Russia has introduced amendments to certain legislative acts, namely Law No. 106-FZ. This impacts foreign companies in the Russian Federation.
Re-accreditation of foreign branches and representative offices
Foreign companies' branches and representative offices that were accredited and were running operations based on a permit to establish offices in the Russian Federation, and whose accreditation does not expire before 1 April 2015, must undergo re-registration with authorised federal authority.
If they do not, the accreditation of branches and representative offices or the permit to open representative offices of foreign legal entities (except for offices of foreign credit institutions and foreign legal entities operating in the area of civil aviation), terminates on 1 April 2015. This means the relevant branches and representative offices lose the right to operate on Russian territory from that date.
The issue of whether this leads to their automatic liquidation or other negative consequences is still undecided. We will continue monitoring this issue and keep you informed.
According to the law, the State Registration Chamber is liquidated and the authorised federal authority in charge is tax inspectorate No. 47 of the Federal Tax Service of Russia for Moscow (the 'Accrediting Body'). For branches and representative offices of foreign companies operating in the area of civil aviation, the Accrediting Body is the Federal Air Transport Agency (Rosaviatsiya), and for branches and representative offices of foreign credit institutions opened in the territory of Russia, the Accrediting Body as well as the authority accrediting foreign nationals being employees of such a representative office is the Bank of Russia.
The Law of the Russian Federation dated 7 July 1993 No. 5340-1, 'On Chambers of Commerce in the Russian Federation ('CC RF'), was supplemented with the provisions that CC RF shall perform personal accreditation of foreign nationals who are employees of branches and representatives offices of foreign legal entities where the purpose and activities of those entities are of commercial nature and may represent foreign legal entities in accreditation of branches, representatives offices thereof. This does not include foreign nationals who are employees of representatives offices of foreign credit institutions and representatives offices of foreign legal entities that operate in the area of civil aviation.
A branch or representative office of a foreign legal entity may engage foreign nationals within a number mentioned in the Register and those who are granted personal accreditation certificates.
New rules for accreditation
The main changes related to the terms and procedure for state accreditation of branches and representative offices of foreign legal entities were made in the Federal Law dated 9 July 1999 No. 160-FZ 'On Foreign Investments in the Russian Federation'. The changes provide that a foreign legal entity which has decided to establish or open a branch of representative office in Russia shall file an application for accreditation with the information certified by the CC RF on the number of foreign nationals being employees of the branch or representative office, and other documents required for the accreditation of the branch or representative office to the Accrediting Body within 12 months after the date of such a decision.
A uniform term is provided for the Accrediting Body to make the decision on accreditation of a branch, representative office of a foreign legal entity or on refusal thereof: no more than 25 business days after filing the application for accreditation and necessary documents. The accreditation of a branch of representative office of a foreign legal entity may be refused on any of the following grounds:
- failure to submit documents required for the accreditation or late submission thereof (upon expiry of the 12 month period after the decision), or non-compliance of the documents submitted with the form, format or requirements established
- invalidity of information contained in the foundation or other documents of a foreign legal entity
- contradiction of the purposes of a branch/representative office to the Constitution of the Russian Federation, international treaties of the Russian Federation, laws of the Russian Federation, or threatening nature thereof to the sovereignty, political independence, territorial integrity, national interests of the Russian Federation
- termination of the accreditation of a branch or representative office due to a gross violation of the Constitution of the Russian Federation, international treaties of the Russian Federation, laws of the Russian Federation, and entry of the relevant records in the state register of accredited branches, representative offices of foreign legal entities (the 'Register').
- Upon making entry in the Register on the accreditation, as well as on changes in the information on or termination of the accreditation of a branch and representative, the Accrediting Body:
- within 3 business days shall send in electronic form such information to the state off-budget funds for the registration or de-registration of the branch or representative office
- within 5 business days shall issue or send to the accredited branch or representative office a document certifying the relevant entry in the Register.
What does it mean in practice?
These amendments to the Law No. 106-FZ unify the basic rules and terms for state accreditation of branches and representative offices of foreign legal entities (including representative offices of foreign legal entities operating in the area of civil aviation) and provide the obligation on applying to the Accrediting Body for entering information on such branches and representative offices to the Register not later than 1 April 2015.
On a separate note we want to highlight that the issue related to obligation of the branches and representative offices of the foreign companies to submit activity reports is still pending. At the present time this responsibility is not provided by any legal act, but that does not mean it will be effected in the near future. We will continue monitoring this issue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.