Russia: Types of Company
Joint Activity Agreement
A joint activity agreement with a Russian company to carry out business in Russia (in formal terms, a partnership) usually involves the foreign company in the contribution of funds, property, or know-how in the form of tangible or intangible assets to the joint activity. The JAA provides for division of profits which need not be in proportion to the partners' contributions.
The joint activity is taxed at the level of its participants (with the exception of value-added tax). One of the participants must maintain separate books for the joint activity.
The existence of a joint activity agreement with a foreign company does not automatically lead to creation of a permanent establishment (PE) in Russia. However, it can be very difficult in practice to defend the "non-PE" position since the law is not very clear in this regard.
A JAA must be registered with the tax authorities (despite the fact that a simple partnership itself is not a taxpayer), the State Registration Chamber for representative offices, and the various social funds.