All legal entities and individual entrepreneurs that intend to engage in business activities must register with the tax authority. In Russia the tax authority keeps the trade register and is thus the primary registration organ also for incorporation of legal entities. The filing for incorporation and tax registration is done simultaneously. (Representative Offices and Branches of foreign legal entities are registered with the State Registration Chamber with subsequent tax registration). Also foreign legal entities may have to register in Russia providing their activities in Russia meet certain threshold criteria (more about this “simple tax registration” below).

In Russia business entities do not undergo separate registrations for the purpose of various types of taxes, such as profit tax or VAT, rather an entity is immediately recorded in the system of all taxes with the single registration. But in addition to the tax registration companies also need to register with the social, medical and pension funds, and the state statistics agency.

The Tax Code sets the general rules for tax registration (articles 83, 84) and the provisions of incorporation are in the Law “On State Registration of Legal Entities and Individual Entrepreneurs” (Law N 129-ФЗ of 08.08.2001). There are also special rules for tax registration certain activities even when the activities do not constitute a separate entity or just consist of a virtual subdivision as defined by the law. This kind of registration will be dealt with more in detail below under the heading Simple Tax Registration and Regional Tax Registration.

A foreign legal entity (“FLE”) may choose to do business in Russia in one of several forms depending on the level of engagement of the company in Russia. The first option is to function only as an exporter which does not under normal circumstances lead to any kind of taxable presence in Russia nor any obligation to register with the Russian authorities. The involvement on the Russian market may be increased without setting up a legal structure by the following steps:

  • Keeping stock on the territory of the Customs Union under a procedure of customs warehouse. (There will be no Russian presence for the FLE if a Russian customer is the actual importer).
  • Using an Agent. If the Agent is an independent party and has the tax status of an independent agent, then this creates no Russian presence for the FLE. If the Agent is related (or non-independent), then the FLE runs the risks of creating itself a taxable presence in Russia in the form of a permanent establishment (see below).

Next in line for organizing Russian presence is undertaking a so-called ‘simple tax registration’ which have to be made if the operations of the foreign legal entity meet certain qualifying criteria. These are the rules when a foreign legal entity has to register with the Russian tax authority without de facto setting up any kind of entity or even not a representative office or branch. We will discuss the rules for simple tax registration below together with the rules determining the obligation of a Russian legal entity to register its presence in a location other than its home location.

A more established presence in Russia can be achieved by setting up a representative office (RO – Russian “Predstavitelstvo”) or a branch office (Branch – Russian “Filial”). An RO and Branch are not considered as Russian legal entities, rather they are determined as subdivisions of foreign firms for representing their interests in Russia. (Therefore references to FLEs also concern ROs and Branches). As long as they carry out merely representative, preparatory and auxiliary functions, they are not liable for profit taxation in Russia. But as soon as the activities qualify more directly as actual business activities then they may be liable for profit tax as so-called permanent establishments, a de facto business operation. (For further details on this see chapter Permanent Establishment Hereby to note that strictly in accordance with the Russian Civil Code it would not be permissible for an RO to transcend the limit of representative functions, whereas a Branch may do it and engage in actual business operations. In practice this means that a Branch has the right to invoice for business transactions in its own name and accept payment to its own bank accounts. The tax authority, which plays a key role here, has so far waived this provision and accepted ROs as commercial entities. A part from this, and slight differences in the registration and accreditation procedures, there are no differences between the RO and Branch, for example, what comes to the accounting and tax regulations.

A Representative Office or a Branch of a foreign company needs to be accredited with the State Registration Chamber. Alternatively the accreditation may be done with the Russian main chamber of commerce (Chamber of Commerce and Industry) or another authorized body depending on the industry, for example, banks are accredited with the Central Bank. But when accreditation is not done with the State Registration Chamber, then an additional registration has to be done with it, as it keeps the consolidated register over all ROs and Branches

ROs and Branches shall also separately be registered with the tax authorities, the social funds, and statistics agency.

In addition to what was said above a FLE may be taxed on its Russian income also without operating in Russia. This is the case when the Russian rules on withholding tax, or source tax, becomes applicable (see chapter Profit Tax for details).

A way to limit the Russian presence while being actively engaged in Russian business is to enter into a joint activity agreement (JAA) with a Russian entity (sometimes referred to as simple partnership). The Russian Civil Code (art. 1041-1054) provides for this form of co-operation, and provisions regarding a JAA are also in the Tax Code (art. 174.1, 180, 278). A JAA is basically a profit sharing arrangement where the foreign party contributes funds, property and know-how, and the Russian party usually manages the business according to the agreement between the parties. Based on the circumstances at hand, a JAA may or may not be deemed to form a Permanent Establishment. The JAA is taxed at the level of its participants with the exception of the Value Added Tax (art. 174.1) and Excise Tax (art.180, Tax Code). The Russian partner, who is the managing partner, has the obligation of accounting by keeping separate books for the JAA and filing the Tax Returns.  Income from the JAA is subject to Russian withholding tax. Hereby, an applicable Tax Treaty may provide relief.
A special form of joint activity is the investment partnership based on a new law of January 1, 2012 (Law No. 335-ФЗ “On Investment Partnerships” of 28.11.2011). The investment partnership is mainly intended for attracting private equity and venture capital to innovative businesses. The investment partnership does not constitute a legal entity.

Russian subsidiary company

Finally the foreign investor may take the full step into Russian business by investing in a wholly or partially owned subsidiary. (When the shareholding of the local entity is divided between one or more Russian, or foreign, companies, then people often refer to the local entity as a ‘joint venture.’ But there is in fact no special legal form of ‘joint venture’ – the actual legal form of such a firm is any of the permissible legal forms by Russian law).

The two most popular forms of corporate legal entities in Russia are the limited liability company (LLC, Russian “OOO”) and the joint stock companies (”JSC”). According to present law a joint stock company can be registered either in the form of a Closed Stock Company (Russian “ZAO”) or an open stock company (Russian “OAO”). Publicly traded companies are registered as OAO. However, according to a published project of amendment of the Civil Code,the OAO and ZAO distinction would be abolished and and both forms would be qualified just as stock companies, but there would be a new distinction between public and non-public corporations. Corporations, the shares of which are publicly issued or traded would qualify as public corporations. And it is by this factual criterion that such companies would be subject to more severe governance and disclosure provisions. Other stock companies and OOO companies would qualify as non-public corporations.

There are no differences in the tax treatment of the various forms of legal entities, but other issues might affect the choice of legal form.

Other possible types of legal entities are:

–          Full partnership
–          Limited partnership
–          Production cooperative

A full partnership (“polnoe tovarischestvo”) is a commercial organization, the members of which (partners) according to the concluded agreement carry out business activities on behalf of the partnership and have personal responsibility for its liabilities. General partnerships operate under constitutive agreements, which are signed by all members of the partnership.
A limited partnership (“tovarischestvo na vere” ) is a commercial organization in which there are partners and limited partners. Limited partners are investors who bear risk of losses up to the amount of their investments and do not participate in the business activities of the partnership.

Partnerships are generally not very popular in Russia and are usually used only for conducting limited set of activities such as legal services, audit assurance, etc.

Simple Tax Registration and Regional Tax Registration of Subdivisions

Russian legal entities and foreign firms which operate in various locations in Russia must under certain conditions undertake separate tax registration at the other locations. Under Russian law such regional presence may qualify as a so-called subdivision even in the case when the firm itself would not consider that the remote operations would amount to a “subdivision.” Different rules apply in relation to subdivisions of foreign legal entities. FLE’s that set up Russian presence without registering a Russian legal entity e.g. OOO or ZAO may register a representative office or branch or alternatively merely make a tax registration without forming any kind of entity. We refer to this kind of tax registration as simple tax registration.

There is a duty to undertake the simple tax registration when the legal criteria are met, and it is thus not left to the discretion of the company to decide whether to register or not. The obligation to register does not per se entail the obligation to pay taxes. Not all companies that register must pay taxes, but all companies present are subject to registration. Registration itself will not create a taxable status of a permanent establishment. If the foreign firm intends to be active at multiple locations in Russia, then it is preferable that it establishes its main Russian presence through a legal entity for it is much easier to comply with the regional registration requirements through a Russian legal entity as opposed to doing it as a FLE. A FLE would have to go through the same procedures for making tax registration at each location, requiring among other things to ensure all the corporate decisions and receive all the original documents from the foreign head office each time separately.

This form of registration is also referred to as Simple Tax Registration. The Tax Code (article 11) defines subdivisions as follows: “For tax registration purposes, a subdivision is any territorially separate subdivision of an organization with permanent workplaces. A workplace is deemed permanent if set up for more than one month.” In other words, as far as subdivisions are concerned, the decisive criterion is not whether a company intended to establish a separate organizational structure, but their existence is determined by factual circumstances. It is therefore sufficient for a company subdivision to be established to have at least one person working permanently in a separate Russian location.

The obligation to comply with Simple Tax Registration fulfills a control function. The process is therefore more like filing information than applying for the establishment of an entity, while the activities (or presence) may occur before filing for registration.

Tax registration is performed in accordance with article 83 of the Tax Code. By this article the Ministry of Finance is delegated powers to set further details for registration of regional presence of Russian entities (Order No. 114н of 05.11.2009) and the presence of foreign entities of 30.09.2010 No. 117н).

Russian legal entities are required to undertake regional tax registration under the following circumstances: 

1. When remote work of employees qualifies as a “subdivision”

The Tax Code (article 11) defines a subdivision as any territorially separate subdivision of an organization with permanent workplaces A workplace is deemed permanent if set up for more than one month.  In other words, as far as  a subdivision is concerned, the decisive criterion is not whether a company intended to establish a separate organizational structure, rather the existence of such is  is determined by factual circumstances.

It is a sufficient condition for meeting the criteria triggering the registration obligation that one person is hired under the given circumstances to work remotely for the company

The registration application has to be filed within one month from meeting the criteria of registering the presence as a subdivision.

2 .Registration of real estate, other immovable property, and means of transportation

A taxpayer (corporation and individual) holding title to real estate must register for this purpose with the local tax office. Under Russian law sea and river vessels as well as aircraft is considered immovable property and is also subject to this kind of registration.
Other means of transport, such as cars, also need to be registered at the location of their home base.  Although the law refers this obligation to the party holding title to the car, the tax office has issued instructions requiring that a leased car also be registered at the local tax office.


The registration requirements for foreign legal entities are as follows:

1. Remote work of employees  qualify as a “subdivision”

The main conditions for this registration requirement are similar to those for Russian legal entities as per above.

2. Registration of real estate, other immovable property, and means of transportation

The main conditions for this registration requirement are similar to those for Russian legal entities as per above.

3. Registration in the capacity of taxpayer for mineral’s extraction tax

4. Opening of a bank account

Foreign legal entities must register with the local tax office of the bank in connection with opening of a ruble or foreign currency denominated bank account.

5. Operating a taxable permanent establishment through a dependent agent

If the activity of the organization or individual in accordance with Russian laws and double taxation treaties forms a permanent establishment of a foreign organization, then the foreign legal entity must register with the local tax office.

6. When a foreign company exports products that have been produced in Russia under tolling arrangements (and other forms of processing)

Accounting and Taxation of Subdivisions

Branches and representative offices (or other subdivisions) of foreign companies may waive the requirement to keep statutory financial accounting (bookkeeping) books as long as they follow the tax accounting rules prescribed by the Russian Tax Code (keeping of all the necessary tax ledgers for each type of tax applicable to the entity’s business). Regional ROs and branches of Russian legal entities, as well as other subdivisions (those under “simple tax registration”), both of Russian and foreign legal entities) do not have to do separate accounting (they do not need to run a separate accounting balance). However if the business operations amount to a taxable permanent establishment, then full accounting is required.

We will briefly outline the special issues that concern taxation of subdivisions.

1. Profit tax

A subdivision files profit tax returns and pays the tax at the local tax office. The amount of tax due to be paid locally is calculated in proportion of the  arithmetical mean of the payroll cost of the subdivision to the total payroll cost of the company and the value of fixed assets of the subdivision to the total value of the fixed assets of the company (art. 288).

2. Property tax

In case that the subdivision does not run a separate accounting balance, the property tax is paid only at the location of the head office (art. 384).

3. Employer’s social contributions

A company does not have to separately pay social contributions at the location of its subdivision if the following conditions are met in regards to the subdivision: (i) it does not run its separate accounting balance; (ii) it does not have its separate bank account, and; (iii) the salaries of the employees are paid at the head office (art. 15.11 Law N 212-FZ of 24.07.2009 “On insurance contributions”).

A foreign organization does not need to pay employer’s social contributions when it does not pay salaries in Russia and does not have a bank account and separate balance in Russia.

4. Personal income tax

Personal income tax has to be submitted to the tax office at the location of the subdivision. The tax is declared to the tax offices both of the head office and subdivision (art. 226.7; 230.2).

A subdivision of a foreign legal has to perform the withholding of tax in case it has a subdivision in Russia and an employee is remunerated for work in relation to such a subdivision. also has this obligation (art. 226.1).

Taxpayer’s Identification Number

At initial registration the with the tax office, taxpayers, both legal entities and individuals, receive a taxpayer’s identification number (INN). The INN is a universal identification number for all types of taxes and duties. The INN should be indicated in all correspondence with the tax authority such as tax returns, statements, applications and other submissions to the tax authority.  

Obligation to Keep the Tax Inspectorate Informed

The taxpayer has an obligation to keep the tax office informed about legally determined matters that may affect compliance with tax law (art. 23). Some of these are presented in below table.

 Changes to be Reported


Time Limits


Opening and closure of bank accounts

Within seven days

Acquisitions of shares or other ownership in another business entity

Within one month

Setting up, reorganization or liquidation of a regional subdivision

Within one month

Reorganization or liquidation of a legal entity

Within three days