FAQ about company registration in Russia
We provide accounting, tax, and legal services to foreign companies. We are part of Accountor Group, the largest provider of business process outsourcing services in Northern Europe.
We have been operating in Russia since 1992 and have registered over 3,000 companies since then.
Below you will find our answers to the questions often raised by foreign investors and companies that want to do business in Russia.
Company registration FAQ
Can a foreigner register a company in Russia?
Yes, any foreign national (non-resident) is entitled to register a company in Russia under Federal Law On State Registration of Legal Entities.
Is it mandatory to have local shareholders and hire local directors?
No, this is not mandatory, but it is important to note that a foreign director will need a permit to work in Russia. Foreign nationals are not entitled to work in Russia before they receive their work permit.
Are there any requirements for the shares held by foreigners and local owners?
As a general rule, the sole founder (shareholder) of a company cannot be another legal entity consisting of one person unless otherwise provided by federal law.
The law on foreign investments sets out that the legal treatment of foreign investors’ activity and use of the profit they derive from investments cannot be less advantageous than the legal treatment of Russian investors’ activity and use of the profit they derive from investments unless otherwise provided by federal law. The law, however, provides for the following restrictions:
- As provided by Federal Law On the Procedure for Foreign Investments in Business Entities of Strategic Importance for National Defense and State Security, foreign investors may not:
- participate in the share capital of business entities of strategic importance for national defense and state security;
- acquire, own or use more than 25% of the total book value of such business entities’ basic production assets;
- enter into other transactions that would result in foreign investors’ control over such business entities.
- Federal Law On Production Sharing Agreements restricts the participation of foreign entities in investments in the prospection, survey and production of mineral raw materials in Russia as well as in the share capital of Russian companies;
- Companies may not be registered as small and medium enterprises (SMEs) if their total share of foreign participation exceeds 49%.
The law provides for other restrictions. Can a foreign director open a corporate bank account in Russia?
Yes, foreign directors may open a bank account for their company in Russia. To do so, they need to go in person to the bank of their choice in Russia or to a notary to sign the necessary documents.
Questions about share capital
Questions raised about the amount of share capital, whether it should be paid in a single or several installments.
How can a company’s share capital be paid?
The shares in a company’s share capital may be paid as follows (Article 66.1(1) Russian Civil Code; Article 15(1) LLC Law):
- Assets (things);
- Shares in the share capital of other business partnerships and companies;
- State and municipal bonds;
- Intellectual rights and rights under license contracts subject to monetary valuation.
The law or company charter may provide for the types of assets that cannot be contributed to pay for the shares in share capital (Article 66.1(2) Russian Civil Code).
What are the requirements for the share capital amount?
- The share capital of limited liability companies (OOO) and joint stock companies (AO) cannot be less than RUB 10,000;
- For public companies – not less than RUB 100,000.
Is the capital dependent on the business size? Are there any restrictions associated with capital?
The share capital is a guarantee that the founders will be able to pay off debts if the company’s business faces some difficulties.
Companies may be registered with the minimum share capital of RUB 10,000 although the law provides for a higher minimum for some activities. For example:
- The minimum share capital is RUB 100,000 for private security activities;
- The minimum share capital is RUB 300,000 for banking activities;
- Minimum share capital amounts are also provided for other industries;
- Share capital amounts may also be affected by regional regulations.
The law provides for no maximum share capital. A greater share capital may be important for a company’s activity since the share capital amount affects the company’s image in the eyes of contractors as well as the prospects of borrowing large sums. It should be borne in mind, however, that a company’s net asset value should not be less than the company’s share capital.
How to pay a company’s share capital by means other than money?
When paying by non-monetary means, it is necessary to evaluate the contributed assets (Article 66.2(2) Russian Civil Code). The asset evaluation is approved by unanimous decision of the general meeting of shareholders (if the legal entity is established by a sole shareholder, then by decision of this sole shareholder) (Article 15(2) and Article 39 LLC Law). Shareholders are not entitled to value a non-monetary contribution higher than the evaluation provided by an independent appraiser (Article 66.2(2) Russian Civil Code).
What is the timeframe for payment of share capital?
For Limited Liability Companies (OOO)
- Each OOO founder must pay its share in the share capital within the period specified in the company incorporation agreement. If there is only one shareholder, then this period is set by the decision for company incorporation.
- The payment term may not exceed 4 months from the date of company registration.;
- Each founder’s share must be paid at a price not lower than the share nominal value. If the share capital is not paid in full, the unpaid part is passed on to the company.
- The share owned by OOO founder confers no voting rights until it is fully paid unless otherwise provided for in the company charter.
For Joint Stock Companies (AO)
- AO shares distributed upon the foundation of AO must be fully paid within 1 year of AO state registration unless a shorter period is provided for in the company incorporation agreement.
- At least 50% of the shares distributed upon incorporation must be paid within 3 months of AO state registration.
- The share owned by AO founder confers no voting rights until it is fully paid unless otherwise provided for in the company charter.
Can a foreign parent company hold shares? If so, can it own a 100% stake?
Yes, a foreign legal entity may own a stake of 100% in a newly established company or invest in an existing Russian company with 100% participation.
Are there any laws regulating CEO liability and rights?
CEOs exercise a number of rights and assume liability for their company’s activity, including for settlements with counterparties. Depending on the severity of wrongdoing, CEOs may be brought to the following liability:
- Financial liability;
- Administrative liability;
- Criminal liability;
- Subsidiary liability;
- Disciplinary action.
The function of CEO is regulated by:
- Russian Civil Code;
- Russian Criminal Code;
- Russian Code of Administrative Offenses;
- Russian Labor Code;
- Law On Limited Liability Companies;
- Law On Joint Stock Companies;
- Law On Bankruptcy;
- Other Russian laws.
Can a company’s registered legal form be changed in the future?
Yes, business entities of one type can be changed into business entities of another type or into production cooperatives. Such transformation is achieved by decision of company shareholders issued as prescribed by law.
Is there a substantial difference between a company registered by a foreign person/company and a local company?
There is a difference. Companies with foreign investments (with a foreign participation share of at least 10%) enjoy the legal protection, guarantees and benefits set out in Article 4(5-6) of the Law On Foreign Investments.
Do we need to register a VAT payer number? If so, what do we need to do so?
Russian law does not provide for a separate company registration for VAT. A company with foreign investments must be registered as a taxpayer in the Russian Federation and get a taxpayer identification number (INN).
How long does it take to obtain an import-export license? For how long are such licenses valid?
Licenses and other permits for import-export operations are issued by the relevant authorized state body for certain types of goods. Import-export licenses are issued within 15 working days and are valid for 1 year.
Do you offer services for registering licenses to sell services?
Yes, we provide advice on licensing issues.
How long does it take to get a work visa?
From 1 to 3 months.
What taxes companies must pay in Russia?
In Russia, there are several taxation systems, and companies pay taxes depending on the system under which they operate. Under the general taxation system, companies pay:
- 20% VAT on any sale;
- 20% profit tax;
- If a company owns real estate property, the company must pay property tax accordingly. The property tax rate varies from region to region but usually is 2.2%;
- Similarly, if a company owns land, the company must pay land tax;
- If a company owns vehicle(s), the company must pay transport tax;
- Tax on employees’ income. When paying salaries to employees, companies must accrue and pay contributions to extrabudgetary funds and tax authorities.
Can the financial year of a Russian division coincide with the financial year of its parent company (for example, from the beginning of April to the end of March of the following year)?
In the Russian Federation, the financial year begins on January 1 and ends on December 31.
Is it possible to submit annual and quarterly reporting online?
Yes, annual and quarterly reporting may be submitted online.
Does a new company need to conduct an audit? If so, do you offer this service?
No, new companies do not need to be audited. Companies need to audit the year preceding the reporting year, so if a company is registered in 2020, its first audit – if it is subject to an audit – should be conducted in 2021.
Can a new company have a bank account in foreign currency? Are there any restrictions on money transfers between countries?
Companies may open a bank account in any foreign currency. Currency transfers between Russian residents and non-residents are made without restrictions but supporting documents must be provided for each transfer.
Do I need to be in Russia to register a company or can you do this without me there?
We can register a company without you being in the country. To do so, it will be sufficient for you to sign the documents necessary for company incorporation in your country in the presence of a notary and get these documents apostilled.
Can an LLC (OOO) or individual entrepreneur be registered in Russia prior to his/her arrival in Russia?
Yes. Company founders or individuals are entitled to sign all the necessary documents for OOO establishment or registration of individual entrepreneur in their country of residence in the presence of a notary. These documents must be apostilled or be subject to consular legalization. We can assist in registering ООО or individual entrepreneur without you having to travel to Russia. This will be done under a notarized power of attorney.
Can we get a temporary or work visa from your company?
No, we cannot issue a visa invitation to foreign nationals so that they can register another organization with this visa. This requires another visa. We, however, assist with visa and work permit applications for foreign nationals acting as company directors and foreign employees.
Do we have to have a physical or virtual office?
The notion of “virtual office” is not regulated under Russian law unlike in some other countries. Russian law also does not differentiate between postal, legal (registered) or actual address as it only provides for the location of a company. The location of a company is determined by the place of its state registration (Article 54 Russian Civil Code) and must be specified in its foundation documents (Article 52(2), Article 54(3) Russian Civil Code). In other words, the legal (registered) address is the address of the company’s actual location which is specified in the company’s foundation documents, and the actual (postal) address is the place of the company’s activity and location of its executive body (director). So, from a Russian law standpoint, the legal (registered) and actual address should coincide with the address of actual location. If the actual and legal (registered) addresses do not coincide, this will not be in line with the law, and the same goes for “virtual office”.
Also, when companies are registered in Russia, tax authorities verify the companies’ actual address in person. Such in-person verifications of company addresses are carried out periodically, so we recommend renting an office from a reliable landlord.
Does the Russian taxation system provide for any special conditions for certain types of companies?
Six tax regimes are currently in place for companies and individual entrepreneurs:
- General taxation system
- 4 special taxation systems:
- Simplified taxation system (simplified taxation system)
- Single tax on imputed income for types of activity
- Single agricultural tax
- Patent taxation system (for individual entrepreneurs only)
- Professional income tax (for self-employed and individual entrepreneurs only)
The vast majority of companies and individual entrepreneurs operate under one of the above tax regimes although the law does not prohibit operating under several taxation systems.
What taxes should highly qualified specialists pay?
Employers act as a tax agent and remit personal income tax on the salaries paid to highly qualified specialists as prescribed in Article 226(1) of the Russian Tax Code. Salaries paid to highly qualified specialists for fulfilling their work functions in the Russian Federation are taxed at 13%.
How many owners and CEOs can a company have?
The minimum number of shareholders for LLC (OOO) is 1 and the maximum 50 (Article 7(3) LLC Law). If the number of shareholders in OOO exceeds 50, then the company should either decrease the number of shareholders or reorganize the company into JSC (AO). If this is not done within a year, then the company could be liquidated in court (Article 88(1) Russian Civil Code).
Company owners (founders) with equal participation shares may appoint several CEOs at the same time, deputies or persons holding other senior positions. Directors may be conferred the right of sole or joint signature. The number of directors and director job titles must be specified in the company charter and recorded in the State Register of Legal Entities. In general, the powers of directors vary as follows:
- They act jointly with partial powers assigned to each director;
- They act independently with partial powers assigned to each director;
- They act independently with full authority.
It is also possible to assign authority among directors, in particular, by type of transactions they can make and joint decisions they can adopt on certain issues.
How many foreign employees can a company hire in Russia?
The Russian government determines the percentage of foreign employees that can be hired every year (Article 8.1(5) Federal Law No. 115-FZ On the Legal Status of Foreign Nationals in the Russian Federation dated July 25, 2002) to regulate the involvement of foreign workforce in certain types of economic activity considering the regional characteristics of the labor market and the employment of Russian citizens as a priority. The percentage of foreign employees allowed to work in the Russian Federation in 2020 is as follows (Government Decree No. 1271 dated September 30, 2019):
- Vegetable production – 50% of the total number of workers;
- Construction – 80% of the total number of workers (this does not apply to Buryatia, Amur Oblast and Moscow, and for Dagestan it is 50%);
- Retail trade of alcoholic beverages and tobacco products in specialized stores – 15% of the total number of workers;
- Land passenger transport and road freight transport – 26% of the total number of workers;
- Other sports activities – 25% of the total number of workers.
Do we need licenses for oil, gas, and other resources? Where can we find accurate information?
Licenses are required for mining. Federal Law N 2395-1 On Subsoil dated February 21, 1992 (as amended on December 27, 2019) sets out that the provision of subsoil and their plots for use is documented by licenses, and Rosnedra issues licenses for subsoil use (http://www.rosnedra.gov.ru). Such licenses are, as a rule, issued by tenders organized by representatives from the executive branch of the government and of the regions. In case of licenses for the rights to exploit a field of federal importance, the Russian government is involved in the evaluation of the tender applications.
No license is required for the wholesale of fuels and lubricants (crude oil, gas fuel, etc.) A list of licensed activities is provided in Article 12 of Federal Law N 99-FZ On the Licensing of Certain Types of Activities dated May 04, 2011, and the wholesale of fuels and lubricants is in this list.
If you have any questions about company registration in Russia, please use the contact form, send an email, call us or use our online chat in the bottom right corner. We look forward to hearing from you.