Financing Startups in Russia

Usually the start-up phase is financed via inter-company financing. There is an essential difference between a subsidiary company and the branch office or representative office. The difference is twofold, related to currency control and to tax and legal matters.

From a currency control point of view, the branch office and representative office are not complicated. One can transfer any funds back and forth between the head office abroad and the Russian branch or representative office, since the head office and Russian branch/representative office are the same legal entity. The transfer is therefore within a foreign entity and not subject to currency control. It is not only less paper work, it also goes rather quickly, since the Russian banking system is high-tech. There are significant differences relating to a subsidiary, however, since it is a Russian legal entity and thus the transfer from abroad is subject to currency controls. The bank has several working days to check the documents (the previously mentioned passport of the deal). If something is wrong in the documents and they are not submitted immediately in the corrected form, the money might be returned.

To read the full version of this article, please download the inaugural issue of Russia Briefing, which can be found in the Asia Briefing Bookstore. Companies requiring assistance may contact Dezan Shira & Associates at russia@dezshira.com for advice or visit www.dezshira.com.