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Taxes in Russia

The Russian Federation (hereinafter “Russia”) is not the only state in Europe where the tax authorities apply strict rules to a Company’s registration including its business address especially for newly established legal entities (companies) and further proactive control procedures (please see the earlier post by Andre Beukes “Acquiring a business address in the Netherlands”).

Even a rent of actual office under a leased agreement does not rule out a risk of the tax authorities’ refusal on tax registration of a newly established company. There are additional costs and difficulties that arise for small size companies with respect to rent premises or office for registration purposes. It is an urgent issue for service providers like IT companies since they do not need any office for their activity.

In the fulfillment of the order included in the minutes of the Presidential Council meeting for strategic development and priority projects dated January 31, 2018 the Ministry of Economic Development of the Russian Federation (“MED”) draft a bill for the simplifying of the registration procedure for newly established companies. The draft of bill on changes into the Federal law “On the state registration of legal entities and entrepreneurs” was posted by the MED of Russia on www.regulation.gov.ru (?01/05/03-18/00079482 by March 29, 2018). There are two important innovations:

1. Post office address is applicable for a company registration as a Company place (i.e. business address).

For the registration purpose an applicant has rights to use the post office address as a place of effective management (permanent executive body) or another individual authorized to act on behalf of the company without power of attorney if the permanent executive body is unavailable.

If the applicant is an individual the post office address defines based on his/her residence. If the applicant is a legal entity (company) that made a resolution on establishment of another legal entity (subsidiary) – the company place.

Application of the post office address for registration is allowed only as soon as an applicant was registered in Federal state information system “Unified system of identification and authentication” (“USIA”).

2. Registration of a newly established company through a Bank.

A credit organization (i.e. Bank) will be entitled to accept documents for the state registration of a newly established company in electronic format signed by a qualified signature of the applicant and to transfer such documents to the tax authorities in electronic format as prescribed by the Government of the Russian Federation as well as in paper format.

The usage of the bank infrastructure that allows filing documents for state registration of a legal entity in electronic format will create the most simplified procedure for registration of newly established companies.

Summarizing the above, the proposed changes are aimed at reducing the costs of small and middle size companies at the initial stage of doing business in the case when the implementation of activities does not require the availability of appropriate premises. At the same time, conditions will be ensured for reducing the number of cases when entrepreneurs and companies apply an illegal approach and use bogus addresses for state registration.

If the legal entity is registered in the USIA it will allow communicating with counterparties and state authorities both electronically and on paper.

At the time of writing, the bill is at the review stage. It has passed an independent anti-corruption examination on May 2, 2018. The planned date for the implementation of the changes is January 1, 2019.

For more information on taxes in Russia you may contact the author of the article, Olga Barbashova, who is a Partner of ALTHAUS Group in charge of financial outsourcing and audit department, responsible for Alt DFK network within DFK International. Her email is: obarbashova@althausgroup.ru.

You may also wish to follow our news on World Business Culture website for more details about taxes in Russia.

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