What to register – a foreign representative office, a branch or a subsidiary?

Foreign companies are free to operate in Russia and compete with local businesses.

If you are planning to work in Russia, you will first need to decide upon your legal form.

This page sheds light on similarities and differences between foreign representative offices, branches and subsidiaries.

Your choice of legal form will determine:

Fast facts

  • 1

    Representative office

    Business unit of a foreign legal person located away from its principal place of business and representing its interests.

    The representative office is controlled by the parent.

  • 2

    Branch

    Subdivision of a foreign company which performs all functions, including revenue generation from commercial activity.

    The branch is controlled by the foreign enterprise.

  • 3

    Subsidiary

    Independent legal entity which owns separate assets and is liable for its debts to the full extent of its property. Its operations are designed to generate profit.

    The subsidiary is controlled by its shareholders.

The business activities of representative offices and branches are not subject to exchange controls. Withdrawals follow a simplified procedure.

In the course of everyday business activity, exchange controls apply to remittances to and from the subsidiary.

Tax treatment

  • Corporate taxes
  • Payroll-related costs
Corporate income tax VAT Property tax
Representative office/branch 20 % 18 % 2,2 %
Subsidiary 6—20 % 0—18 % 2,2 %

Representative office/branch:

  • Corporate income tax: 20 %
  • VAT: 18 %
  • Property tax: 2,2 %

Subsidiary

  • Corporate income tax: 6—20 %
  • VAT: 0—18 %
  • Property tax: 2,2 %
Transportation tax

applies in the case of vehicle ownership and is computed according to the guidelines established by Article 359 of the Russian Tax Code.

Treatment of representative offices/branches:

  • The profit is exempt from tax and freely available to the parent. Intra-group transfers are not subject to taxation.
  • The landlord is exempt from VAT on real estate rentals within the Russian Federation to foreign organisations accredited in Russia.

Treatment of subsidiaries:

  • Special tax benefits are available if the foreign company’s share does not exceed 25%.
  • Profit is available to shareholders via dividend payouts taxed at 15%.

Insurance funds

Foreign employee temporarily staying in the Russian Federation

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 1,8 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %
  • Compulsory medical insurance fund (FOMS): 0 %

Foreign employee staying on a HQS visa*

  • Social Insurance Fund (FSS) — Injury: 0,2 %

Temporarily resident foreign employee

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 2,9 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %
  • Compulsory medical insurance fund (FOMS): 5,1 %

Temporarily resident HQS*

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 2,9 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %

Permanently resident foreign citizen

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 2,9 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %
  • Compulsory medical insurance fund (FOMS): 0 %

Permanently resident HQS*

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 2,9 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %

Employee who is a Russian national

  • Pension fund (PF): 22 %
  • Social Insurance Fund (FSS) — Sickness/motherhood: 2,9 %
  • Social Insurance Fund (FSS) — Injury: 0,2 %
  • Compulsory medical insurance fund (FOMS): 5,1 %
Employee status Pension fund (PF) Social Insurance Fund (FSS) Compulsory medical insurance fund (FOMS)
Sickness/motherhood Injury
Foreign employee temporarily staying in the Russian Federation 22 % 1,8 % 0,2 % 0 %
Foreign employee staying on a HQS visa* 0,2 %
Temporarily resident foreign employee 22 % 2,9 % 0,2 % 5,1 %
Temporarily resident HQS* 22 % 2,9 % 0,2 %
Permanently resident foreign citizen 22 % 2,9 % 0,2 % 0 %
Permanently resident HQS* 22 % 2,9 % 0,2 %
Employee who is a Russian national 22 % 2,9 % 0,2 % 5,1 %
* HQS – Highly Qualified Specialist: a foreign citizen with work experience, skills or achievements in a specific field and a monthly salary of 167,000 roubles or above.

Taxes borne by employees

Employee’s tax status Personal income tax (NDFL)
Resident* 13 %
Non-resident** 30 %

* Tax resident – stays in Russia for over 183 calendar days in 12 consecutive months ** Non-resident – stays in Russia for less than 183 calendar days in 12 consecutive months


Client Club

Accounting

Representative office / branch

  • Annual report on the activity of foreign companies
  • Сorporate income tax return (foreign companies)
  • VAT return
  • Property tax declaration
  • Report on average staff employed
  • 2-NDFL personal income tax report
  • Pension fund report (RSB-1)
  • Social insurance fund report (4-FSS)

Subsidiary

  • Balance sheet
  • Income statement
  • Statement of changes in equity (for large corporations)
  • Cash flow statement (for large corporations)
  • Report on proper use of funds received (for large corporations)
  • Footnotes to the financial reports
  • Сorporate income tax return
  • VAT return
  • Property tax declaration
  • Report on average staff employed
  • 2-NDFL personal income tax report
  • Pension fund report (RSB-1)
  • Social insurance fund report (4-FSS)
Representative office / branch Subsidiary
Annual report on the activity of foreign companies
Balance sheet
Income statement
Statement of changes in equity for large corporations
Cash flow statement for large corporations
Report on proper use of funds received for large corporations
Footnotes to the financial reports
Сorporate income tax return (foreign companies)
Сorporate income tax return
VAT return
Property tax declaration
Report on average staff employed
2-NDFL personal income tax report
Pension fund report (RSB-1)
Social insurance fund report (4-FSS)
Total: 8 reports 10 (13) reports
More on accounting services

Process and Time to Completion

Representative offices / branches

Accreditation of a representative office or branch on Russian territory:

  • – full legal support
  • – preparation and submission of documents to the Interregional Tax Office №47 in Moscow
  • – registration with Pension Fund, Social Insurance Fund, Rosstat
  • – opening a bank account
  • – supplying a company seal
from 130,000 roubles
Registering employees with the Chamber of Commerce and Industry (up to 4 people) 15,000 roubles / person
Registering employees with the Chamber of Commerce and Industry (from 5 people) 10,000 roubles / person

Time to completion: up to 30 working days

Subsidiaries

Still have questions? Please, contact us ;)

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