Establishing a company in Russia offers access to one of the largest countries in the world, rich in natural resources and positioned between Eastern Europe and Northern Asia. While Russia represents a challenging market, its size and resource potential make it a significant destination for strategic investments.
This guide provides an overview of the commercial legal structures available for foreign investors and outlines the primary taxation rules to help navigate the business environment in Russia effectively.
Legal Business Structures in Russia
The Civil Code of the Russian Federation allows several types of legal entities for commercial activities. The most common options for foreign investors include:
- Full Partnerships
- Limited Partnerships (Kommandit Partnerships)
- Limited Liability Companies (OOO)
- Joint-Stock Companies (JSC)
- Closed Joint Stock Company (ZAO)
- Open Joint Stock Company (OAO)
Let’s explore each structure in detail.
1. Full Partnership
- Must be formed by at least two participants.
- All partners are jointly and severally liable for the obligations of the partnership.
- No minimum capital is required by law.
- A partner leaving the partnership remains liable for two years after withdrawal.
Full partnerships are rarely used by foreign investors due to the unlimited liability exposure.
2. Limited Partnership (Kommandit Partnership)
- Formed by at least one general partner (with full liability) and one limited partner (liable up to their contribution).
- No separate legal personality from its founders.
- No minimum capital requirement.
This model may be considered for smaller scale or joint business ventures during the initial stages of establishing a company in Russia.
3. Limited Liability Company (OOO)
The Limited Liability Company (OOO) is the most popular legal structure among foreign investors when establishing a company in Russia.
- Can be founded by one or more persons (maximum of 50 shareholders).
- Minimum share capital: 10,000 rubles.
- Managed by a General Meeting of Members and optionally a Board of Directors.
- The company is not liable for the obligations of its shareholders.
- Shareholders are liable only to the extent of their capital investment.
The LLC (OOO) is one of the most preferred structures when establishing a company in Russia, especially for small to medium-sized enterprises.
4. Joint Stock Companies (JSC)
There are two types of JSCs in Russia, both suitable for larger or more structured business operations:
Closed Joint Stock Company (ZAO)
- Shares are not publicly traded and can only be transferred between existing shareholders.
- Minimum share capital: 10,000 rubles.
- No legal obligation to establish a board of directors.
Open Joint Stock Company (OAO)
- Shares can be publicly offered and traded.
- No limit on the number of shareholders.
- Minimum share capital: 100,000 rubles.
- Managed by a Board of Directors, with daily operations handled by an executive team.
These structures are often selected by larger enterprises or those planning to raise capital through public share offerings while establishing a company in Russia.
Taxation in Russia
Understanding the Russian tax system is critical when establishing a company in Russia. Below are the main taxes and applicable rates:
1. Corporate Profit Tax
- Standard rate: 20%.
- Regional authorities may offer reduced rates for qualifying investments.
2. Value-Added Tax (VAT)
- General VAT rate: 20%.
- Reduced rate: 10% (applicable to certain goods).
- Export operations: 0% VAT.
3. Property Tax
- Varies by region but cannot exceed 2.2% of the property value.
4. Personal Income Tax
- 13% for tax residents.
- 30% for non-residents.
5. Social Insurance Contributions
- Employers must pay approximately 30% on salaries.
- An additional 10% applies to high-income earners exceeding a defined threshold.
Conclusion
Establishing a company in Russia requires careful consideration of legal structure, taxation, and regulatory obligations. While the market can be complex, Russia offers significant opportunities for investors with long-term strategies and local compliance support.
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