law of 21.11.1996 No. 129-FZ “About accounting”. Accounting is kept by society continuously from the moment of its registration before reorganization or elimination. Conducting accounting of property, obligations and economic operations is carried out by double record on the interconnected accounts of accounting (an asset and a passive).
Audit
Societies with the foreign capital are obliged to book obligatory audit in case society is credit institution, insurance company or society of mutual insurance, commodity or stock exchange or investment fund and also if total revenue in one year exceeds 400 million rubles or the sum of assets of balance exceeds for the end of reporting year in 60 million rubles.
Acquisition of real estate by society
Society with participation of the foreign capital has the right to get real estate (buildings, rooms, the land plots) in Russia in property. At the same time it is necessary to consider that these transactions demand the state registration. Restrictions in acquisition of the land plots for the foreign organizations or the Russian organizations with foreign participation are established by the Russian laws. The following restrictions are provided:
– the organizations with participation of the foreign capital have the right to rent more than 50% of the agricultural land only for a period of up to 49 years (Law “About Land Turnover of Agricultural Purpose”);
– the foreign organizations are forbidden to get the land plots in border regions of Russia (The Land code of the Russian Federation).
from Andrey Nikishenko, 2019