KnowRussia

Meeting your regulatory responsibilities

CHOOSING YOUR LEGAL STRUCTURE…

TRADING FROM YOUR EXISTING LEGAL ENTITY AT HOME…

Importantly, practically speaking Russia’s domestic laws are largely unenforceable against foreign legal entities selling online to Russian consumers, though a seller must comply with rules of the jurisdictions in which he has established legal entities and by the rules of international law.

SETTING UP A RUSSIAN LEGAL ENTITY…

Once a foreign company establishes a legal entity within Russia for the purpose of conducting commercial activity, applicable rules change and an e-retailer will find himself subject to an increased level of regulation and its associated obligations. That said, having a Russian legal entity does bring with it a number of benefits, for instance, the setting up of a warehouse and enabling the declaration of goods for the purposes of custom clearance procedures.

FINDING A MIDDLE GROUND…

There are methods of establishing a physical presence in Russia without actually setting up a legal entity, such as the establishment of a representative or affiliate office, but both have their domestic operations limited under Russian law and are subject to varying levels of Russia’s regulation. Importantly, neither of these bodies can physically sell products on their establishing companies’ behalf to a consumer in Russia.


RUSSIAN TAX SUMMARY

Tax Rate Notes
Corporation Tax 0% A 0% tax rate applies to companies performing educational and medical activities
Corporate Profits Tax 15.5-20% The basic corporate profits tax rate consists of 2% payable to the central government, with 13.5% to 18% payable to regional governments depending on location
Capital Gains Tax 15.5-20% Capital gains are generally included in taxable income and taxed at the regular rates. In special circumstances, the capital gains tax rate can be reduced to 0%
Withholding Tax – Dividends 13-15% Dividends received by Russian entities or individuals who are residents of Russia are subject to withholding tax at 13%. Dividends received by a foreign entity from a Russian entity are taxable at a rate of 15%
Withholding Tax – Other Interest 20% This rate applies to payments to foreign legal entities that are not attributable to a Russian entity, i.e. bank interest
Value Added Tax 10-18% The standard rate of VAT is 18%, which is charged on goods sold and services rendered. A reduced rate of 10% is charged on certain food products and children’s goods
Social Tax on Employee’s Salaries 10-30% All annual payments to an employee of less than RUB624,000 (approx. $10,000) are charged at 30%. All annual payments to an employee in excess of this amount are charged at 10%
Currency Exchange Control – Cash $3,000-$10,000 Individuals are permitted to carry a maximum of $10,000 in cash into Russia. However, individuals may only leave Russia with a maximum amount of $3,000 in cash
Currency Exchange Control – Bank Transfer N/A There are generally no restrictions on payments to foreign entities or individuals through normal banking channels

KEY LEGISLATION

The snapshot provided here is not an exhaustive guide. Russia has a highly complex and frequently changing legislative infrastructure and hierarchy, with many regional differences, so consulting an expert is an absolute must to ensure you’re compliant!

RUSSIAN FEDERAL LAW SEEKS TO LOOK AFTER ITS CONSUMERS, WITH A WHOLE HOST OF REGULATIONS IN ADDITION TO THE RUSSIAN CIVIL CODE GOVERNING THE BUYING AND SELLING PROCESS, INTELLECTUAL PROPERTY RIGHTS, JURISDICTIONAL REMIT IN INTERNATIONAL TRANSACTIONS AND PRIVACY AND ADVERTISING.

Mandatory security requirements apply when processing and storing a consumer’s personal data.

  • The full consent of the data subject must be obtained and the purpose for the collection disclosed;
  • Technical and organisational measures must be taken to protect against the unlawful disclosure of data;
  • The data subject can demand access to and the removal of their personal data;
  • The Federal Service for Supervision of Communication, Information Technologies and Media must be notified before personal data is processed; and
  • At present, no specific regulations exist governing the use of Cookies on websites.

The Distance Selling Regulations are designed to add certainty to consumer contracts relating to the purchase of goods from a distance, i.e. those sold online.

  • Obligations are imposed surrounding timely and transparent delivery processes and full seller disclosure;
  • Imported goods must conform to Russian standards for the product in question;
  • Consumers can cancel an order any time before its receipt, or within 7 days of goods being delivered;
  • If not specified otherwise by the seller, consumers can return goods up to 3 months after receipt;
  • All refunds must be paid within 10 days; and
  • Alcohol and goods whose free distribution has been prohibited or limited by the Russian Federation cannot be sold online.
  • Legislation exists regulating marketing communications sent by electronic means – unsolicited commercial communications are not permitted, and spam can only be lawfully sent after obtaining consent.

*APPLICABLE LEGISLATION

The Federal Law of the Russian Federation from July 27, 2006, No. 152-FZ, The regulations on ‘Securing Personal Data Being Processed in Personal Data Systems’, enacted by the Russian Government Regulation of 17/11/2007, No. 781; The Information, Information Technologies and Information Protection Act No. 149 FZ, of 27 July 2006; The Strasbourg Convention for the Protection of Individuals with Regard to Automatic Processing of Personal Data 1981, signed and ratified by the Russian Federation on December 19, 2005, Federal Law No. 242-FZ “On Amendments to Certain Legislative Acts of the Russian Federation for Clarification of the Procedure of Personal Data Processing in Information and Telecommunication Networks”, adopted on 21 July 2014 with a deadline for compliance of September 1, 2015; Federal Law of the Russian Federation, March 2006, No.38-FZ “On Advertisement”

Other areas of interest

Reaching and engaging your consumers

With 88% of the population only speaking Russian and a consumer desire to chat before making an online purchase, localising for the Russian market is key

Receiving payment from your customers

Over 90% of consumers pay cash on delivery, but other electronic payment methods are rapidly gaining a foothold.

Getting The Goods To Your Customers

With a total surface area of over 17,075,000 km2 spanning 11 time zones and two continents, Russia is a force to be reckoned with.

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