Russian Federation: Foreign Investments In Russian Companies And Businesses

Foreign Investments in Russian Companies and Businesses

Current Russian legislation is intended to encourage foreign investments in Russian companies and businesses, and otherwise to promote the use of foreign assets in Russia. For example, certain customs and tax relief are available to foreign investors making financial contributions to Russian companies and bringing assets into Russia for use by a foreign company's branch operations in Russia. Additionally, in some instances, customs duty may not be charged on certain foreign assets (e.g., basic production assets) brought into Russia, provided that the assets (i) are not under excise taxes, (ii) are for purposes contemplated by, and set forth in, the corporate founding documents, (iii) are brought into Russia within the time period prescribed in the corporate founding documents, and (iv) shall not be sold or otherwise alienated to a third party after delivery to Russia.

A foreign investor may invest in an existing Russian company or may establish a Russian company itself, and the company may be owned either partially or wholly by one or more foreign investors. Companies with foreign capital may take a variety of forms, including the traditional corporation or partnership, or some other economic corporate entity. The precise forms of the companies permitted in Russia, and each of their characteristics, are governed by the Russian Federation Civil Code and other Russian legislation, and shall be the topic of further "Mondaq" Website articles.

A company with foreign capital must be registered with the State, although the place of registration will depend on the amount of foreign capital invested. If the foreign share ownership exceeds 100,000 rubles (or approximately USD $5,000 at the current exchange rate), the company must be registered with the State Registration Chamber at the Ministry of Justice in Moscow. If the company ownership is less than 100,000 rubles, the company must be registered with the state registration authorities within the relevant state or territory where the company is domicile. For example, a St. Petersburg company must be registered with the Registration Chamber in St. Petersburg.

In any event, regardless of the amount of foreign capital involved, the registration process shall be completed by the relevant authorities within 21 days of receipt of the registration application. At present, the registration fee in Moscow is 334 rubles (or approximately USD $17.00) and in St. Petersburg, 417.50 rubles (or approximately USD $21.00).

The foreign company must be registered with the State Tax Service within 10 days after being registered with the Registration Chamber, failing which the company will be fined 5,000 rubles (or approximately USD $250.00), as well as with a number of compulsory state funds, including the Pension Fund, the Compulsory Medical Insurance Fund and the Social Insurance Fund. These various registrations normally may be completed within one to two weeks.

In addition to the registration fee referred to above, the other fees for establishing a foreign company in Russia will include:

i. a fee of 62 rubles (or approximately USD $3.00) for registering the company with the State Statistics authorities;

ii. a fee of 300 rubles (or approximately USD $15.00) for certifying two sets of the corporate founding documents, one set to be provided to the State Tax Service and the other set to be provided to the bank when opening a bank account);

iii. a fee of 83.50 rubles (or approximately USD $4.15) for the signature of each person identified on notarized bank cards which list the persons with authorized access to the company's bank account;

iv. a fee of 300 rubles (or approximately USD $20) for making the company seal or stamp; and

v. a possible charge for opening the company bank account which can be upwards to 1,000 rubles (or approximately USD $50.00).

In order for a foreign company to open a branch office in Russia, authorization must be obtained from the State Registration Chamber. The authorization is issued for a limited period of time, although not more than three years, with the right to apply for an extension of time at the end of the authorized period. The fee for a foreign company opening a branch office in Russia is 41,000 rubles (or approximately USD $2,050.00).

A company with foreign capital in Russia must comply with the Russian regulations governing bookkeeping standards and principles, although if the foreign investor so wishes, the bookkeeping can simultaneously be conducted according to the standards and principles applied in the country of the foreign company's residence.

Finally, while Russian legislation is intended to advance foreign company ownership and investment in Russia, the State is empowered to impose certain restrictions on the ownership and investment by statute or presidential decree, although all other restrictions shall be considered to be invalid.

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.

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