REGISTRATION OF BRANCH OR REPRESENTATIVE OFFICE

REGISTRATION OF BRANCH OR REPRESENTATIVE OFFICE IN RUSSIA

Introduction

Foreign companies may operate in Russia without creating a new entity by establishing a representative office or a branch. The advantages of operating through a representative office or a branch are:

• Has fewer administrative, tax and accounting obligations.
• Is considered to be non-resident for currency control purposes.
• May be able to benefit from a relevant double tax treaty.

A branch and a representative office share four attributes under Article 55 of the Russian Civil Code:

• They are subdivisions of a legal entity;
• They are physically separated from their parent legal entity;
• They are located away from the headquarters of the parent organization; and
• Their mission is to represent as well as protect the interests of the parent organization.

The powers are determined by the parent organization. Generally speaking, the powers of a branch are more extensive than those of a representation office, that is to say that the traditional function of a representative office is to represent and protect the interests of the parent organization whereas a branch in addition to performing these two functions, also conducts the general business of the parent organization on its behalf. For example, a branch office of a bank can conduct banking transaction just as much as the parent office but the representative office cannot.

Since neither a branch nor a representative office is a legal entity, responsibility for all of their actions may be borne by the parent organization. The legal status of both offices has the following features:

• Both offices operate on the basis of Regulations adopted by the parent organization;
• The respective heads of both offices are appointed by the head office of the appropriate legal entity and they act on the basis of a power of attorney issued to them by the head office;
• The existence of both offices shall be stipulated in the foundation document of the parent organization;
• Both offices are deemed formed and thus acquire legal status from the time they are recorded in the state register of legal entities;
• All property used by either office belongs to the parent legal entity;
• Neither one of these two offices may be transformed into an independent legal entity by the parent legal organization.

Registration of a Representative Office:

A license from a competent authority is necessary to establish a representative office in the Russian Federation (“RF”). The Chamber of Commerce and Industry of the Russian Federation and the State Registration Chamber of the Russian Ministry of Justice have the authority to accredit foreign representative offices. A representative office can be accredited for a period of 1, 2 or 3 years that can be subsequently extended.

The following documents should be submitted in order to register a representative office:

1. A written application for a license to establish a representative office in the Russian Federation (executed on the letterhead of the foreign company, signed by the managing person and sealed with the seal of the foreign company. The application should contain information on the name of the foreign company, its date of incorporation, address, main business, purpose of establishing a representative office in Russia and information on business cooperation with Russian partners and its prospects);
2. The articles of association of the foreign company. If the legislation of the registering jurisdiction does not require articles of association, the foreign company should confirm that by a note from the registering authority;
3. A certificate of registration of the foreign company or a note from a trade (bank) register (the document will be considered valid for 6 months from the date of issue);
4. A certificate of solvency from a bank servicing the foreign company in its country of incorporation (the document will be considered valid for 6 months from the date of issue);
5. The decision of the foreign company to establish a representative office in Russia;
6. A general power of attorney with all the necessary powers for the Manager of the representative office;
7. A power of attorney for the person in charge of conducting the accreditation procedures in the State Registration Chamber;
8. The Regulations of the representative office;
9. A document that certifies the address of the representative office in the Russian Federation;
10. Letters of credence from Russian business partners (at least two letters drafted on company letterhead in a free form, signed by the managing persons and sealed should be produced);
11. A document certifying the consent of the local authorities regarding the location of a representative office (submitted only if the representative office is established in Moscow);
12. A completed form with information about the representative office (two copies of the form have to be completed in typewritten form and signed by the attorney of the foreign company and sealed by the company seal).
13. A letter, which approves the registration of parent entity in tax office in the country of its registration.

Foreign legal documents are only accepted if they bear authentic marks that they have been legalized or apostilled, unless the contrary is provided in an international treaty of which the Russian Federation is a party to. A Russian translation of those documents, certified by a notary public or in a Russian Consulate should be attached to the originals.

In the chamber, simultaneously with its accreditation, the representative office is included in the state register.

This procedure is obligatory for all representative offices, it does not matter when and where it was accredited. The certificate of inclusion in the state register confirms the official status of the representative office and it is needed for opening bank accounts, registering with tax authorities, obtaining Russian visas and custom procedures.

If it is necessary, and on the approval of the accreditation authorities, the representative office has a right to open branches in different regions.

It is necessary to take into consideration that in order to obtain the permission to open a representative office outside Moscow, one should have a preliminary agreement with the local executive authorities on the question of its location.
Registration of a branch

The main requirements which refer to the establishment of branches of foreign entities are set out in the Law “Foreign Investments in Russian Federation” which came into force on 2 of June 1999 (Art. 21, 22).

A branch is created for the purpose of running a business on the territory of the Russian Federation which is identical to the business run by the foreign company outside the Russian Federation and it can only be liquidated by a decision of the foreign company.

State control of the creation, monitoring of activities and liquidation of branches is observed by the obligatory accreditation of branches in the State Registration Chamber, a sub-division of the Department of Justice of the Russian Federation. A branch can be accredited for a period of 1 to 5 years that can be subsequently extended.

The list of documents required for the accreditation of branches is identical to the list required for the accreditation of representative offices.

The certificate of inclusion in the state register confirms the official status of the branch/representative office and it is needed for opening bank accounts, registering with tax authorities, obtaining Russian visas and custom procedures, etc.

Registration can take approximately four weeks to complete, although there is an accelerated procedure available (for an additional fee payable to the authorities) which reduces this to two weeks. In order to perform fully fledged activities after accreditation it is necessary to carry out the following actions, which can take approximately three weeks to complete:

1. To register with the tax authorities;

2. To register with off-budget state funds of the RF;

3. To register in The State Statistics Committee of the Russian Federation;

4. To open bank accounts in a Russian bank (foreign and/or ruble currency accounts);

5. To register a seal.