TRADERUN
MOODUL
TRADERUN
MODULE
BUSINESS PECULIARITIES IN THE EU,
RUSSIA AND
EASTERN PARTNERSHIP COUNTRIES
ÄRI ERIPÄRAD EUROOPA LIIDUS, VENEMAAL JA IDAPARTNERLUSRIIKIDES
Lecturers: Ryhor Nizhnikau (
responsible ) Giorgi Gaganidze,
Sergei Proskura, Andres Assor
P2EC.00.202 (UT
code ), RIE 7044 (TLU code)
Reading materials: Business peculiarities in Russia
Lugemismatejal: Äri eripärad Venemaal
Created by Sergei Proskura
Tartu 2013
TABLE OF CONTENTS
INTRODUCTION ....................................................................................................................................... 3
1. LEGALIZATION OF A COMPANY WITH A
FOREIGN OWNER IN RUSSIA ....................................... 4
1.1.
Laws ............................................................................................................................................. 4
1.2.
Documents for
registration of the company ........................................................................... 5
1.3.
The Head of the new company ............................................................................................... 6
1.4.
Payment of the authorized capital of the company ............................................................... 6
1.5.
Address of the company ......................................................................................................... 7
1.6.
Activities of the company ........................................................................................................ 7
1.7.
Seal .......................................................................................................................................... 8
1.8.
Branch office accreditation ..................................................................................................... 8
2.
FORMS OF INCORPORATIONS (
TYPES , PROS AND
CONS ) ......................................................... 10
2.1.
Private
Entrepreneur ............................................................................................................. 11
2.2.
Limited
Liability Company ..................................................................................................... 11
2.3.
Closed
Joint -
Stock Company ................................................................................................. 13
2.4.
Company name ..................................................................................................................... 14
2.5.
Comparison of
different forms of incorporation of
companies ............................................ 15
3.
TAXATION , DUTIES AND EXCISES .............................................................................................. 17
3.1.
The
essence of the tax system, the principles and
functions of
taxes .................................. 17
3.2.
The main taxes ...................................................................................................................... 20
3.3.
Tax rates in 2013 in Russia .................................................................................................... 22
4.
LABOUR RELATIONS (
INCLUDING IMMIGRATION LAWS) ......................................................... 25
4.1.
Entry and
stay of foreign citizens in the
Russian Federation ................................................ 25
4.2.
Types of visas for foreign citizens in the Russian Federation................................................ 25
4.3.
Migration Registration of Foreign Citizens in the Russian Federation .................................. 28
4.3.1.
The procedure for bringing the
work of
highly skilled professionals (VKS) ...................... 30
4.3.2.
Your work permits for foreign citizens arriving in Russia in the
visa -free
regime ............ 33
4.4.
Responsibility for violation of immigration laws ................................................................... 34
5. BANKRUPTCY/
CLOSING DOWN THE COMPANY ....................................................................... 39
5.1. The procedures applied in the bankruptcy ................................................................................ 39
5.2. Fictitious or deliberate bankruptcy ............................................................................................ 42
5.3.
Criminal code......................................................................................................................... 42
6. ALLOWANCES/ PERMISSIONS NEEDED, PROCEDURES TO ACQUIRE ........................................ 43
6.1. The privileges granted to foreign investors ............................................................................... 43
6.2. Excise duties ............................................................................................................................... 45
7.
ACCOUNTING ............................................................................................................................ 49
7.1 Levels of the system of accounting
regulation in the Russian Federation ................................ 49
7.2. The Federal Law "On Accounting" ............................................................................................ 51
7.3.
Chart of
accounts and
other documents .............................................................................. 52
7.4.
Russian tax system ................................................................................................................ 53
7.5.
Banking system in Russia....................................................................................................... 53
ABOUT TRADERUN
PROGRAMME ......................................................................................................... 55
2
INTRODUCTION
The
current reading
material focuses on the business peculiarities in Russia.
***
The aim of the Traderun programme course “FUNDING PROJECTS IN RUSSIA AND EASTERN
PARTNERSHIP COUNTRIES” is to provide the students with comprehensive and practical
overview of the fundraising possibilities in EU and Estonia. The course gives an overview of
EU structural support and regional implementing agencies, that are available for a
businessman to apply for a fund.
A successful student will be aware of and understand the EU fundraising possibilities in the
frames of cooperation with Russian and Eastern Partnership countries, and able to define the
financing criteria and priorities.
The current reading material summarises the main aspects covered by lectures and
structurises the information channels for the future.
The course supports the other Traderun courses, especially the course related to EU
cooperation with Russia and Eastern Partnership Countries.
3
1. LEGALIZATION OF A COMPANY WITH A FOREIGN OWNER IN RUSSIA
Today the investment attractiveness of Russia is very high. In
addition to the
dynamic pace
of
development of the
economy , Russia
offers to foreign investors increasing every
year the
market of
goods and
services to consumer and business. Most often, this together with the
high
rate of
return on invested capital is a crucial
factor in the
decision to enter the Russian
market.
One possible way to
full implementation of business activities on the territory of the Russian
Federation - is the
creation of a
legal entity.
An enterprise with foreign capital - is created on the territory of the Russian business-
organization whose founders are foreign citizens or
organizations . Russian
legislation provides for the
establishment of
enterprises in Russia as a 100-
percent foreign ownership
and joint - with the participation of Russian and foreign shareholders.
Established on the territory of the Russian Federation entity with absolute or partial foreign
ownership will operate
within the
framework of the Russian legislation. That is, the laws of a
foreign
investor is limited to a
choice of the legal form of the enterprise, defined deadlines
for accounting and tax reporting
rules for transactions and other mechanisms for
making and
processing of business transactions.
Forms of organization of business organizations:
Public joint-stock company (otkrytoe akcionernoe obshchestvo, OAO).
Private joint-stock company (zakrytoe akcionernoe obshchestvo, ZAO).
Limited liability company (obshchestvo s ogranichennoj otvetstvennost'ju, OOO).
Association and
others .
1.1. Laws
The main laws
governing the establishment and
operation of organizations in Russia (as with
foreign capital, as
without foreign capital)^
Civil Code, from 30.11.1994 № 51-FZ (the last version of 11.02.2013)
Companies Act, of 26.12.1995 № 208-FZ (the last version of 05.04.2013)
The Law on Limited Liability Companies, from 08.02.1998 № 14-FZ (the last version
from 29.12.2012)
On state registration of legal entities and
individual entrepreneurs, from
08.08.2001 № 129-FZ (as last amended on 29.12.2012)
4
1.2.
Documents for registration of the company
In
order to
register a company with foreign capital in Russia, it is
necessary to
carry out the
whole range of legal
actions that you want to implement Russian citizens in the registration
of legal entities without foreign participation. In addition,
there are some nuances
associated with the
special status of foreign shareholders.
To register a company with foreign capital must provide an expanded list of documents
compared with a
package of documents necessary for the registration of organizations with
Russian capital.
Consider the example of a package of documents on registration of a limited
liability company (LLC).
If the founder are individuals:
Document confirming payment of state
duty for registration of a limited liability
company, 4000 rubles (≈ EUR 100);
Decision on the establishment of the founders LLC (Minutes of the founders);
Application for state registration of the LLC in the form approved by the
Government of the Russian Federation (includes registered office of creating
company);
Charter Company (
Memorandum and
Articles of Association);
List of participants of the company, if the participants more
than one;
Notarized
translation of the passport (
identity card) in Russian, made in Russia (not
in a foreign
country );
If the
residence of a foreign
citizen in a foreign country is not listed in the passport,
certified translation of the document confirming the address of permanent
residence, the Russian
language , made in Russia (not in a foreign country).
If the founder are the legal entities:
Document confirming payment of state duty for registration of a limited liability
company, 4000 rubles (≈ EUR 100);
Decision on the establishment of the founders LLC (Minutes of the founders);
Application for state registration of the LLC in the form approved by the
Government of the Russian Federation (includes registered office created Ltd.);
Charter Company (Memorandum and Articles of Association);
List of participants of the company, if the participants more than one;
Copy of the document confirming the state registration (
Certificate of
Incorporation or
equivalent );
An extract from the commercial register (or its equivalent), which contains
information about the foreign legal entity;
5
Notarized translation into Russian of the listed documents, made in Russia (not in a
foreign country);
Certificate from the
bank about the
account to confirm the investor's
ability to pay;
Certificate on tax number in the country of non-
resident ;
Power of
attorney for the
person responsible for signing the necessary documents
for opening accounts and registration of the LLC with foreign investments.
The
above documents is not
complete ,
since the registration of companies with 100%
foreign ownership and equity participation, there are some differences (other than the
contents of the package of documents depends on the list of founders of the legal entity).
We should also
focus on
such features of the Russian legislation:
1.3.
The Head of the new company
In Russia adopted the
basic name of the head - "General
Director " (CEO) (mostly used) and
the "Director". Appointment of Head of the newly created company - at the time of
registration of the legal entity they must necessarily be a citizen of Russia. If the founders
originally planned this way, and with the continued activities of the company will not have
any problems. But if it is assumed that the
firm created should be headed
alien , after its
state registration must be registered at the
Employment Center and get the
permission of
the Federal Migration
Service on the
admission of foreign
workers (
both the company and its
future foreign director).
Appointment to the post of Director-foreigner immediately
upon creation of the company,
without obtaining permission mentioned, is a gross violation of immigration laws. Permitting
Federal Migration Service is a very complicated procedure, which will be discussed in Lecture
4.
1.4.
Payment of the authorized capital of the company
For different
organizational forms of companies have different
terms of payment of the
authorized capital. For a limited liability company 50% of the
share capital must be
paid up
to the
date of state registration of the company. The remaining
part must be paid within 1
year from the date of incorporation. For the company (Public joint-stock company or Private
joint-stock company) 50% of the share capital must be paid no
later than 3 months from the
date of state registration of the company. The remaining part must be paid within 1 year
from the date of incorporation. Payment of the authorized capital can be made both in
cash and
assets of the founders.
6
Payment of the authorized capital up to the moment of state registration of the company
made the
following ways :
money - by opening a temporary bank account from which you made after the
registration of the founders of the money is transferred to the main account of the
company;
estate - by transferring the property to the Head of the company (CEO) under the
act temporarily, and after checking company founders made by the head of the
property is transferred by an act of the company.
1.5.
Address of the company
The law does not
require documentary
evidence of the
location of the enterprise (exact
address) in the territory of Russia in his account, but later on, in the course of business, the
company will need to have the document on the
basis of which its registration is made at a
specific address specified in the statute.
Such a document can be:
certificate of ownership of any non-
residential premises
lease office (
production ) of non-residential premises (
usually with a copy of the
certificate of ownership of the lessor's premises);
Registration is also possible at the address of permanent residence (residence registration)
on the territory of St. Petersburg and the
Leningrad region of its head (CEO).
The tax authorities have the right to inspect the actual location of the company at the
address specified in the statute. In the absence of registration at the company
could be
fined in the
amount of 5,000 rubles (≈ EUR 120).
Most often, the
fact of being the company's registered address is checked by
banks , customs
authorities and leasing companies.
However , a recent
increase in the address verification by
the
security services of
major Russian companies with state participation. For major tenders
for the
supply of goods or services for the implementation of large companies such checks
can be carried out in
secret .
1.6.
Activities of the company
Any commercial organization in Russia may
engage in any
activity that is not prohibited by
law. Of the individual activities
required to obtain licenses (for example, passenger
transport, trade in
alcohol ,
mining , educational activities). Main activities of the company
are declared at check-in and
specify the unified state register of legal entities. Moreover,
there is the
concept of "core business". The main
purpose - to determine the amount of the
premium social security of workers.
7
In the future, you can
change as many
times as the main activity. The procedure for
changing it
takes a
period of 7
days and require the payment of the state fee of 800 rubles (≈ EUR 80).
Each activity is indicated by the statistical software. Full list of
states in the classifier NACE
(National Classification of
Economic Activities) (in Russian transcription is “OKVED”).
It is always desirable to specify the exact name of the activity in
accordance with the
qualifier that there was no refusal to register the company on
formal grounds .
1.7.
Seal
Every commercial organization in Russia is
bound to have a
round seal. Seal is not registered
anywhere,
manufacture seals deal with a lot of companies - enough to
express your wishes,
and you manufacture any seals. A reprint of a round seal is required at the bank and the
customs authorities. The company also has the right to have an unlimited amount of any
stamps and use
them on your own. However, all the basic documents of the company must
be certified by a round seal it. For example, the notary does not notarized document without
the round seal.
1.8.
Branch office accreditation
It is necessary to distinguish the creation of companies with foreign investments from the
opening of a branch office accreditation of a foreign legal entity in Russia. This branch - is a
separate subdivision of a foreign legal entity located
outside of its location and performing
all or part of the functions, including the
function of representation. Registration is
done by a
branch of its accreditation in the
manner determined by the Government of the Russian
Federation. The branch is
considered to be accredited if the information on it is listed in the
state register of branches of foreign legal entities.
Stages of registration of the company with foreign capital:
1. Founders are
holding a
meeting of the founders,
develop bylaws, sign the
necessary documents (minutes of the meeting and the Articles of Association).
2. The head of the notary signs the application for registration of the company.
3. The founders (one or all at
once )
issues the power of attorney to the representative
of conducting to supply and
delivery of documents to the tax office.
4. Founders paid registered capital in cash or property.
5. Any person (the head of the company (CEO), the founder of the company or a
representative by the power of attorney) pay the state fee for registration of the
company.
6. The representative of the founders of the company passes to the tax office all
documents for the registration of the company.
8
7. Federal Tax Service carries out the state registration of the legal entity. Carried out
simultaneously with the registration of tax registration, obtaining codes of State
Statistics
Committee , registration with the
Pension Fund, the Social
Insurance Fund
and the Fund of obligatory
medical insurance.
8. The representative of the founders of the company receives the documents after
registration.
9. The head of the company (CEO) or a representative of the
proxy opens a bank
account.
After committing all of
these activities, the company is a registered business entity, and may
work legally.
Some of the timelines:
Registration with the Tax Authorities 5-7
working days
Company Seal production 2 working days
Registration with the State Statistics Committee, with the non-budgetary funds
(Pension Fund, Social Insurance Fund, Obligatory Medical Insurance Fund) is done
by the tax authorities
Opening of bank accounts depends on the bank
Registration with the Federal Service for Financial Markets of
shares emission 30
working days
Limitations of foreign participation
There are features and limitations of participation of foreign investors in Russian companies.
Such features are set for the banking and insurance activities in these areas, the state
provides certain restrictions for foreign investors. There is also a restriction on the
purchase of shares by foreign investors, the largest Russian companies with state capital (
Gazprom ,
Rosneft and others).
9
2. FORMS OF INCORPORATIONS (TYPES, PROS AND CONS)
Starting your own business, it is
important to
choose the
best form of incorporation of the
enterprise. Currently in Russia there are different forms of business enterprises as well as
private enterprise. This lecture will address the most common form of the creation of the
business, as well as a
brief description of all existing forms of incorporation of companies in
Russia.
Key used form of business organization in Russia:
Individual Entrepreneur (individual’niy predprinimatel, IP);
Limited Liability Company (LLC) (obshchestvo s ogranichennoj otvetstvennost'ju,
OOO);
Closed Joint Stock Company (CJSC) (zakrytoe akcionernoe obshchestvo, ZAO).
Each of these forms has advantages and
disadvantages .
Selection of a
particular form of
incorporation of the enterprise depends on many different factors. The set and the
effect of
these factors are different for different types of businesses.
For example,
before the start of the business may have some
questions :
Do you like independence?
Do you want to start a business with
someone else ?
Are you willing to provide a large document in the company?
Are you
going to buy large quantities of goods on
credit ?
Are you able to independently make the required amount of capital?
As is often the
case , you may
find that your answers suggest
several possible solutions. You
will also, eventually, will have to choose the best form of incorporation of your company.
The answers to the above questions may
lead to the following conclusions:
You have decided to conduct a joint business activities. Do you want to start a
business with someone else, then you should think about the Closed Joint Stock
Company or a Limited Liability Company.
Your
sales activity is associated with a
greater risk, it may be
wise to think about
the Closed Joint Stock Company.
If you
cause difficulty maintaining the register of shareholders and additional
reporting on the shares, you should choose a Limited Liability Company.
You are going to buy large quantities of goods on credit, then it is better to
choose a Closed Joint Stock Company.
Some of the findings may
seem contradictory. All the
same , the
final selection of the optimal
variant is
yours . It is necessary to analyze the pros and cons.
10
First , try to understand what
lies behind the
term "Private Entrepreneur":
2.1.
Private Entrepreneur
Private Entrepreneur - is a natural person who is engaged in business activities
independently.
NB! Private Entrepreneur can only be a citizen of Russia, so in the context of this lecture,
this form of business is irrelevant. However, some consider this form.
Private enterprise has its advantages:
a minimum of organizational formalities;
a minimum of accounting documents;
economic independence;
there is no need to make share capital (at registration is not required).
The main disadvantage of an Private Entrepreneur is that it is liable for its obligations with all
its assets.
Serious problems can
arise from a private owner in the event of his
illness or
absence from. If not pre-think the
issue may be in trouble.
Now let us consider
another legal form of the enterprise - the limited liability company:
2.2.
Limited Liability Company
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