Reasons for recent rejections of applications for accreditation of representative offices of foreign companies

Since the function of accreditation of representative / branch offices of foreign companies was transferred to the Federal Tax Service Inter-District Bureau No.47 for Moscow, the number of applications for accreditation rejected for formal reasons has increased. 

Previously, whenever applications submitted for state registration contained errors or inconsistencies, or whenever any documents were missing, the State Registration Chamber of the Russian Ministry of Justice would suspend the procedure and provide a detailed response to the applicant, allowing him or her to submit a corrected set of documents and thus successfully complete accreditation formalities.

Today

• whenever there is the slightest inconsistency in the wording of provisions in the Regulation on a representative / branch office of a foreign legal entity,
• whenever documents are missing,
• whenever submitted documents are executed or translated with mistakes,

the Federal Tax Service takes negative decision about accreditation. This means that the foreign company not only needs to collect all documents again (including originals, since no documents are returned to the applicant in case of rejection), but also needs to pay the state duty of 120,000 rubles (i.e. around 2,200 euro at mid-April’s exchange rate).

Devil in the details …

During the so-called re-accreditation that lasted until April 1, 2015 and caused a lot of commotion, it was discovered that texts of the Regulation of many representative / branch offices no longer comply with the recently changed legislation. Specifically, article 22 of the Federal Law “On Foreign Investments in the Russian Federation”. Often the essence of such inconsistencies is purely in the wording in titles of sections and articles of Regulations.

Specific example: according to recent changes in legislation, Regulations now reflect types of activity and not functions of the representative office. Therefore, the name of the appropriate article must be changed. If the wording is incorrect, the tax bureau has a formal reason to reject the application for accreditation due to incompliance with legal requirements.

Another example: we were contacted by a company that chose to extend its accreditation by itself and was refused. Reason: the Regulation did not indicate the location of the parent company in the country of registration. We introduced the required corrections and successfully obtained accreditation for that foreign representative office.

If the law does not say anything – guess!

Another interesting situation that we encountered in our practice concerns foreign representative offices with expiring accreditations. The current law does not recognize a procedure such as “extension of accreditation”. Thus, essentially, representative / branch offices with expiring accreditations need to go through the procedure of primary accreditation. However, inspectors also want the set of documents to include not only the initial Resolution of a foreign legal entity to establish a representative / branch office in the Russian Federation (already submitted to state agencies at initial registration), but also a new Resolution of a foreign legal entity to extension a representative / branch office in Russia. The law does not say a word about this Resolution to extension, but inspectors still demand it. From the legal point of view, whenever accreditation is extended, the parent company of the representative / branch office must adopt a new resolution on the creation of such a representative / branch office, not extension of its activities.

We believe that the legal norm in question is not worked through and illogical, but nothing can be done – we are forced to act the way the state agency requires.

Lost in translation…

As you may be aware, all documents in foreign languages that are submitted for accreditation purposes must be translated into Russian and notarized.

Often companies, driven by the desire to economize, entrust translations to people that cannot make them correctly (even with considerable translator experience). The thing is that legal documents contain a lot of specialized terms and concepts; if they are translated by a person, who does not understand their specifics, he or she can choose the wrong synonym or completely incorrect term. And incorrect term use is incompliance with the law and another cause to reject the accreditation application. It is very important for translations to be made not just by a translator, but also a lawyer, who can correct the translation before submitting it to the notary for certification.

Considering the above, we would like to warn our clients yet another time: do not attempt accreditation by yourselves, do not economize on lawyers and translators. In the light of recent events, the wisdom “a miser pays twice” is becoming relevant as never before.