Foreign investments into Russia . Tax consequences. Legal basics Federal Law ‘On Foreign Investment in the Russian Federation’ (Law on Foreign Investments) from July 9, 1999, N 160-FZ Civil Code (4 parts), Tax Code (2 parts),
- Export/import of commodities or services without permanent presence in Russia,
- Joint activities through a partnership,
- Activities through a representative office,
- Activities through a Russian legal entity (a subsidiary).
1.1. Unlimited partnership – a partnership whose members (partners) are fully liable for its obligation,
1.2. Limited partnership – a partnership within which several partners have full liability and at least one partner has limited liability (to the extent of such partners’ contribution),
1.3. Limited Liability Company – a company in which the liability of each participants is limited to the extent of such participant’s contribution,
1.4. Additional Liability Company – a company in which the participants are, in addition to the extent of their contribution, equally additionally liable in accordance with a multiple applicable to all their contributions,
1.5. Joint-Stock Company (open and closed),
1.6. Production cooperative – an association of individuals for joint production and other economic activities based on membership or personal labor or other participation,
1.7. Unitary enterprise – legal form reserved for state and municipal enterprises.
Law ‘On State Registration of Legal Entities and Individual Entrepreneurs’ from August 8, 2001, N 129-FZ
Documents which are necessary for the registration:
- an application for state registration in the established form,
- the decision of establishing of a legal entity,
- the legal entity’s foundation documents,
- excerpt from the relevant register of legal entities of the country of the founder’s origin, or any other certificate proving the legal status of the foreign legal entity,
- receipt for payment of the state registration duty in the amount of 2 000 rubles (approx. 55 euro).
State registration must be carried out within 5 days as of the moment of submission of the documents to the tax body.
Upon completion of registration a company receives:
1. Certificate of registration of the legal entity,
2. Certificate of the company’s registration as a taxpayer with the local tax authority,
3. Information letter issued by the Territorial Body of the Federal Service of State Statistics on the Company’s registration therewith.
4. The legal entity’s foundation documents with stamp of tax body,
5. Excerpt from Single State Register of legal Entities.
Then by post:
6. Notice on the company’s registration as a payer of pension contributions with the Territorial Body of the Russian Federation Pension Fund,
7. Notice on the company’s registration as a payer of insurance premiums with the Territorial Body of the Russian Federation Social Insurance Fund,
8. Notice on the company’s registration as a payer of insurance premiums with the Territorial Body of the Russian Federation Obligatory Medical Insurance Fund
- passive income (such as dividends, interest, royalties), fines,
- income from sale of immovable property and shares related to charter capital, which consists of more than 50 % of immovable property,
- lease income,
- international transportation,
received by foreign legal entities from sources in Russia is subject to profits tax withholding at source.
Unless lower Double Tax Treaty rates apply, the domestic withholding rate for:
- dividends is 15 %,
- interest, royalties and other types of income listed in the tax code (except freight) is taxed at 20 %.
To enjoy Double Tax Treaty benefits, a foreign legal entity should provide to a Russian tax agent (paying company) a residence certificate from the tax authorities.
1.Royalties for trademarks with Russian origin.
An aggressive scheme of tax optimization.
Conception is not determined in Russian legislation and practice.
Rules have a loopholes.