Permanent representation of a foreign organization in Russia: judicial practice and optimization analysis. Formation of a permanent representative office: tax aspect Foreign organization without a permanent representative office
Topic 5. Permanent representative office of a foreign organization in the Russian Federation for tax purposes
5.1. The importance of the tax status of a foreign organization
The main thing for the emergence of the institution of representation is the actual activity of a resident of one state on the territory of another state. Moreover, this activity must have a number of special characteristics, i.e. Whether or not the activities of a foreign legal entity on the territory of the Russian Federation fall under the concept of a permanent establishment in accordance with the legislation of the Russian Federation and international tax treaties.
In order to correctly qualify the activities of a foreign organization and determine its tax obligations, it is necessary to disclose the content of the concept of “permanent establishment”, i.e. establish essential features, the presence of which the activities of a foreign organization lead to the formation of a permanent establishment for tax purposes.
5.2. Definition of permanent establishment in accordance with the norms of international agreements
Depending on the country with which the relevant double taxation agreement has been concluded, the concept of “permanent establishment” may vary, taking into account the specifics and features of a particular agreement. At the same time, agreements, as a rule, establish general rules for determining the fact of the formation of a permanent representative office, referring to the norms of the domestic legislation of the states party to the agreement in the event that a particular term or concept is not defined (or not clearly defined) by the agreement itself.
Determination of a permanent establishment in accordance with Russian tax legislation.
The definition of the concept of “permanent representative office of a foreign organization” for the purposes of Chapter 25 of the Tax Code of the Russian Federation and the criteria on the basis of which the activities of a foreign organization are considered leading to the formation of a permanent representative office are given in Art. 306 of the Tax Code of the Russian Federation.
In accordance with paragraph 2 of Art. 306 of the Tax Code of the Russian Federation, a permanent representative office of a foreign organization in the Russian Federation is understood as a branch, representative office, division, bureau, office, agency, any other separate division or other place of activity of this organization (hereinafter referred to as the branch), through which the organization regularly carries out business activities in the territory of the Russian Federation, related to:
use of subsoil and (or) use of other natural resources;
carrying out work stipulated by contracts for the construction, installation, installation, assembly, commissioning, maintenance and operation of equipment, including gaming machines;
sale of goods from warehouses located on the territory of the Russian Federation and owned or leased by this organization;
carrying out other work, providing services, conducting other activities, with the exception of those provided for in paragraph 4 of Art. 306 Tax Code of the Russian Federation
Directly from paragraph 2 of Art. 306 of the Tax Code of the Russian Federation it follows that the legislation establishes the following characteristics of a permanent establishment:
the presence of a separate division or any other place of activity of a foreign organization on the territory of the Russian Federation;
carrying out business activities by a foreign organization on the territory of the Russian Federation;
carrying out activities on a regular basis.
In the simultaneous presence of a combination of these characteristics, the activities of a foreign organization in the Russian Federation are defined as leading to the formation of a permanent representative office.
Analyzing the criteria according to which the formation of a permanent establishment is recognized, it is necessary to clarify the following concepts: business activity, place of activity and regularity of activity.
It is considered that a foreign organization has a permanent place if its activities in the Russian Federation are carried out in rented premises or in the customer’s premises or any other area specially provided for this purpose.
Example 5. A foreign organization has equipment in Russia that it leases to a Russian organization. Such activities of a foreign organization may lead to the formation of a permanent representative office in the Russian Federation.
When tangible property (in this case, equipment) is transferred or leased to third parties through a fixed place of business maintained by an enterprise of one contracting state in another, the activity makes the place of business a permanent establishment. This position is also stated in clause 2.4.1. Methodological recommendations to tax authorities on the application of certain provisions of Chapter 25 of the Tax Code of the Russian Federation concerning the specifics of taxation of profits (income) of foreign organizations, approved by order of the Ministry of Taxes of the Russian Federation of March 28, 2003. No. BG-3-23/150. According to these Methodological Recommendations, if the mere fact of a foreign organization owning property on the territory of the Russian Federation cannot be considered as leading to the formation of its permanent representative office on the territory of the Russian Federation (clause 5 of Article 306 of the Tax Code of the Russian Federation), then the use of such property for commercial purposes may under certain conditions, create a permanent representative office of a foreign organization.
Regularity.
Example 6. The Russian enterprise entered into agreements with resident companies of Austria and Germany to provide equipment maintenance services on the territory of the Russian Federation. Employees of foreign companies come to the enterprise 1-2 times a year and within 2-3 days provide services stipulated by the terms of the contracts.
The Moscow Department of the Ministry of Taxes and Taxes of the Russian Federation took the following position regarding the recognition of activities as regular in this situation (letter dated June 18, 2003 No. 26-12/32420).
In this case, it is necessary to be guided by the definitions of the term “permanent establishment”, which are given in Art. 5 of the Convention between the Government of the Russian Federation and the Government of the Republic of Austria of April 13, 2000 “On the avoidance of double taxation with respect to taxes on income and capital” and in Art. 5 of the Agreement between the Russian Federation and the Federal Republic of Germany of May 29, 1996 “On the avoidance of double taxation with respect to taxes on income and property.”
These articles define that the expression “permanent establishment” means a permanent place of business through which the activities of the enterprise are carried out in whole or in part. However, the agreements do not define the period of time after which the activities of a foreign organization on the territory of another state lead to the formation of a permanent representative office (with the exception of construction sites), as well as the start and end dates of the activities of a permanent representative office. Therefore, when determining the dates for the beginning and completion of the activities of a permanent representative office, one should be guided by clause 3 of Art. 306 of the Tax Code of the Russian Federation, i.e. criterion of regularity of activity.
Based on clause 2.1 of the Regulations on the peculiarities of accounting with tax authorities of foreign organizations, the activities of a foreign organization are regular if it carries out or intends to carry out it in the Russian Federation through a branch for a period exceeding 30 calendar days a year (continuously or cumulatively).
Taking into account the above, the activities of resident companies of Austria and Germany to provide equipment maintenance services on the territory of the Russian Federation are not regular and do not lead to the formation of permanent representative offices of these companies in the Russian Federation.
Example 7.In accordance with a separate contract, the German enterprise sends German specialists to the Russian enterprise for a period of less than 25 days once a year to train maintenance personnel in the rules of operating equipment.
In this case, in accordance with Art. 5 Agreement between the Russian Federation and the Federal Republic of Germany of May 29, 1996. “On the avoidance of double taxation in relation to taxes on income and property”, the provision of services and the extraction of income can be considered as one-time and not leading to the formation of a permanent establishment in the territory of the Russian Federation. In relation to the income obtained, one should be guided by clause 2 of Art. 309 of the Tax Code of the Russian Federation. The duties of a tax agent in the event of payment of income by a foreign organization are defined in paragraph 2 of Art. 310 Tax Code of the Russian Federation.
Example 8. A Finnish company several times a year provides a Russian organization with repair and maintenance services for equipment located in the Russian Federation (specialists of the Finnish company are in the Russian Federation for a total of less than 30 days).
In accordance with Art. 4 of the Agreement between the Government of the Russian Federation and the Government of the Finnish Republic of May 4, 1996, a permanent representative office of a foreign legal entity is understood as a permanent place of regular activity related to the construction, installation, installation, assembly, adjustment and maintenance of equipment, as well as the performance of other works
In accordance with Art. 7 of the above-mentioned Agreement, income received by a Finnish company is not related to the implementation of activities through a permanent establishment and, accordingly, this income is subject to taxation only in the country of tax residence of the company, i.e. in Finland.
Example 9. A German company sends its specialists to the Russian Federation once a year for a period of less than 25 days to provide engineering services to a Russian company (training services for operating personnel of beverage bottling lines).
In accordance with the provisions of the Agreement between the Russian Federation and the Federal Republic of Germany of May 29, 1996 “On the avoidance of double taxation with respect to taxes on income and property” and Chapter 25 of the Tax Code of the Russian Federation, a permanent representative office is formed when the enterprise regularly carries out business activities. In the case under consideration, the provision of services and the generation of income can be considered as one-time and not leading to the formation of a permanent representative office on the territory of the Russian Federation (letter of the Ministry of Finance of the Russian Federation dated March 26, 2002 No. 04-06-05/1/14).
Entrepreneurial activity. To recognize that the activities of a foreign organization create a permanent establishment for tax purposes, it is necessary that these activities be of an entrepreneurial nature.
Since most organizations are created specifically for the purpose of making a profit, their activities on the territory of the Russian Federation are entrepreneurial.
In order to fully assess the pros and cons of the decision to establish a permanent establishment, it is necessary to determine the tax consequences of its establishment. One of the signs of the formation of a permanent representative office is the implementation of commercial activities by a foreign organization on an ongoing basis. However, Russian tax legislation stipulates a number of cases when a permanent representative office is not formed when a foreign company carries out its activities. These include intermediary activities, which do not always involve the creation of a permanent establishment in the tax sense. While a foreign organization operates on the territory of the Russian Federation without forming a permanent representative office, tax jurisdiction does not fully apply to it.
Publication
Determining the status of a permanent establishment
In the Russian Federation, the profit of a foreign company is taxed only if the profit is received as a result of the company's activities through a permanent establishment, and only to the extent that is directly attributable to the permanent establishment. Until the moment a foreign person has a permanent establishment, this person cannot be considered as participating in the economic life of the country to the extent that it falls under its unlimited tax jurisdiction 1 .
The qualification of the activities of a foreign company as forming or not forming a permanent establishment is determined:
the position of the Russian Ministry of Finance as the competent authority to clarify the provisions of agreements on the avoidance of double taxation, including on the issues of establishing a permanent representative office;
the position of the regulatory tax authorities;
the position of the Supreme Arbitration Court of the Russian Federation, which ensures the uniformity of judicial practice, as well as the federal arbitration courts of the districts, reviewing the decisions of the courts of first and appellate instances that have entered into legal force and forming judicial practice 2.
A permanent representative office of a foreign company means a branch, representative office, department, bureau, office, agency, any other separate division or other place of business through which the organization regularly carries out business activities in Russia related to:
use of subsoil and/or other natural resources;
carrying out construction, installation, installation, assembly, maintenance and operation of equipment;
sale of goods from warehouses located on Russian territory;
carrying out other work, providing services, conducting other activities.
The Tax Code of the Russian Federation defines three main features of a permanent establishment (Article 306 of the Tax Code of the Russian Federation):
the presence of a separate division or other place of activity on the territory of the Russian Federation;
carrying out business activities by a foreign organization on the territory of the Russian Federation;
carrying out such activities on a regular basis.
In Russian legislation there is no definition of the concept of “place of business of a company”. The OECD Model Convention 3 defines the place of business as any premises, facilities or installations used for the conduct of a business. Moreover, it does not matter whether they are owned by the company or rented. It can also be any space, without premises: a representative of a foreign company holds meetings, concludes contracts, negotiates essential conditions, and all this in itself already creates a place of activity. In addition, the place of business may be located in another enterprise where the foreign company permanently has some premises at its disposal. Any form of presence of a foreign company in another country can be recognized as a permanent place of business.
As an example, the Commentaries to the OECD Model Convention give the following situation. A foreign company sends its employee to another country to a counterparty company. The employee lives abroad for a long time, works in the counterparty’s office, monitors the fulfillment of his obligations, and resolves issues related to the execution of contracts on the spot. Although the seconded employee uses someone else's office, the latter can still be considered a permanent establishment for tax purposes because the company has a “fixed place of business” in the other country.
The definition of entrepreneurial activity is given in the Civil Code of the Russian Federation: entrepreneurial activity is an independent activity carried out at one’s own risk, aimed at systematically obtaining profit from the use of property, sale of goods, performance of work or provision of services by persons registered in this capacity in the manner prescribed by law (Part. 3 clause 1 article 2 of the Civil Code of the Russian Federation).
The third sign of a permanent establishment in accordance with the Tax Code of the Russian Federation is carrying out business activities on a regular basis. This means the following: if a company carries out or intends to carry out activities on the territory of the Russian Federation for a period exceeding 30 calendar days continuously or cumulatively in a year, then this implies that it is obliged to register with the tax authority at the place of activity 4.
Thus, the activities of a foreign company lead to the formation of a permanent establishment with the simultaneous presence of the specified characteristics.
A foreign company will be considered to have a permanent establishment if it:
carries out deliveries through a person who, on the basis of contractual relations with this foreign organization, represents its interests in the Russian Federation;
acts on the territory of the Russian Federation on its behalf;
has and regularly uses the authority to conclude contracts and agree on essential terms (contract price and delivery terms), creating legal consequences for a foreign organization (dependent agent) (clause 9 of Article 306 of the Tax Code of the Russian Federation).
If such criteria are met, the activities of a foreign company lead to the formation of a permanent establishment. In this case, the company is required to register with the tax authorities of the Russian Federation.
International tax aspect
It should be taken into account that if there is an agreement on the avoidance of double taxation between the Russian Federation and the country of incorporation of the company, then the rules of this agreement should be applied, since they take precedence over the rules of national legislation (Article 7 of the Tax Code of the Russian Federation). In addition, as a rule, international treaties for the avoidance of double taxation provide for more favorable tax regimes than local legislation 6 .
If there is no agreement on the avoidance of double taxation, then when taxing such a permanent establishment one should be guided by the norms of the current Russian legislation (Chapter 25 of the Tax Code of the Russian Federation “Income Tax”).
Avoidance agreements apply to taxes such as income tax, property tax, capital gains tax, and personal income tax. The exceptions are the indirect tax VAT and land tax, which is local.
Tax reporting of a foreign organization
Any permanent representative office, having registered on the territory of the Russian Federation, is obliged to comply with laws regarding mandatory accounting 7 and maintain tax records in accordance with Chapter. 25 Tax Code of the Russian Federation. For this purpose, an accounting policy 8 must be developed.
There is one exception for accounting: if a foreign organization maintains accounting in accordance with International Financial Reporting Standards (hereinafter referred to as IFRS), which are approved by the IASB, then it may be exempt from accounting in accordance with Russian rules. To do this, you need to inform the tax authorities that the company plans to keep records according to IFRS.
As for tax accounting, there are no exceptions. If you intend to pay income tax, an accounting policy must be prescribed that will be applied in the future.
Income tax
If a foreign company carries out activities in Russia that lead to the establishment of a permanent establishment, it is required to pay income tax. In accordance with Ch. 25 of the Tax Code of the Russian Federation, foreign organizations are taxpayers (Article 246 of the Tax Code of the Russian Federation).
The following are the objects of taxation of such companies:
income received from carrying out business activities on the territory of Russia through a permanent representative office, minus expenses incurred by this permanent representative office;
income from the ownership, use and disposal of property of a permanent establishment minus expenses associated with the receipt of such income (depreciation, utility bills, etc.);
other income from sources in Russia related to the permanent establishment (for example, ownership of securities and receipt of dividends on them).
The procedure for calculating the tax base of a permanent establishment of a foreign organization is carried out in accordance with Art. 307 Tax Code of the Russian Federation 9.
The tax period is a calendar year, the reporting period is a quarter, half a year, 9 months (Article 285 of the Tax Code of the Russian Federation).
The reporting form (Article 289 of the Tax Code of the Russian Federation) is a tax return for income tax 10, as well as a tax calculation of the amounts paid to foreign organizations for income and taxes withheld 11. The deadline for submitting reports is the 28th of the next month based on the results of the reporting period, as well as March 28 of the next year based on the results of the tax period (Article 289 of the Tax Code of the Russian Federation).
A foreign organization has the right to take into account expenses incurred for tax purposes only if it receives income from business activities in the Russian Federation through a permanent representative office recognized for tax purposes. If there is no business activity, the foreign company is not recognized as a permanent establishment for tax purposes and has no right to account for expenses in Russia.
The presence or absence of a permanent establishment for tax purposes is determined by the taxpayer independently. If he has difficulties determining such status, he should send a request to the tax office.
If a foreign company does not establish a permanent representative office on the territory of the Russian Federation, but receives relevant income from sources in Russia, such as dividends, interest on borrowed funds, income from the sale of real estate, from leasing property, fines and penalties for violation of the terms of contracts and etc. (clause 1 of Article 309 of the Tax Code of the Russian Federation), in this case the foreign company is recognized as a payer of income tax. But at the same time, income tax will be withheld by the tax agent (the company that pays this income) 12.
The tax agent is obliged to withhold income tax at the appropriate rate (Article 310 of the Tax Code of the Russian Federation) and transfer it to the budget 13. And at the end of the reporting period, submit a declaration to the tax service.
Accordingly, a foreign organization that does not operate in Russia will receive the amount under the agreement (contract) minus the corresponding tax.
Value added tax
If we consider a foreign company that has a permanent representative office in Russia, then it will also be recognized as a taxpayer (Article 143 of the Tax Code of the Russian Federation) for VAT and pay this tax in the manner and within the terms (Article 174 of the Tax Code of the Russian Federation) that are established for ordinary Russian organizations .
If a company pays VAT on the territory of Russia on the cost of work and services provided, then it, accordingly, has the right to deduct the corresponding amounts of taxes on purchased goods, work, services, report to the tax inspectorate 14 and pay the corresponding amount to the budget.
If income is paid to a foreigner who does not carry out activities in Russia, but cannot pay himself, VAT must be withheld by the tax agent from the income paid to the foreigner.
The tax agent informs the tax service about income paid to foreigners and about VAT amounts withheld.
Property tax
The object of property tax for foreign companies is both real estate and movable property related to fixed assets (Article 374 of the Tax Code of the Russian Federation). It all depends on the tax status of the foreign company (Article 373 of the Tax Code of the Russian Federation).
If a foreign company establishes a permanent representative office for tax purposes in Russia, then it will pay property tax on both real estate and movable property.
If the company does not establish a permanent establishment for tax purposes, no property tax is paid on movable property. But if there is real estate in the property, then the company becomes a payer of property tax (Article 379 of the Tax Code of the Russian Federation).
The tax period is a calendar year, the reporting period is a quarter, half a year, 9 months (Article 379 of the Tax Code of the Russian Federation). At the end of each reporting and tax period, taxpayers are required to submit reports to the tax authorities (Article 235 of the Tax Code of the Russian Federation).
Unified social tax
A foreign company will pay UST through its permanent representative office if it has employees with whom employment contracts have been concluded (Article 235 of the Tax Code of the Russian Federation).
Payments accrued to a foreign employee working under an employment contract are subject to UST regardless of the status of the employee (permanently or temporarily residing in Russia), the place where the contract was concluded, and also regardless of where payments are accrued and made (abroad or on the territory of the Russian Federation ) 15 .
Tax is imposed on payments and other remuneration accrued in favor of individuals under employment and civil law contracts (Article 236 of the Tax Code of the Russian Federation).
Tax and reporting periods (Article 240 of the Tax Code of the Russian Federation), the rate, tax return (Article 243 of the Tax Code of the Russian Federation), deadlines for submitting reports (Article 243 of the Tax Code of the Russian Federation) - all this corresponds to the procedure with which ordinary Russian taxpayers work.
Personal income tax
A foreign company is obliged to withhold personal income tax in cases where it pays income to individuals (Article 207 of the Tax Code of the Russian Federation). The tax rate depends on the residence of the individual. A resident is a person who stays on the territory of the Russian Federation for at least 183 calendar days over the next 12 consecutive months. For a resident, tax is withheld at a rate of 13%, for a non-resident - 30% (Article 224 of the Tax Code of the Russian Federation).
A permanent establishment, regardless of status, acts as a tax agent in relation to payments in favor of such individuals.
The object of taxation is income received by taxpayers from sources in the Russian Federation from sources outside the Russian Federation - for individuals who are tax residents, and from sources in the Russian Federation - for individuals who are not tax residents (Article 209 of the Tax Code of the Russian Federation).
The tax period is a calendar year (Article 216 of the Tax Code of the Russian Federation), the deadline for submitting reports (Article 230 of the Tax Code of the Russian Federation) is no later than April 1 of the year following the expired tax period (Article 230 of the Tax Code of the Russian Federation).
Land tax
Land tax is paid by a foreign organization if it acquires land plots (Article 389 of the Tax Code of the Russian Federation) on the right of ownership, the right of permanent (perpetual use) or the right of lifelong inheritable possession. In this case, the foreign company becomes a payer (Article 388 of the Tax Code of the Russian Federation) of land tax.
Land tax is paid before February 1 of the year following the expired tax period (Article 398 of the Tax Code of the Russian Federation). Once a year, without advance payments (Article 393 of the Tax Code of the Russian Federation). Declaration 16 is submitted.
Transport tax
The object of taxation arises when a foreign company (Article 357 of the Tax Code of the Russian Federation) acquires ownership or takes possession of a vehicle (car, airplane, yacht and other water or air vehicles) (Article 358 of the Tax Code of the Russian Federation).
There is an obligation to register a vehicle within 30 days from the date of purchase, receipt for use or disposal.
The tax is paid once a year (Article 360 of the Tax Code of the Russian Federation) until February 1 of the year following the expired tax period (Article 363.1 of the Tax Code of the Russian Federation). Tax rates are determined by local legislation.
At the end of the tax period, taxpayers submit a tax return on tax to the tax authority at the location of the vehicles 17.
Commercial activities of a foreign company without establishing a permanent representative office
The Tax Code of the Russian Federation stipulates a number of cases when a permanent representative office is not formed when a foreign company conducts business in Russia:
ownership of securities, shares in the capital of Russian organizations, as well as other property in the absence of other necessary signs of a permanent establishment (clause 5 of Article 306 of the Tax Code of the Russian Federation);
conclusion of a simple partnership agreement or another agreement involving joint activities of its parties, fully or partially carried out in the Russian Federation (clause 6 of Article 306 of the Tax Code of the Russian Federation);
provision by a foreign organization of personnel to work on the territory of Russia in another organization in the absence of other signs of permanent establishment (clause 7 of Article 306 of the Tax Code of the Russian Federation);
carrying out operations for the import into or export of goods from our country, including within the framework of foreign trade contracts, in the absence of other signs of a permanent establishment (Clause 8 of Article 306 of the Tax Code of the Russian Federation)
Also, the activities of a foreign company will not be considered as leading to the formation of a permanent establishment if it is carried out on the territory of the Russian Federation through a broker, commission agent, professional participant in the securities market or through any other person who acts as part of the usual main (ordinary) activities (independent agent ) 18 .
When determining the tax base for income tax, the commission agent does not take into account income in the form of property (including cash) received in connection with the fulfillment of obligations under the commission agreement, with the exception of commission remuneration (subclause 9, clause 1, article 251 of the Tax Code of the Russian Federation). And everything acquired through transactions belongs to the principal (Article 996 of the Civil Code of the Russian Federation). Expenses incurred by the commission agent are subject to reimbursement by the principal. Consequently, the profit from the transaction is the profit not of the commission agent, but of the principal, which is subject to taxation under the laws of the country of incorporation.
Intermediary scheme for tax optimization
The activities of the principal may be recognized as leading to the formation of a permanent establishment and will be subject to taxation in Russia if the tax authorities can prove that the commission agent, acting within the framework of the commission agreement, has the right to negotiate the essential terms of contracts with buyers.
The risk of recognizing a permanent establishment will be minimized and tax liabilities for income tax will not arise if the commission agent demonstrates that he has the authority to sign contracts, and all decisions are made by the principal, and the commission agent performs exclusively intermediary functions in relation to several partners (principals), and his activities are basic and ordinary.
Thus, taking into account the provisions of Art. 306 of the Tax Code of the Russian Federation, foreign companies can carry out their activities in Russia without forming a permanent representative office, and therefore may not have tax status and not pay income tax.
1 Tax Law / Ed. S.G. Pepelyaev. M.: Publishing House FBK-Press, 2000.
2 Ovcharova E.V., Travkina N.A. Permanent representative office of a foreign organization in Russia: judicial practice and optimization analysis // Glavbuh, January 18, 2007. URL: http://www.glavbuh.net.
3 Commentary on Article 5.
4 Clause 2.1.1. Regulations on the specifics of accounting for foreign organizations with tax authorities, approved by Order of the Ministry of Taxes of Russia dated 04/07/2000 No. AP-3-06/124.
5 Poputarovsky O., Kutyaeva O. International taxation: advantages and risks of using agreements to avoid “double” taxes” // Bulletin of the federal state institution “State Registration Chamber under the Ministry of Justice of the Russian Federation”, 2009, No. 5.
6 Timin E. How to choose the optimal form of work for a foreign company in Russia // Practical tax planning, 2008, No. 1.
7 Federal Law of November 21, 1996 No. 129-FZ “On Accounting”; Regulations on maintaining accounting and financial statements in the Russian Federation (Order of the Ministry of Finance of Russia dated July 29, 1998 No. 34n); Accounting policy for accounting purposes - PBU 1/98 “Accounting Policy” (Order of the Ministry of Finance of Russia dated December 9, 1998 No. 60n).
8 Accounting policy for accounting purposes - PBU 1/98 “Accounting Policy” (Order of the Ministry of Finance of Russia dated December 9, 1998 No. 60n).
9 Akilova E.V. Calculation of the tax base, calculation of the amount of tax payable by the permanent establishment // Taxes (newspaper), 2008, No. 3.
10 Order of the Ministry of Finance of Russia dated May 5, 2008 No. 54n “On approval of the tax return form for corporate income tax and the procedure for filling it out.”
11 Order of the Ministry of Science of Russia dated April 14, 2004 No. SAE-3-23/286@ “On approval of the tax calculation form (information) on the amounts paid to foreign organizations for income and withheld taxes.”
12 Potemina E.O. Performing the functions of a tax agent in relation to payments to a foreign organization for income not related to a permanent establishment // Accountant and Law, 2008, No. 6.
13 Prikhodin S.A. Permanent representative office of a foreign organization for income tax purposes (Article 306 of the Tax Code of the Russian Federation). Essential features // Website of the Legal Bureau “JURISTOCRAT”, May 31, 2009. URL: http://www.ukrat.ru.
14 Order of the Ministry of Finance of Russia dated November 7, 2006 No. 136n “On approval of the tax return form for value added tax and the procedure for filling it out.”
15 Perebeinos Yu.A. Tax features of permanent representative offices of foreign organizations // Accounting Bulletin, 2007, No. 9.
16 Order of the Ministry of Finance of Russia dated September 16, 2008 No. 95n “On approval of tax return forms and tax calculations for advance payments of land tax and procedures for filling them out.”
17 Order of the Ministry of Finance of Russia dated April 13, 2006 No. 65n “On approval of the tax return form for transport tax and the procedure for filling it out.”
18 Sokolova I.N. Performing the functions of a tax agent in relation to payments to a foreign organization for income not related to a permanent establishment // Taxes (newspaper), 2006, No. 32.
Bibliography
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Prikhodin S.A. Permanent representative office of a foreign organization for income tax purposes (Article 306 of the Tax Code of the Russian Federation). Essential features // Website of the Legal Bureau “JURISTOCRAT”, May 31, 2009. URL: http://www.ukrat.ru.
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The developing Russian market is quite attractive for foreign enterprises whose goal is development and expansion outside their country. Therefore, it is not unusual for management to decide to open a branch or representative office of a foreign company in Russia. At the same time, one of the effective tools that can improve the economic situation of any state is the policy of attracting foreign investment into its economy. But in order to carry out commercial activities in our country and invest their capital, foreign organizations need appropriate guarantees, including the scope of taxation. Legal status of separate divisions of a foreign organization
The Russian state continues to work to improve the system of legal regulation of taxation, trying to take into account the interests of the budget and the interests of foreign organizations operating in Russia.
The creation of a representative office or branch of a company in Russia presupposes the independent active conduct of business by a foreign company - this approach should not be confused with passive investment in Russian organizations.
Control of the functioning of separate divisions of foreign companies in Russia is carried out in accordance with the provisions of the Federal Law “On Foreign Investments in the Russian Federation” dated 07/09/1999 No. 160-FZ. More precisely, the law applies exclusively to branches of foreign organizations.
It talks about the opening of (commercial companies with) and branches in Russia, but nothing is said about the establishment of representative offices (because nothing is invested in the Russian economy). Accordingly, there is no definition of representation in the text of the law, and no legal regime has been established for it, even in the case of accreditation.
Both a representative office and a branch are a separate division of a legal entity that is located outside its location, only the duties of the first include representing the interests (and protecting them) of this legal entity, the task of the second is to carry out the functions of this legal entity (or only a certain part of them) ) and its representatives.
Neither form is in itself a legal entity and has no legal capacity: their legal status will be governed by the law of the state in which the head office was registered. Separate divisions manage the property of the legal entity that founded them and operate in accordance with the regulations approved by it.
In other words, despite being located on the territory of the Russian Federation, representative offices and branches of foreign companies will be subject to the laws of the country where the parent organization is located in relation to:
- creation process,
- rights and obligations,
- schemes of work and its completion,
- rules for the appointment of management and the scope of its powers, etc.
However, before the unit begins to function at all, it will need to obtain permission from the Russian authorities, that is, undergo accreditation. When representative offices or branches are accredited, they also need to be registered with the Federal Tax Service in order to control the tax contributions they make to the Russian budget.
The legal status of a branch of a foreign company in the Russian Federation regulates all the most important issues related to this division. It should reflect basic data on the features of the functioning of the branch in Russia, which do not contradict the laws of the Russian Federation:
- full name (of the foreign parent company and the branch itself);
- organizational and legal form of business;
- branch location address;
- legal address of the head office;
- the goals pursued by the branch management;
- activities;
- size, composition and timing of capital investment;
- management rules.
Information about both representative offices and branches of foreign organizations must be entered into the Consolidated State Register of representative offices and branches of foreign companies accredited in the Russian Federation. Proof of inclusion in the register is the presence of a company division with an appropriate certificate as a guarantee of confirmation of the official status of a foreign company at the federal level, since without it it will be impossible to open a bank account, carry out transportation through customs, etc.
The forms of doing business in Russia by foreign organizations can be different. A foreign management company must have a representative office or branch in Russia or do without it, for example, by hiring an individual resident of the Russian Federation, signing contracts directly with counterparties from Russia, etc.
There is also the option of opening a resident subsidiary and conducting business through it. A competent choice of the form of business organization will help to avoid losses associated with the payment of taxes, the amounts of which could be lower, or the payment of which could be completely avoided.
General characteristics of branches and representative offices of foreign organizations in the Russian Federation are:
- exist in the form of a separate division separate from the parent company and operate in accordance with its standards;
- the parent company is financially responsible for their actions;
- management is vested with powers by the foreign parent company to the extent specified in the power of attorney issued to them;
- use a share of the parent company’s property, accounted for separately from the company;
- do not have independent legal capacity, are not recognized as legal entities and perform actions on behalf of the parent company;
- are created and liquidated by decision of the head office;
- are not required to prepare financial statements.
Despite a large number of common points, a representative office and a branch are not the same thing. A branch of a foreign company has a broader list of functions compared to a representative office, since it has the authority not only to represent the interests of the company and protect them, but also to carry out the same business activities as the foreign founder.
We will conduct a comparative analysis of the taxation of various forms of activity of a foreign organization.
| Form of activity | VAT | Income tax | UST | Property tax |
|---|---|---|---|---|
| Subsidiary | Calculated on a general basis, you can choose the simplified taxation system. | 24% (you can choose simplified tax system – 6%, 15%). The object of taxation is income received through branches in Russia (you can take into account revenue and expenses that arose abroad, but are related to the work of the branch), minus the costs of these branches | Calculated on a general basis, you can choose the simplified taxation system | |
| Permanent establishment (branch, division, bureau, agency, office, etc.) | Calculated on a general basis, there are nuances regarding the taxation of services | 0.24 | Calculated on a general basis | |
| No permanent establishment | Incoming is withheld by the tax agent from VAT taxable income. Outgoing – 0% | There is no deduction from business proceeds. In other cases, it is withheld by the tax agent (up to 20%) | No (the company is not a taxpayer) | |
So, when choosing the optimal operating mode, a foreign company should pay attention to the following points:
- Resident subsidiaries pay all taxes at standard rates, but they are entitled to apply a special tax regime. They also have the opportunity to take advantage of international tax planning opportunities.
- Doing business without establishing a permanent representative office in Russia is suitable only for those companies whose work in the Russian Federation is occasional, since this form of activity has a limited scope, although it involves a small tax burden.
- The creation of a permanent representative office is not beneficial in terms of taxation due to the fact that it will have to pay all taxes approved by the tax legislation of the Russian Federation without the right to switch to a special regime for their payment.
If you choose between a branch and a representative office, you need to decide for what purpose a separate division is created - to conduct full-fledged activities and perform all the same functions as the parent organization abroad, or only to represent and protect the interests of the head office. In the second case, it will be enough to establish a representative office, and in the first case, one cannot do without opening a branch on the territory of the Russian Federation.
Features of opening a branch of a foreign company in Russia
A branch is sometimes called a permanent establishment; these are identical concepts, but the key word here is “permanent”. This is recognized as a representative office that regularly conducts business activities in the Russian Federation related to:
- to the sale of goods from our own warehouses located in Russia;
- to carry out work on construction, installation, installation, adjustment, assembly, operation, maintenance of equipment in accordance with concluded agreements (equipment can also be understood as slot machines);
- to the exploitation of subsoil and/or other natural resources;
- to perform any other work other than those listed in clause 4 of Art. 306 of the Tax Code of the Russian Federation.
Branches of foreign organizations that have been accredited in Russia are characterized by the following features of their activities:
- Branches have the right to engage in business activities.
- Branches as non-legal entities:
- are not liquidated due to bankruptcy;
- do not have an authorized capital;
- do not prepare financial statements;
- do not pay VAT on the rental of residential and office premises without furniture and equipment;
- do not consolidate tax returns.
- The branch is not a resident from the point of view of currency legislation.
Some areas of activity of foreign organizations are controlled by the Russian authorities in a special way. An example is the work of foreign insurers in Russia.
The operating conditions for branches of foreign insurance companies seem to be more stringent compared to other types of activities due to the desire of the Russian authorities to preserve and develop the national insurance market, and this requires strict regulation of the integration of foreign capital into this area.
The total quota for foreign capital participation in the authorized capital of insurance companies is 25%, and the share of foreign investors in the authorized capital of Russian insurers cannot exceed 49%.
In addition, foreign companies are prohibited from engaging in:
- life insurance;
- compulsory insurance (including state insurance);
- insurance of property related to government supplies and contract work for government purposes;
- insurance of property interests of municipal and state enterprises.
9 years after Russia’s accession to the WTO (August 22, 2012), foreign organizations will be able to create direct branches in Russia if the company’s assets as a whole are more than $5 billion as of the end of the year before filing an application to establish a branch.
Many people are also concerned about whether a branch of a foreign company can be a declarant. The Customs Code recognizes, among others, as declarants:
- foreign legal entities if they are official representative offices of foreign states or transport certain goods (in accordance with international agreements of the Russian Federation);
- foreign companies that have established a representative office on the territory of the Customs Union and import certain goods for the personal needs of the representative office.
Features of opening a representative office of a foreign company in Russia
A representative office is engaged in representing the interests of a legal entity and protecting them, but the answer to the question of whether a legal entity is a representative office of a foreign company will be negative.
Typically, the purpose of a representative office is:
- facilitating the work of the company’s head office in the Russian Federation;
- preparation of contracts with clients in Russia for the head office;
- advertising and promotion of goods, works, services of a foreign organization;
- marketing research;
- dissemination of information about the head office;
- searching for clients among Russians;
- development of business contacts;
- conflict resolution.
Representative offices of foreign organizations in Russia have limited goals: they cannot conduct foreign trade or economic activities and do not conclude transactions on their own.
The active development of representative offices in the Russian Federation is explained by a number of advantages inherent in this form of doing business by foreign companies in Russia:
- Availability of VAT benefits for rental premises (if the benefit is mentioned in an international agreement).
- Accounting is kept only to calculate tax liabilities, nothing more.
- Exemption from certain customs duties - during the period of accreditation in the Russian Federation, no fee is charged for the import of property required for the operation of the representative office.
- Simplified procedure for registering foreign labor - representative offices are not required to obtain permission to hire accredited foreign workers.
Work of a foreign organization in Russia without representation
Any representative of a foreign business, however, not only foreign, working in another country, strives to minimize his costs, so it is extremely important for him to know whether a foreign company can operate in Russia without a representative office. After all, even without establishing a representative office in Russia, foreign companies can derive income from activities on its territory, for example, by concluding contracts with domestic organizations directly. 
The Russian authorities are very well aware of this, so they have taken measures to indirectly tax the activities of foreign companies. Although they do not pay taxes (for example, Unified Agricultural Tax and property tax) as registered taxpayers, the Russian company with which they cooperate does this for them. In this situation, she will be the tax agent of the foreign partner.
A list of income of foreign companies from which taxes are paid through the source of payments has been compiled:
- Funds after division of property.
- Dividends from participation in Russian joint stock companies.
- Interest on debts of third parties.
- Profit from the sale of shares.
- Funds from the use of intellectual property on the territory of the Russian Federation (foreign films in Russian cinemas, for example).
- Revenue from international transportation (if there is at least one acceptance and dispatch point in Russia).
- Remittances from the sale or rental of personal property (the property must be the property of the company and be located in Russia).
One of the ways to reduce costs in such a situation is to register an individual entrepreneur instead of representing a foreign company by a resident of Russia, who will perform representative functions.
This is often more profitable in terms of taxation and is definitely simpler in terms of documentation. An agency agreement or a contract agreement is concluded with an individual entrepreneur, after which, according to the terms of the agreement, he begins to represent the interests of a foreign organization, receiving remuneration for this.
Where to register a separate division of a foreign company in Russia
Let's look at how to register a representative office of a foreign company in Russia. The registration procedure must certainly precede the start of activities of a foreign company. To do this, you need to contact MIFTS RF No. 47 for the city of Moscow: since 2015, it has been authorized to carry out accreditation of branches and representative offices of foreign companies on the territory of the Russian Federation.
If a separate division of a foreign company intends to carry out activities in the field of civil aviation, it should apply for accreditation to the Federal Air Transport Agency.
Representative offices of foreign credit companies must be accredited by the Bank of Russia (the Federal Tax Service of Russia, however, is responsible for issuing a certificate of entry into the state register of accredited representative offices).
Both in the case of aviation and credit companies, personal accreditation is required for foreigners planning to work in a branch or representative office established in the Russian Federation. This issue is dealt with by the Chamber of Commerce and Industry of the Russian Federation.
If a foreign firm (company) is going to open a representative office in Moscow, then this procedure, unlike that in other regions of the country, does not require the preliminary execution of a document confirming the approval of the location of a separate division on the territory of a constituent entity of the Russian Federation with local authorities.
Main stages of creating a foreign representative office in the Russian Federation
The procedure for registering credit institutions with foreign investments in Russia seems to be quite long and complex and consists of the following stages:
- preparation of necessary documentation;
- applying to the body that has the authority to accredit companies with the chosen line of activity, submitting documents (the procedure includes certification of the number of foreign personnel by the Chamber of Commerce and Industry);
- waiting for the issuance of permission to establish a representative office and a certificate of inclusion in the Consolidated State Register of Accredited Representative Offices;
- printing production;
- contacting the tax authorities for registration (for example, to open a representative office in Moscow, you need to contact the Moscow Tax Inspectorate No. 47);
- obtaining a document on registration in the statistical register of Rosstat;
- registration with extra-budgetary funds;
- opening a bank account and notifying the tax service about it.
Accreditation of foreign companies in Russia
Registration of a representative office or branch of foreign legal entities on the territory of the Russian Federation is impossible without first undergoing accreditation.
Accreditation is recognition and confirmation of the legal status of a separate division of a foreign organization.
Today in Russia there is no single body that would deal with accreditation, and therefore this responsibility is delegated to various government agencies, depending on the field of activity of the foreign company.
Until 2015, accreditation of foreign representative offices and branches was carried out by:
- Chamber of Commerce and Industry of the Russian Federation.
- State Registration Chamber under the Ministry of Justice of the Russian Federation.
- Ministry of Justice of the Russian Federation.
- Ministry of Foreign Affairs of the Russian Federation.
- Bank of Russia.
- Federal Aviation Service of the Russian Federation.
Since 2015, the functions of the accrediting body have been transferred to the Federal Tax Service (MIFTS No. 47).
Registration of representative offices of foreign companies for tax registration
Any corporate entities, including representative offices, branches and organizations themselves, legally capable and established under the laws of foreign states, are recognized as legal entities for tax purposes. The creation of a permanent representative office is not considered a corporate form of division: it can be recognized for tax accounting purposes as a branch, representative office, commercial enterprise of legal entities or individuals working on behalf and in the interests of a foreign company.
A separate division of the company, which will operate on the territory of Russia, is required to register with the registering tax authorities within 30 days. This procedure was approved by the Ministry of Finance of the Russian Federation, but its violation does not provide for punishment, including a fine.
Without exception, all branches and representative offices of foreign companies are required to register with the tax service of the region of the Russian Federation in which its activities are actually carried out or vehicles and real estate are located.
If work is carried out in several areas at once, in each of them you need to be registered with the local Federal Tax Service inspectorate.
Changing the legal address of a representative office of a foreign company involves adjusting the registration data: Federal Tax Service employees must be notified of this in a timely manner. If we are talking about transferring a company to the territory of another constituent entity of the Russian Federation, it will have to be removed from tax registration and re-registered with the Federal Tax Service of the region that the company has chosen to carry out commercial activities.
Important: if the representative office/branch or the foreign company itself has changed or will change the information that is included in the Consolidated Register, the management of the separate division is obliged to notify the registration authority about this and make changes to the register no later than 15 calendar days from the date the relevant information ceases to be relevant.
It should be noted that the basis for registration with the Federal Tax Service of Russia is not only the opening of a branch of a foreign company in the Russian Federation, this can include the purchase of real estate or vehicles in Russia, including those imported into the country, opening accounts in Russian banks and making profit from sources In Russian federation. 
During the registration process, the tax authority assigns a foreign company both an INN and a KPP, but sometimes the KIO (foreign organization code) is indicated instead of the INN. Both codes are indicated in the certificate issued upon completion of the registration procedure (in Form 2401IMD).
Registering a representative office of a foreign company with extra-budgetary funds
After a foreign company has opened its representative office in the Russian Federation and settled all relations with the tax service, it must register with extra-budgetary funds - the Pension Fund and the Social Insurance Fund, for which the law allows 30 days from the date of completion of registration.
The registration procedure takes 5 days, but if any of the required documents are not submitted, the process will drag on for a longer period due to the necessary information request in such a situation from the Federal Tax Service and the Rosstat branch.
Upon request, a representative office/branch is assigned, like all legal entities in Russia, statistics codes:
- OKPO,
- OKOGU,
- OKATO,
- OKVED,
- OXF,
- OKOPF.
There is no need to submit any documents to the Compulsory Health Insurance Fund (MHIF) yourself: information about the branch/division will be provided by the Pension Fund.
Making a seal for a branch/representative office of a foreign organization in the Russian Federation
The seal of a representative office of a foreign company cannot be made on the basis of the preferences and decisions of the founders or heads of separate divisions on the territory of the Russian Federation. A sketch of the seal of the branch or representative office being created must first be registered with the MIFTS of the Russian Federation, for which the following set of documents will need to be prepared:
- Application for production of a seal.
- Document approving the sketch (for example, an order from the head of a separate division).
- A notarized copy of the permission to establish a representative office.
- A notarized copy of the certificate confirming the entry of information about a division of a foreign company into the Consolidated Register of Accredited Institutions.
- Regulations on the branch or representative office (notarized copy).
- A copy of the head of the department.
- Power of attorney issued to the head of a separate division.
The production of the seal will begin only after it has been assigned a number in the City Register of Stamps (issued, as a rule, by the manufacturer - an organization accredited by the Moscow Registration Chamber). You will need to present two notarized copies:
- Permission to establish a separate division of a foreign company.
- Certificate of inclusion in the Consolidated State Register.
The entire procedure for assigning a number and making a seal takes no more than 3 days. The minimum cost of such a service is 100 rubles and depends on the equipment, method and urgency of printing.
Opening a current account in a Russian bank
To complete the procedure for registering a branch or representative office of a foreign company in Russia, it is necessary to open a current account in a Russian bank. Authorized banks open accounts on the basis of concluded bank account agreements on behalf of accredited representative offices. 
Opening bank accounts for the purpose of carrying out fiscal operations by separate divisions of foreign organizations requires the submission of additional documents:
- regulations on branch/representative office;
- power of attorney issued to the head of a separate division.
In addition to the papers listed above, to open a bank account, a foreign legal entity will also need to collect a standard set of documents. The authority to open accounts (ruble and foreign currency) is with the head of a separate division of a foreign company.
To find out about the complete set of necessary documents for opening an account for a division of a foreign company in a Russian bank, read the information about.
Necessary documents for opening a representative office of a foreign company in Russia
A separate division of a foreign company can begin its activities only after submitting the required package of documents to the Federal Tax Service (MIFTS No. 47) - for accreditation, to the tax authorities - for tax registration and to extra-budgetary funds - also for registration.
Documents to be collected for opening a branch of a foreign legal entity:
- An extract from the register of legal entities of the state in whose territory the organization is registered, a certificate of incorporation (or another document that contains information about the registration number, date, place of registration, registration authority and is issued in a foreign state upon registration).
- The decision to establish a branch/representative office or a copy of the agreement on the basis of which work is carried out on the territory of Russia (signed by the head of the branch or other authorized representative).
- A power of attorney issued to the appointed head of a new branch/representative office, giving him the appropriate powers (usually we are talking about a general power of attorney, which abroad is unlimited, but by the Russian authorities it is recognized as valid for only 1 year).
- An ordinary power of attorney for a representative of a foreign company who submits and receives documents (if he is not the head of a branch).
Additional set of papers for presentation to the accrediting body:
- Application in writing to MIFNS No. 47 for Moscow (Form 15AFP) signed by the head of the branch/representative office or a person authorized to certify documents.
- Constituent documents (charter) of a foreign organization.
- A certificate received from the authorized body of the state in which the head office of the foreign company is opened regarding the registration of the organization as a tax payer (must contain the taxpayer code or its equivalent).
- A copy of the identity card and certificate of registration with the tax authority (TIN, if available) of the head of the representative office or branch.
- Card of information about a representative office or branch of a foreign organization.
- Letters of recommendation from Russian business partners (minimum 2).
- A document proving that the location of a branch/representative office of a foreign company outside the borders of Moscow has been agreed upon with local executive authorities.
An additional set of documents to be presented to the registration authorities for registration with the tax authority:
- Application form for registration of a foreign organization with the tax authorities (2001I).
- Regulations on the branch or representative office.
- Charter of the foreign parent company.
- A certificate from the tax service of the state in which the head office of the foreign company is located, stating that the company in question pays taxes. Must contain the taxpayer code or an analogue that replaces it (no more than six months should pass from the moment of its issuance until presentation to the Federal Tax Service of Russia).
- Permission to establish a branch or representative office.
- Certificate of inclusion in the Consolidated Register of Accredited Representative Offices.
Russian tax authorities have no right to demand other documents.
Additional set of papers for submission to extra-budgetary funds:
- Application for registration with extra-budgetary funds.
- Regulations on the branch/representative office.
- A copy of the certificate of registration with the tax service in Russia (certified by a notary).
- Permission to establish a branch/representative office in the Russian Federation.
- Certificate of entry of information about the branch/representative office into the Consolidated Register of Accredited Representative Offices.
- Statistics codes assigned to a division of a foreign company.
- Documents confirming information about the legal address (usually a letter of guarantee).
- An order appointing an accountant or a certificate confirming the absence of an accountant in a department of a foreign organization.
Documents provided by foreign companies to Russian government agencies are valid for 12 months from the date of issue.
The documents must indicate the following information about the foreign company and its divisions established on the territory of the Russian Federation (if such information is not in the papers, they must provide it to the government services of the Russian Federation in the form of additional data):
- direction of activity of the organization and its divisions;
- location of the foreign company;
- contact details of the company itself and its divisions located in Russia (e-mail, Internet resource address, telephone);
- information about the head of the organization, the founder of the head office (as an individual or legal entity - registration number, day of registration, name and address of the registering authority, tax payer code), head of the representative office or branch (passport details, registration address, date and place of birth, TIN );
- full name of the servicing banking institution, current account number, SWIFT code;
- size of the authorized capital;
- the number of employees and the planned number of foreign employees of the branch/representative office in Russia;
- income for the previous year;
- Russian business partners.
Legalization and translation of documents of foreign companies
Each foreign document must have an apostille or a genuine mark of legalization at a consular office abroad.
All papers are submitted to Russian government agencies translated into Russian, and the translation must be made by an organization accredited for this purpose, and then certified by a notary or the consulate of the country of origin.
Powers of attorney and decisions must be notarized for the signatures and powers of the signatories contained therein.
Russia has entered into agreements with some states that abolish the legalization of documents. If the country of incorporation is a party to such an agreement, it does not need to legalize papers when doing business in the Russian Federation.
Cost and timing of the procedure for registering a foreign representative office in the Russian Federation
For the accreditation of each branch opened in Russia, the head office of a foreign organization will have to pay a state fee, the amount of which is 120 thousand rubles for any period of accreditation. There is no fee for accreditation of a representative office.
The processing time for documents will be:
- 18 working days at the State Registration Chamber;
- 5-10 working days at the Chamber of Commerce and Industry.
The additional payment to the State Registration Chamber for urgency (readiness of the certificate within 5 days) is 15 thousand rubles; the Chamber of Commerce and Industry does not carry out urgent procedures.
In addition, the services of the State Registration Chamber for issuing a certificate of accreditation of a branch or representative office of a foreign company are paid, the amount of payment varies depending on the period of accreditation:
| Cost of issuing an accreditation certificate (thousand rubles) | ||
|---|---|---|
| Fees for the State Registration Chamber | ||
| Duration of accreditation (years) | Branch | Representation |
| 1 | 20 | 35 |
| 2 | 35 | 65 |
| 3 | 50 | 80 |
| 5 | 75 | - |
| Chamber of Commerce and Industry fees | ||
| 1 | - | about 90 ($1500) |
| 2 | - | about 150 ($2500) |
| 3 | - | about 210 ($3500) |
The Russian tax authorities register a foreign company as a taxpayer within 5 working days.
The process of obtaining permits to hire foreign labor by a branch of a foreign company can take 3-12 weeks. The deadlines depend on the type of work permit.
Head of a foreign separate division, his rights and obligations
A foreign citizen may be appointed to the position of head of a branch or representative office of a foreign organization located in Russia only after. It is also necessary to obtain a special permit to attract foreign personnel to work in a branch of a foreign company (can be issued only after completion of the accreditation procedure).
Representing the interests of a foreign legal entity, protecting them, executing orders from the head office, ensuring the functioning of a separate division on the territory of Russia are the main tasks of the head of a branch/representative office of a foreign company.
The executive body (general director) of the head office must issue an order appointing an individual to the position of manager, with whom an employment contract is concluded and the terms of remuneration for the work are negotiated.
The salary of the head of a representative office of a foreign company will depend on the size of the foreign founding organization and the scope of responsibilities assigned to him.
The head of a separate division of a foreign company performs any actions on the basis of the power of attorney issued to him and the regulations on the branch/representative office on behalf of the founding organization.
The text of the regulations on the branch/representative office, approved by the management body of the foreign company, sets out the procedure for managing the branch/representative office, describing:
- control procedure in detail;
- the method, rules and timing of communicating orders from company managers to department heads;
- clear instructions about who the manager reports to and to whom he reports;
- procedure for checking the work of managers.
The power of attorney is issued personally to the head, and not to the department as a whole, and it states:
- date of registration;
- list of powers of the manager;
- his right to resolve issues that arise in the process of operational and ongoing work;
- his right to sign contracts, make transactions (the amounts of contracts may be limited, restrictions on the subject of the agreement may be declared, etc.);
- the right of the manager to open a current account in a banking institution (ruble or foreign currency), manage money;
- his right to issue powers of attorney and transfer his powers in case of unforeseen situations, the conditions for such actions.
The change of the head of the representative office is not a personal decision of the founders of the head office; the Russian structures that control the activities of the division must be notified about this event. Information about this must be documented; on its basis, appropriate changes will be made to the Consolidated Register of Accredited Units. 
Accounting and reporting of foreign representative offices
After registration, a separate division of a foreign organization is required to maintain accounting records, namely, prepare internal reports for the head office. It is prepared in the language and in the manner prescribed by the laws of the state in which the parent company is established.
Closing a foreign representative office or branch in Russia
Liquidation of a representative office or branch of a foreign company is a procedure aimed at terminating the activities of a division and deregistering it from the tax service.
The closure of a representative office of a foreign organization in Russia must take place according to the rules provided for by the current legislation of the Russian Federation. 
The grounds for terminating the work of a representative office may include:
- Expiration of accreditation, the renewal of which was not taken care of in time.
- Closing the head office in the state where it was registered.
- Systematic violations of Russian laws by divisions of a foreign organization and the subsequent decision of the accreditation body to liquidate them.
- Termination of an international agreement between Russia and the state where the company that opened a representative office in the Russian Federation on the basis of this agreement is registered.
- The decision to close a representative office made by the founders of the parent company.
Before starting the procedure for closing a separate division of a foreign organization, you must:
- Write an application for liquidation (Form 15PFP), which is certified by the signature of the head of the branch or an authorized person and which contains the following information:
- reasons for termination of business activities;
- registration number;
- day of accreditation;
- validity period of the permit.
- Fill out an application in form 11SN-Accounting.
- Make a notarized copy of the official minutes of the meeting’s decision to close the separate division.
- Prepare constituent documents and company charter.
- Take up the minutes of all meetings during which it was decided to open a branch/representative office and appoint a manager.
- Issue a certificate confirming the closure of a current account at a banking institution.
- Issue a power of attorney for the head of the branch/representative office.
- Execute a power of attorney for the foreign firm's attorneys, who will be entrusted with carrying out the liquidation procedure on behalf of the head office.
- Raise the previously received certificate of registration of the unit in Russia indicating:
- changes made;
- Taxpayer numbers.
To deregister with the Pension Fund you will additionally need:
- application in the form of the Pension Fund of Russia;
- all reports to the Pension Fund on the closing day (2 copies of originals and copies in electronic format);
- an extract or information sheet from the tax office;
- notification of deregistration with the Federal Tax Service.
To deregister with the Social Insurance Fund, you will additionally need:
- application in the form approved by order No. 576 n dated October 25, 2013;
- liquidation report (Form 4 FSS);
- notification of the amount of insurance premiums;
- insurance certificate (or notice);
- a letter of refusal of the remaining funds in the account in favor of the Russian treasury (if the money is not withdrawn to the company’s account).
To deregister with Rosstat you must provide:
- notification with OKTEI codes;
- a letter requesting that the unit be deregistered.
Step-by-step instructions for liquidating a branch of a foreign company located in Russia:
- Organizing a meeting of the founders of the parent company and making a decision on liquidation.
- Preparation of all required documents, including income declaration and calculation of the full tax amount.
- Notification of interested parties, including employees.
- Conducting personnel events.
- Sending a notification to MIFTS No. 47 about deregistration and termination of the division’s operation (within no more than 15 days from the date of the decision on liquidation).
- Notification of the regional branch of the Pension Fund about the closure of a branch/division (within 15 days from the date of the decision).
- Notification of the local unit of the Social Insurance Fund about closure (within the same time frame as MIFTS, Pension Fund).
- Passing the reconciliation process at MIFTS:
- in the input department (with presentation of an income statement);
- in the department of desk audits (with presentation of an extract on transactions on the current account);
- in the department for working with taxpayers and the debt settlement department (with presentation of a register of information on the income of the department’s employees and reconciliation of tax payments);
- Submitting an application to the MIFTS to complete the closure procedure.
- Deregistration with the Pension Fund of Russia.
- Deregistration from the Social Insurance Fund.
- Receiving notification of deregistration from Rosstat.
- Closing a bank current account.
It takes 14 days to review documents and applications for closing a separate division from the date of submitting a set of papers to the tax authorities; the total liquidation period is approximately 30 days.
If inspections are necessary, the process is delayed until their final completion and lasts about 3 months.
The Pension Fund announces its decision within 10 days, the Social Insurance Fund only needs a week.
In general, the entire process of closing a branch or representative office, starting with the preparation of documents and ending with the issuance of a decision by tax authorities and extra-budgetary funds, takes about six months.
How a foreign company can open a representative office or create a branch in Russia: Video
Permanent representative office of a foreign organization- branch, representative office, department, bureau, office, agency, any other separate division or other place of activity of a foreign organization through which it regularly carries out business activities on the territory of the Russian Federation.
The term "Permanent establishment" in English: Permanent establishment.
A comment
The taxation regime for foreign organizations operating in Russia depends on whether its activities are recognized as carried out through a permanent establishment or not.
Thus, the profit of foreign organizations is recognized (Article 247 of the Tax Code of the Russian Federation):
For foreign organizations operating in the Russian Federation through permanent missions - income received through these permanent missions, reduced by the amount of expenses incurred by these permanent missions;
For other foreign organizations - income received from sources in the Russian Federation. The income of these taxpayers is determined in accordance with Article 309 of this Code.
The signs of a permanent establishment are specified in Art. 306 of the Tax Code of the Russian Federation "Features of taxation of foreign organizations. Permanent representative office of a foreign organization."
Foreign organizations operating through permanent establishments are subject to income tax almost like Russian organizations, based on profits calculated as income reduced by the amount of expenses incurred. The specifics of calculating taxable profit of such organizations are determined by Art. 306 - 308 Tax Code of the Russian Federation.
It should be noted that the concept of “Permanent Representative Office” is not associated with the official registration of a foreign organization. Thus, a foreign organization that has not registered a branch may be recognized by the tax authorities as having a permanent representative office if the conditions specified in Art. 306 of the Tax Code of the Russian Federation.
Example
A foreign organization imports goods into Russia into a rented warehouse and sells goods from this warehouse to Russian buyers. Contracts with Russian buyers are concluded on behalf of a foreign organization.
Such activities of a foreign organization are recognized as a permanent establishment.
If Russia has a valid agreement with the country of a foreign organization, then the provisions of this agreement must be taken into account (by virtue of Article 15 of the Constitution, the norms of the agreement have higher legal force than the Tax Code of the Russian Federation). Such agreements usually describe the features of recognition of a permanent establishment (usually in Article 5).
Definition from regulations
Russian Tax Code
Article 306. Peculiarities of taxation of foreign organizations. Permanent representative office of a foreign organization
1. The provisions of Articles 306 - 309 of this Code establish the specifics of tax calculation by foreign organizations carrying out business activities on the territory of the Russian Federation, if such activity creates a permanent representative office of a foreign organization, as well as tax calculation by foreign organizations not related to the activity through a permanent representative office in the Russian Federation, receiving income from sources in the Russian Federation.
2. For the purposes of this chapter, a permanent representative office of a foreign organization in the Russian Federation means a branch, representative office, division, bureau, office, agency, any other separate division or other place of activity of this organization (hereinafter in this chapter - the branch), through which the organization regularly carries out business activities on the territory of the Russian Federation related to:
use of subsoil and (or) use of other natural resources;
carrying out work stipulated by contracts for the construction, installation, installation, assembly, commissioning, maintenance and operation of equipment, including gaming machines;
sale of goods from warehouses located on the territory of the Russian Federation and owned or leased by this organization;
carrying out other work, providing services, conducting other activities, with the exception of those provided for in paragraph 4 of this article.
For the purposes of this Code, the activities of a foreign organization on the territory of the Russian Federation also include activities carried out by a foreign organization - operator of a new offshore hydrocarbon deposit and associated with the production of hydrocarbons at a new offshore hydrocarbon deposit.
3. A permanent representative office of a foreign organization is considered established from the beginning of regular business activities through its branch. However, the activity of creating a branch does not in itself create a permanent establishment. A permanent establishment ceases to exist from the moment of termination of business activities through a branch of a foreign organization.
When using subsoil and (or) using other natural resources, a permanent representative office of a foreign organization is considered established from the earlier of the following dates: the date of entry into force of the license (permit) certifying the right of this organization to carry out the relevant activity, or the date of the actual start of such activity. If a foreign organization performs work, provides services to another person who has the specified license (permit) or acts as a general contractor for a person who has such a license (permit), when resolving issues related to the formation and termination of the existence of a permanent representative office of this foreign organization, a procedure similar to that established by paragraphs 2 - 4 of Article 308 of this Code is applied.
4. The fact that a foreign organization carries out activities of a preparatory and auxiliary nature on the territory of the Russian Federation in the absence of signs of a permanent establishment provided for in paragraph 2 of this article cannot be considered as leading to the formation of a permanent establishment. Preparatory and auxiliary activities, in particular, include:
1) use of facilities solely for the purposes of storage, display and (or) delivery of goods belonging to this foreign organization, prior to the commencement of such delivery;
5. The fact of ownership by a foreign organization of securities, shares in the capital of Russian organizations, as well as other property on the territory of the Russian Federation in the absence of signs of a permanent establishment provided for in paragraph 2 of this article, cannot in itself be considered for such a foreign organization as leading to the formation of a permanent representative offices in the Russian Federation.
6. The fact that a foreign organization has concluded a simple partnership agreement or another agreement involving joint activities of its parties (participants), carried out in whole or in part on the territory of the Russian Federation, cannot in itself be considered for this organization as leading to the formation of a permanent representative office in the Russian Federation.
7. The fact that a foreign organization provides personnel to work on the territory of the Russian Federation in another organization in the absence of signs of a permanent representative office provided for in paragraph 2 of this article cannot be considered as leading to the formation of a permanent representative office of the foreign organization that provided the personnel, if such personnel acts exclusively on behalf of and in the interests of the organization to which he was sent.
8. The implementation by a foreign organization of operations for the import into or export from the Russian Federation of goods, including within the framework of foreign trade contracts, in the absence of signs of a permanent establishment provided for in paragraph 2 of this article, cannot be considered as leading to the formation of a permanent establishment of this organization in Russian Federation.
9. A foreign organization is considered as having a permanent establishment if this organization supplies from the territory of the Russian Federation goods belonging to it, obtained as a result of processing in the customs territory or under customs control, and also if this organization carries out activities that meet the criteria , provided for in paragraph 2 of this article, through a person who, on the basis of contractual relations with this foreign organization, represents its interests in the Russian Federation, acts on the territory of the Russian Federation on behalf of this foreign organization, has and regularly uses the authority to conclude contracts or agree on their essential terms on behalf of this organization, while creating legal consequences for this foreign organization (dependent agent).
A foreign organization is not considered to have a permanent establishment if it operates on the territory of the Russian Federation through a broker, commission agent, professional participant in the Russian securities market or any other person acting as part of its main (ordinary) activities.
10. The fact that a person operating on the territory of the Russian Federation is interdependent with a foreign organization, in the absence of signs of a dependent agent provided for in paragraph 9 of this article, is not considered as leading to the formation of a permanent representative office of this foreign organization in the Russian Federation.
Tax Code of the Russian Federation (TC RF);
Tax Code, N 117-FZ | Art. 306 Tax Code of the Russian Federation
Article 306 of the Tax Code of the Russian Federation. Features of taxation of foreign organizations. Permanent representative office of a foreign organization (current version)
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Commentary to Art. 306 Tax Code of the Russian Federation
1. Analysis of the rules of paragraph 1 of Art. 306 shows that:
1) and the provisions of Art. 306, and the norms of Art. 307 - 309 of the Tax Code (see commentary to them) establish the specifics of calculating corporate income tax:
a) foreign organizations. The latter include foreign legal entities, companies and other corporate entities (including those that are not legal entities) with civil legal capacity, created in accordance with the legislation of foreign states, international organizations, as well as branches and representative offices of foreign organizations and international organizations created on the territory of the Russian Federation (Article 11 of the Tax Code);
b) foreign organizations carrying out business activities on the territory of the Russian Federation (i.e., independent activities carried out at their own risk, aimed at systematically obtaining profit from the use of property, sale of goods, performance of work or provision of services, Article 2 of the Civil Code). If such activity creates:
Permanent representation of a foreign organization on the territory of the Russian Federation (i.e. bureau, office, agency, see the concept of “permanent establishment” below);
Construction site on the territory of the Russian Federation (see commentary to Article 308 of the Tax Code);
2) they define the specifics of calculating corporate income tax by foreign organizations:
a) whose activities are not related to the activities of their permanent representative offices on the territory of the Russian Federation;
b) who, nevertheless, derive (receive) income from sources in the Russian Federation (for cases when income is considered received from sources in the Russian Federation, see commentary to paragraph 1 of Article 309 of the Tax Code);
3) rules art. 306 and the norms of Art. 307 - 309 of the Tax Code are devoted specifically to the peculiarities of calculating corporate income tax. It means that:
a) the general rules for calculating corporate income tax cannot be completely ignored: they apply in this case, but only to the extent that does not contradict the rules of Art. 306 - 309 NK;
b) the rules for determining the tax base, accounting for income and expenses and other taxation issues (for which the provisions of Articles 306 - 309 of the Tax Code do not provide for certain specifics) are also subject to application in relation to profits (income) received by foreign organizations.
2. Specifics of the rules of paragraph 2 of Art. 306 is that:
1) they provide the legal definition of a permanent representative office of a foreign organization in the Russian Federation. In this regard, you need to pay attention to a number of important circumstances:
a) the concepts of “branch”, “representative office”, given in Art. 55 of the Civil Code (and in other norms of the Civil Code) do not coincide with the concepts of “branch” and “permanent representative office” used in Art. 11, 306 NK;
b) the concepts given in Art. 306, do not coincide with the concepts of “branch”, “permanent representative office” and “other separate division of the organization” used in Art. 11 NK;
c) for the purposes of taxation with corporate income tax, it is necessary to be guided by the concepts of “branch” and “permanent representative office” used in Art. 306 - 309 NK. They take precedence over the rules and art. 55 Civil Code, and Art. 11 of the Tax Code (as special rules before general rules): the conclusion was made on the basis of a systematic analysis of Art. 2, 55 Civil Code and Art. 11, 306 NK;
2) for income tax purposes, a permanent representative office of a foreign organization in the Russian Federation includes:
a) branches, representative offices and other separate divisions of foreign organizations:
Created in accordance with the established procedure on the territory of the Russian Federation (including on the territory of the continental shelf, economic and exclusive zones of the Russian Federation, other components of the territory of the Russian Federation, and not only on the land territory of the Russian Federation);
At the location of which stationary jobs have been created (i.e. jobs created for a period of more than one calendar month);
b) branches, bureaus, offices, agencies, etc. separate divisions of a foreign organization (as is known, Article 55 of the Civil Code of this kind of territorially separate divisions is unknown). In practice, the question arose: how can these separate divisions carry out transactions on the territory of the Russian Federation? Of course, receiving income from sources in the Russian Federation (not to mention making profit from business activities on its territory) involves the completion of various transactions. And the fact that the Tax Code ignores the rules of Art. 153 of the Civil Code (that only actions of citizens and legal entities aimed at establishing, changing, terminating civil rights and obligations are recognized as transactions, see more about this in the book: Guev A.N. Article-by-article commentary on part one of the Civil Code of the Russian Federation. 2nd edition. M.: INFRA-M, 2001. pp. 293 - 396), creates significant difficulties in practice. However, until the legislator makes changes and additions to Art. 153 of the Civil Code (or, conversely, in Article 11, 306 of the Tax Code) we must proceed from the fact that for tax purposes with corporate income tax, transactions carried out by permanent representative offices of a foreign organization in the Russian Federation (for example, in accordance with a power of attorney issued to the head of the permanent representative office) ), are subject to accounting;
c) other places of activity of a foreign organization (for example, construction sites). In practice, the question arose: do the rules of Art. 306 - 309 Tax Code in cases when the functions of such permanent missions are performed by individuals? Systematic interpretation of Art. 207, 208 Tax Code and Art. 246, 306 of the Tax Code does not allow to answer this question positively: the fact is that the mentioned individuals calculate and pay another tax - personal income tax; 306 - 309 of the Tax Code. In this case, the object of taxation is recognized as the income of a foreign organization received from business activities on the territory of the Russian Federation through a permanent representative office, and other income received by a permanent establishment (clause 1 of Article 307 of the Tax Code), as well as expenses of a permanent establishment...
The calculation of income tax by foreign organizations carrying out business activities on the territory of the Russian Federation through permanent representative offices is carried out in the manner established by Articles 306 -309 of the Tax Code. In this case, the object of taxation is recognized as the income of a foreign organization received from business activities on the territory of the Russian Federation through a permanent representative office and other income received by a permanent establishment (clause 1 of Article 307 of the Tax Code), and the expenses of a permanent establishment in a situation...