What are the basic advantages and disadvantages during the setting up of LLC with foreign investments or foreign company Branch / Representative office?

Advantages / Disadvantages

Branch / Representative Office

LLC with foreign investments

Setting up cost

«-» More than LLC

«+» Less than Branch / Representative office

Setting up procedure and terms

«-» More than LLC

«+» Less than Branch / Representative office

Usage of conventional tax system

«-» Conventional tax system cannot be used

«+» Conventional tax system can be used subject to the requirements of Tax legislation of Russian Federation

Commercial activity arrangement on the territory of RF

«+/-» Only Branch of the company has right to arrange commercial activity on the territory of RF. Representative office of a company cannot arrange any commercial activity.

«+» LLC can arrange commercial activity

Shutting down/Liquidation cost

«+» Less than LLC

«-» More than Branch / Representative office

Shutting down/liquidation procedure and terms

«+» Less than LLC

«-» More than Branch / Representative office

Tax benefits

«+» VAT benefits are provided in rent of premises part on condition if the similar benefits are specified in international agreement.

«-»Benefit is not provided

Tax benefits

«+» During the building site registration in Russian tax authorities the branches do not arrange profit tax advanced payments and do not assess the amount of profit tax for the site activity period (12 months as a rule)

«-» Benefit is not provided

Dividends taxation

«+» After tax the earned profit is tax exempt

«-» When the dividends are paid out of the profits after tax this dividends subject to tax at the rate of 9 and 15% unless otherwise provided by double taxation avoidance agreement

Settlements between parent and Russian affiliated company or between the Head organization and Russian branch / representative office

«+» During the settlements additional reasons are not required

«-» During the settlements additional reasons are required (by virtue of loan agreement, service contract, dividends etc.)

Work permits arrangements for employees

«+» Work permits arrangement for foreign employees is not required. Upon condition: (1) such employees has passed personal accreditation in accrediting organization, (2) within the amount agreed by the accrediting organization, (3) such procedure is available only in regard to the foreign employees of those countries where the similar procedure is applied.

«-» Work permits are to be arranged for foreign employees.

Date of foundation
company «ROSCO»
Membership in professional organizations:
SRO NP «Audit Chamber of Russia»
(Certificate No 1809 dated 28.12.2009)
Chamber of Tax
(Certificate No 78)
NP «Partnership of RSE»
(Russian Society of Evaluators)
Membership in public association:
Moscow Chamber
of Commerce and Industry
(Certificate No 123-973 dated 21.12.2009)
Partnership of Turkish Entrepreneurs (RTIB)
(as per the results of 2009 -
is included in the register of reliable enterprises of Moscow
Certificates of conformity:
Certificate of conformity to the requirements of GOST R ISO 9001-2008 (ISO 9001:2008)
is insured