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Russia: Types of Company

Representative Office

The term "representative office" first appeared in Russian legislation in the 1991 Russian Federation Law on Foreign Investment in the RSFSR, applied to Russian enterprises operating with foreign investment funds. The form took on more substance when Part I of the Russian Federation Civil Code was promulgated at the end of 1994.

A representative office is generally understood to be a subdivision of a foreign legal entity that represents the entity in a foreign country, and doesn't normally carry on commercial activity, but the wording of the Civil Code doesn't exclude such activity, and in practice the Representative Office has come to be the primary initial structure used by foreign companies setting up in Russia.

Article 55 of the Civil Code states: The representative office is a discrete subdivision of a legal entity, situated in a different location, that represents and protects the interests of that legal entity. A representative office has the right to open bank accounts and engage in activity to facilitate its work within the territory of the Russian Federation.

In many respects, the Russian Representative Office resembles the 'branch' often used in Western jurisdictions. However, it is taxed as a separate organism, and is widely accepted as a normal form of business organisation. There are however some, relatively rare, situations in which a branch as such is to be preferred to a Representative Office.

A representative office or a branch of a foreign company must be registered with the tax authorities, social funds, and other state bodies. The nature of the activities performed will determine whether the activities are subject to Russian taxation. Generally, tax filings must be made even if no taxable activities are performed or if no income is generated.

Current procedures for legalizing the representative office of a commercial organization are set forth in the provisions of a December 4, 1994 law, the Interim Statute on the Accreditation of Representative Offices of Foreign Companies under the State Registration Chamber, and the Maintenance of a Composite Registry of the Representative Offices of Foreign Companies within Russian Federation Territory.

A Representative Office is normally given a three-year registration term, renewable. Individual employees of the RO can be 'accredited', a status which accords a few more or less useful privileges, on application. Section II of the Interim Statute establishes the procedures for the registration of the representative offices of foreign legal entities in Russia. In order to obtain authorization to open a representative office of a foreign company, the following documents must be presented to the State Registration Chamber:

  • Application
  • Two letters of recommendation from Russian partners
  • The charter documents of the foreign company
  • An extract from the trade registry of the foreign company's country of origin, or another document certifying the registration of the foreign firm in that country
  • Confirmation of solvency
  • Information card about the representative office
  • Documentation of state tax payment
  • Documentation confirming the location of the representative office within the Russian Federation
  • Power of attorney from the 'mother' company

Well, those are the rules. In practice, as usual in Russia, the reality can be different. Less information may in fact suffice, and the process may be either more or less complicated depending on circumstances and individuals.

 

 

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