Simple Establishment Options For Asian Traders In Russia
Russia is very much part of the China’s OBOR Silk Road plans, and is also developing trade ties with India and other South-East Asian nations and the ASEAN trade bloc as well as its own Eurasian Economic Union. The opening up of new Russian Trade Corridors, especially with Asia is a relatively new phenomena, but one that is showing increasing potential. Russian trade with China is up 30%,
with the Eurasian Economic Union 38% with ASEAN up 13% and India also growing as Russia is buying more Indian products than ever before in the wake of EU sanctions, as well as growing joint technical ventures between the two nations, who have also developed a bilateral investment fund. The Singaporean Government has also expressly suggested its domestic businesses reach out to the Russian market for new opportunities.
We have written extensively in previous articles about how best to proceed with setting up operations in Russia, which in many ways offers great potential – it is relatively easy to get an import-export license, and Russian profits taxes are very competitive at just 20%. These can be reduced further by the use of Double Tax Agreements, and the permitted billing of expenses to the Russian entity from the Parent Company. This is a summary.
Registering A Trademark in Russia
Russia acknowledges the main international intellectual property conventions such as the Madrid Agreement Concerning International Registration of Trademarks and the Paris Convention for the Protection of the Industrial Property. Foreign companies can initiate a trademark registration even without Russia operations, while such a business, providing it does not maintain an operating presence in Russia, is not under obligation to register with the Russian tax authority. For more information about the filing procedures, please click here
Setting Up A Representative Office in Russia
RO in Russia are suitable for liaising with Russian suppliers and purchasing from your overseas HQ, organizing QC and souring activities, or evaluating the Russian market for potential business development opportunities. They are quick and relatively easy to set up, have a simplified method of accounting and tax reporting, and may also claim back VAT and import duties from any assets and purchases that will be used for the purposes of running the RO purposes (such as cars, office machines and equipment). ROs in Russia can use a simplified, fast tracked banking scheme in Russia for withdrawal of finances for the parent entity. For more information, please click here
Setting Up A Branch Office in Russia
Branch Offices in Russia differ from Representative Office (RO) establishments as they can perform direct commercial activities and generate local income. For this reason, they are often the preferred vehicle of choice for foreign investors looking to commence trade and import-export functions in Russia. For more information please click here
Setting Up A Wholly Foreign Owned Entity in Russia
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. They differ from RO and Branch Offices as the LLC is legally independent, and can possess its own property and assets. LLC are not liable for Parent Company debt, 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, 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) and can apply for use of Russia’s simplified tax system. For more information please click here
With the procedural aspects of setting up in Russia relatively straightforward, other issues that need to be taken into consideration when choosing the correct investment vehicle for investing in Russia are as follows:
- Any applicable Double Tax Treaty in force that can reduce tax overheads;
- Any applicable Free Trade Agreements that reduce or eliminate import duties.
The Russia trade corridors are emerging and are of especial interest to foreign investors from Asia. Now is the time to get into the market while Western sanctions mean Russia is actively searching for Asian investment partners, buyers and suppliers.
Russia Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, the Silk Road & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Eurasian region. We maintain offices in Moscow and St.Petersburg through our Russian partner firm, as well as our own offices in China, South-East Asia and India. For assistance with Russian issues or investments into Russia and Asia, please contact us at russia@dezshira.com or visit us at www.dezshira.com
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Assisting Foreign Investors into Russia
Dezan Shira & Associates´ Russian investment brochure offers an overview of the services provided by the firm – both foreign investment into Russia and Russian investment into Asia. It is Dezan Shira´s mission to guide investors through Russia´s complex regulatory environment and assist with all aspects of establishing, maintaining and growing business operations in the region.
