Doing Business in Russia

8 Doing Business in Russia KPMG Starting a Business in Russia Rostov-on-Don Legal structures for starting a business in Russia Investors often face the problem of deciding which legal structure they should choose for their business in Russia. Below you can find guidance on establishing the following: - CoBusinesses conducting direct sales Distributorship contract businesses Representative offices or branches Russian subsidiaries Direct sales A foreign legal entity (FLE) that sells goods directly from abroad to customers located in the Customs Union (in particular, in Russia) would not be subject to Russian taxes and would not be required to establish a presence in Russia via any corporate structures. The Russian customers are responsible for clearing the imported goods through customs and for paying customs duties and taxes (import VAT, excise), as well as customs processing fees. Import duty rates are set in the Unified Customs Tariff (UCT) of the Customs Union of Russia, Belarus and Kazakhstan. Generally, these import duty rates vary from 5% to 20% and apply to goods imported from countries that enjoy 'most favoured nation' status with Russia. If goods are imported from developing countries with most favoured nation status, then the customs rates can be reduced. Import VAT is payable on the customs value of the imported goods, and increases according to the amount of the import customs duty. Technological equipment not manufactured in Russia can be exempted from import VAT when imported into Russia. Technological equipment imported into the Customs Union is also likely to be exempted from import customs duties, provided certain requirements are met. Some goods imported into the Customs Union are subject to non-tariff regulations (e.g. certification, licensing, quotas, etc.). Currently, legislation on non-tariff regulations is being developed in both the Customs Union and Russia. Customs clearance fees depend on the cost of the services rendered by the customs authorities, but cannot exceed RUB30,000 (USD450). A 'disposal charge' is also payable on imported vehicles. The rates of this charge can vary depending on the engine power, vehicle weight and seating capacity. Since 2012, Belarus, Kazakhstan, and Russia have formed a single economic zone. These countries' economies are now more tightly integrated than they were under the Customs Union, and freedom of movement for goods, services, capital and labour is ensured, along with guaranteed equal treatment for legal entities. In 2012, Russia joined the World Trade Organisation (WTO) and became a full member. As part of joining the WTO, Russia now has certain commitments ©2016 JSC KPMG. All rights reserved.

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