Op/Ed by Natalia Galdeskaya, Olimpline Consulting
Each legal entity or foreign company operating in international markets knows that effective management and correct financial administration are key to successful business operations. Audit is an independent inspection of bookkeeping and financial reporting aimed to provide a professional report on its accuracy. Continue reading…
Russia’s Prime Minister, Dmitry Medvedev has stated in a report to the State Duma that he wishes the Russian economy to be driven by SME’s, stating that “Small enterprises currently account for a little under 20% of the country’s economy. This figure should be at least 50%, as in other developed economies. This is the main goal, and, of course, it requires new tools.”
The Russian economy is expected to grow this year at a rate of about 2% following three years of recession caused in part by Western sanctions placed upon it, wiping out nearly all trade with Europe.
The Supreme Eurasian Economic Council, the Governing body of the Eurasian Economic Union met in Bishkek on Friday, with Russian President Vladimir Putin stating that mutual trade volume of the EAEU states had increased 38% YoY, while exports from the EAEU were up 37%.
He stated “I should note that the cooperation within the EAEU is successfully developing as together we’ve achieved certain results in the formation and strengthening of the large common market with general rules for economic operators. The EAEU common market has worked as a safety cushion despite the costs related to the global unfavorable environment, and the economies of the EAEU member-states have managed to adjust to new realities. What I think is most important is that the structure of export-import operations has substantially improved, and the share of commodities in 2016 trade dropped while the share of cars, transport vehicles, as well as food and agriculture producers rose.”
Luc Jones, a Partner with the Antal recruitment practice in Moscow, has just published the third edition of his guide to living and working in Russia, the archly titled “Why Russians Don’t Smile“.
The book, which runs to 174 pages, contains nineteen sections dealing with everything from etiquette to language to entertainment, with a lot of detail about how best to operate within a Russian business environment. A selection of tips:
- Don’t arrange business meetings before 10am. Russians do breakfast at home.
- Business Russians generally don’t drink vodka at lunch.
- Don’t believe everything you’ve read in International media about Russia.
- Do arrange business cards, and preferably with a Russian translation on one side.
- It can be considered bad luck to shake hands across a door entrance. Do in inside.
- Always give an odd number of flowers. Even numbers of flowers are for funerals.
- Business attire is conservative. Black suit, white shirt. Leave pink in the wardrobe.
- Russians use two names, their full and shortened, and they may not appear similar.
- Russians buy expensive. Mark ups on luxury brands are often higher than in Europe.
- Russia is often considered a terrible place to do business but a great place to make money!
Op/Ed by Natalia Galdeskaya, Olimp Consulting
Establishing and operating a Limited Liability Company (LLC, in Russian: OOO) is the best route for foreign investors entering Russia to buy and/or sell products or services. These are legal entities and can be formed by either just one individual, or several individuals or legal entities.
Comparing a Russian LLC to a Russian Representative Office or Branch Office
- The LLC is legally independent (it can be party to a legal relationship, suitor, and defendant before the court), and can possess its own property and assets;
- LLCs are not liable for Parent Company debt;
- LLCs can use international tax planning techniques such as those associated with the reallocation of funds (payments of loan interests, dividends, license payments etc.) for reducing tax obligations and increasing profitability;
- LLCs can function in the Russian market through subsidiaries using Partnership Intermediary Agreements (a subsidiary can import goods and act as the declarant on Russian Customs);
- An LLC can apply for use of Russia’s simplified tax system.
Leo Shen, the General Manager of Chinese online retailer AliExpress, has said that the Russian market has enormous prospects and opportunities for growth, including in the e-commerce segment. “The Russian market has huge prospects. These are not general protocol words. I, indeed, think so. I visited Russia five times in the last two years and saw the Russian market has enormous opportunities of boosting the retail trade via e-platforms. Development of e-commerce in Russia resembles now the situation observed in China several years ago,” Leo Shen stated in an interview with Tass.
As global warming becomes a reality, inevitable implications for the opening up of the Russian Arctic are beginning to take shape. There are eight Arctic nations, all members of the Arctic Council and including Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden and the United States. China, France, Germany, India, Italy, Japan, South Korea, Netherlands, Poland, Singapore, Spain and the United Kingdom are all observer nations. Of these, Russia’s coastline onto the Arctic Ocean is the second longest, after Canada, and the only one that covers territory that reaches into Europe and Asia at its western and eastern points, respectively. For this reason, the development of the Northern Passage, long practically ice bound, and unfeasible for navigation, is now becoming reality.
By Natalia Galdetskaya, Olimpline Consulting
Foreign invested companies often encounter administration difficulties when first establishing operations in Russia, as the local reporting requirements differ from those in their home country. Reporting back to head office must still be provided in standard corporate protocols, while local mechanisms must also be adopted to be in compliance with Russian laws. Foreign companies establishing a Representative Office (RO) or Branch Office (BO) in Russia may encounter some challenges in adjusting their procedures for getting started.
Russian Prime Minister Dmitry Medvedev has stated in an interview on Chinese State TV that both the Chinese and Russian governments are looking at ways to link the Eurasian Economic Union (EAEU) with China’s One Belt, One Road (OBOR) initiative.
Russia has approved China’s Industrial & Commercial Bank of China (ICBC) for providing Chinese RMB clearing services in Moscow, with the service operating from March 22. The facility eases the use of RMB as a trading currency between the two countries, and expedites the use of transactional settlements in financial services and co-operation between them.
Russia’s central bank announced the inclusion of the Renminbi in its national foreign exchange reserves at the end of 2015.