“Your first 50 right steps to enter the Russian food market”.
Step № 34 – “Opening a branch or a representative office of your company in Russia”
And the third step telling about the types of legal entities in Russia will be about the branch and representative office.
A branch of a foreign company is a separate division operating under the direction of its parent company and performing all or part of its functions. A branch is fully subordinate to the company that established it, the parent company is responsible for all its obligations. Functions of a branch are comparable with functions of any Russian company.
A branch can open and close accounts in Russian and foreign banks, enter into transactions, sign contracts. When opening a branch, a foreign company will be considered a non-resident, and its taxation will be governed by a bilateral agreement on prevention of double taxation, if such there is such an agreement between the countries.
To start its operation in Russia a branch has to go through the procedure of accreditation, which lasts 25-30 working days and will require payment of the state duty of 120,000 rubles.
Branches are a form of presence in the Russian market that is popular with large foreign businesses. When approaching these branches, Russian customers understand that they address representatives of well-known brands whose reputation and reliability are well known. For a foreign company, the presence of a branch in Russia increases the efficiency of interaction with Russian and foreign clients operating in Russia.
Unlike a branch, a representative office has a minimum authority. For example, it cannot conduct business. According to the law of Russia, a representative office can only be engaged in marketing and advertising activities, searching for partners, drafting contracts and solving industrial situations.
To start working in Russia, representative offices (like branches) need to get accredited, which lasts 25-30 working days and will require payment of the state duty of 120,000 rubles.
Just like a branch, a representative office increases the credibility of your company among your potential Russian clients.
Approximately 80% of functions of a representative office and a branch are similar. If you have a lot of money and are willing to bear monthly expenses of an office and staff, of course, it is better to open a branch. If you are just starting to work with Russia, then I recommend hiring an individual representative and grant him/her with necessary authorities. He/she will perform the same tasks as a representative office, but you will not need to open a company and bear the cost of registration.
When a branch or a representative office rents an office, in accordance with the Tax Code of the Russian Federation, VAT (20%) is not included in the rent.
Material provision of branches and representative offices is carried out at the expense of the properties and assets of the parent company. “Transfers” of such properties and assets between the parent company and its branch / representative office are recorded within the company itself. It is much easier than, for example, transferring property of a foreign company to its subsidiary in the Russian Federation. The same applies to bank transfers. In other words, a foreign company can transfer funds quicker to compensate expenses related to its activities in Russia.
If you are a medium or small family company, and you are not yet ready to open an official representative office in Russia. A very good solution for you will be to hire yourself a representative of your company in Russia.
Be sure to post information about your representative on your official web site and specify his/her contact details. This will help him/her greatly to develop your business in the food market of Russia.
If you get a Russian representative, communication with your potential partners in Russia will become easier. They will see that you are your company is serious about entering the Russian market. So, all preliminary negotiations with your partners in Russia will be take less time.
Moreover, the business reputation of your Russian representative, will also contribute to the reputation of your company. The better and the more credible your reputation is, the bigger and the more serious Russian companies will work with you.
Business Adviser in the Russian Food Industry
Please read the same my other steps:Backward