Reporting of foreign representative offices and branches

Both foreign and foreign organizations can be engaged into entrepreneurial business on the territory of the Russian Federation. Foreign companies can register its representative office for work in the Russian market in accordance with the order, provided for by the law.

Business activity of the foreign organization can be conducted via a representative office or branch.

A representative office is a separate subdivision of the legal entity, situated outside its location, which represents its interests and protects them.

A branch is a separate subdivision of the legal entity, situated outside its location and exercising all its functions or their part, including functions of the representative office. It is important that neither a representative office, nor a branch are legal entities.

For taxation purposes a branch or a representative office of the foreign organization, registered on the territory of the Russian Federation, shall pay taxes in accordance with the tax law of the Russian Federation. The foreign organization, which conducts business on the territory of the Russian Federation via a branch, representative office, division, bureau, office, agency, any other separate subdivision shall be registered at the tax authority at the place of engagement into this activity. A tax declaration shall be provided by every taxpayer  on every tax, payable by this taxpayer, unless it is provided for otherwise by the law on taxes and dues. Consequently, representative offices of foreign organizations shall provide all tax declarations on every tax, payable by this foreign organizations.

Let’s consider the procedure of submission of the tax reports of the representative office (branch) of the foreign organization.

IIT (individual income tax)

Separate subdivisions of foreign organizations in the Russian Federation as well as Russian companies, shall calculate, deduct from the taxpayer and pay the calculated amount of the IIT. So, a representative office (branch) of the foreign organization , shall calculate, deduct from the taxpayer and pay to the budget the amount of the IIT from the amount of the salary and other remunerations, accrued to the employees of this representative office (branch).

As for the reports, the duty is imposed on the representative office (branch) of the foreign organization on provision of information to the tax authority at the place of its registration on incomes of individuals, and amounts of taxes charged and deducted in the tax period annually latest on April 1 of the year, coming after the expired tax period, as per form 2-NDFL.

Property tax

Foreign organizations, conducting business in the Russian Federation via permanent representative offices and (or) owning immovable property on the territory of the Russian Federation, on the continental shelf of the Russian Federation and in the exclusive economic zone of the Russian Federation, shall be recognized the payers of the property tax.

Movable and immovable property, related to the objects of fixed assets, as well as property, received under the concession agreement, shall be recognized the objects of taxation for foreign organizations.

Let us remind that movable property, accepted for accounting fixed assets from January 1, 2013 shall not be recognized the objects of taxation

Accounting of objects shall be kept in accordance with the order, established in the Russian Federation for accounting.

Representative offices and branches of foreign organizations, shall have the right not to keep accounting as per the established rules if in accordance with the law of the Russian Federation on taxes and dues they keep accounting of incomes and expenses in accordance with the order, determined by the Russian law. As for the duty of the representative office of the foreign organization to submit accounting statements to the tax authorities of the Russian Federation as per the forms and in accordance with the order, established for Russian organizations, the representative office of the foreign organization does not have it.

The order of submission of statements on the property tax is similar to the order, established for Russian organizations. Calculations on advance payments and tax declaration on the property tax shall be provided by the taxpayers to the tax authorities.

The tax calculation on advance payments on the tax shall be submitted latest 30 calendar days after the expiry date of the corresponding accounting period. Tax declarations as per the results of the tax period shall be provided by the taxpayers latest on March 30 of the year, coming after the expired tax period.

Profit tax

For foreign organizations, conducting business in the Russian Federation via permanent representative offices, incomes, received via these permanent representative offices, reduced by the amount of incurred expenses are the object of taxation with the property tax. The profit tax shall be calculated and paid by the representative office of the foreign organization by itself.

Irrespective of availability of the duty on payment of the tax and (or) advance payments on the tax, peculiarities of calculation and payment of the tax upon expiry of each reporting and tax period taxpayers shall submit statements to the tax authorities at its location and at the location of each separate subdivision.

Foreign organizations, conducting business via a permanent representative office, shall submit the tax declaration, as well as the annual report on operation in the Russian Federation as per the results of the tax (accounting) period. The annual report shall be provided to the tax authority at the location of the permanent representative office.

VAT

Organizations shall be recognized the VAT payers. For taxation purposes legal entities shall be recognized as the organizations, which are formed in accordance with the law of the Russian Federation, as well as foreign legal entities, companies and other corporate formations, having civil legal capacity, established under the law of foreign states, international organizations, branches and representative offices of the indicated foreign persons and international organizations, established on the territory of the Russian Federation, consequently for taxation purposes branches and representative offices of foreign organizations shall be recognized independent payers of the value-added tax.

A taxpayer shall provide the tax declaration on the value-added tax to the tax authority at the place of its registration, irrespective of the fact, whether he performed business operations in the corresponding tax period.

From January 01, 2014 taxpayers shall submit the tax declaration to the tax authorities at the place of their registration as per the established format in the electronic form over telecommunication channels via an electronic turnover operator latest by the 20th day of the month, coming after the expired tax period.

The same concerns tax agents, not being taxpayers or being taxpayers, released from fulfillment of the duties of the taxpayer, related to calculation and payment of the tax, they shall submit the corresponding tax declaration to the tax authorities at the place of its registration latest by the 20th day of the month, coming after the expired tax period.

So, beginning from the tax period for 1 quarter 2014, branches and representative offices of foreign organizations, registered in the tax authorities, shall submit the VAT declaration in the electronic form. If the VAT declaration is provided in hard copy, the organization can be brought to responsibility and fined for 200 rubles.

 

The material is prepared by Boykova T.N., Expert of «RosCo»

March 24, 2014

Date of foundation
company «ROSCO»
2004
Membership in professional organizations:
SRO NP «Audit Chamber of Russia»
(Certificate No 1809 dated 28.12.2009)
Chamber of Tax
Consultants
(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)
Non-Profit
Partnership of Turkish Entrepreneurs (RTIB)
Ratings:
A++1+++1++[%]
(as per the results of 2009 -
А++1+++1+[%])
Company
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)
Professional
liability
is insured