How a foreigner can open a company in Russia

Russia has one of the world's largest economies and a significant domestic market. The country offers many opportunities for entrepreneurs and investors. With a strong economy, a strategic location at the crossroads of Europe and Asia, and a range of government incentives, the Russian Federation has become a prime destination for international businesses looking to expand.

Russia’s attractiveness for business is due to its unique combination of economic advantages, modern infrastructure and a favorable legal framework. The country boasts one of the largest consumer markets in the world, abundant natural resources and a skilled workforce. In addition, the Russian government actively encourages foreign investment through tax incentives, simplified company registration procedures and incentives tailored to specific industries.

Business Opportunities

Russia’s economy is the 4th largest in the world (GDP PPP), highly developed, high-tech and diversified, with an emphasis on the energy sector, agriculture, industry and the defense complex. Despite sanctions and geopolitical challenges, there are still opportunities for foreign business in a number of industries — especially from Russia-friendly countries in Asia, the Middle East, Latin America and the CIS.

Top 20 industries in Russia that are of greatest interest to foreign business, taking into account market potential, government support, exports and openness to investment:

1. Energy and mining.

• Oil, gas, coal, rare earth metals.
• High export potential, especially to Asian countries
• Foreign companies participate through joint ventures and technology partnerships

2. Alternative energy.

• Wind power, solar power plants, hydrogen
• In demand amid the desire for decarbonization

3. Construction and infrastructure.

• Especially transport (roads, bridges, ports) and housing
• Industrial parks and SEZs are actively developing in the regions

4. Agricultural sector and food industry.

• Production of grain, meat, milk, fertilizers
• Russia is one of the largest exporters of agricultural products (wheat, sunflower oil)

5. Agricultural machinery and agrotech.

• Foreign technologies are in demand, including drones, satellite monitoring and IoT

6. Pharmaceuticals and medical technologies.

• Import substitution stimulates localization of foreign manufacturers

7. IT and digital technologies.

• Including cloud services, cybersecurity, AI, fintech
• Priority area of government support

8. Security and dual-use technologies.

• Biometrics, video surveillance, access and control systems

9. Automotive components and electric transport.

• Due to the departure of Western brands - the need for new suppliers and partners

 10. Mechanical engineering and machine tool building.

• High demand for high-precision machines and equipment

11. Logistics and warehouse infrastructure.

• Expansion of logistics corridors to Asia and the Middle East
• Foreign solutions for automation and warehouse management are in demand

12. Chemical industry.

• Production of fertilizers, plastics, chemical components for export

13. Tourism and hotel business.

• Domestic and alternative tourist routes are developing
• Investments in hotels, glamping, infrastructure are in demand

14. Telecommunications.

• Development of 5G networks, AI in telecoms, satellite communications

15. Retail and e-commerce.

• Fast-growing domestic market
• Foreign brands are in demand through franchises and marketplaces

16. Commercial and industrial real estate.

• Industrial parks, warehouses, business centers.
• Attractive for investment through funds and private investors

17. Cosmetics and household chemicals.

• Import substitution opens up opportunities for localization of foreign brands

18. Waste disposal and ecology.

• Recycling waste, disposal technologies, "green" startups

19. Biotechnology.

• Medicines, genetic engineering, agricultural biotechnology

20. New materials and nanotechnology.

• Used in mechanical engineering, construction, defense, medicine

Advantages of opening a company in Russia

• The outflow of Western foreign capital has significantly “thinned out” the business environment. This “sanitary cleaning” has significantly reduced market competition. In fact, it did not take place in profitable types of economic activity.
• Liberalization of legislation. Foreign capital is guaranteed an internal legal regime similar to the Russian one, and is also legally guaranteed protection of investments, the possibility of their unhindered withdrawal to the homeland, etc.
• Target market. The population of the Russian Federation is approaching 150 million people, and there are many large cities and towns in Russia.
• Low cost of resources and labor. Relatively low costs for rent, electricity and personnel.
• The ability to own the entire business, not just a part of it, unlike many other countries.
• Simplified access to the EAEU markets. Through Russia, you can enter the markets of Kazakhstan, Belarus, Armenia, Kyrgyzstan without customs barriers.
• Support for foreign investors. Programs at the federal and regional level, such as tax incentives (in SEZs and priority development areas), subsidies and grants for launching and localization, state support for exports.

Conditions for foreigners to carry out entrepreneurial activity in the Russian Federation

As noted above, Russian legislation is quite loyal to foreign investors: according to Article 4 of Federal Law No. 160 of 09.07.1999 "On Foreign Investments in the Russian Federation", a national legal regime is established with respect to foreign capital. This means that companies with foreign capital are provided with the same conditions, rules of operation and benefits for doing business as Russian organizations, with some exceptions. The specifics of doing business in Russia for foreigners lie only in their legal status as organizers of this business.

To open their own business, a foreign citizen must comply with several simple conditions:

• legally be or live in Russia, in particular on the basis of refugee status, RWP (temporary residence permit) or residence permit;
• when opening a business, register at the place of residence/stay;
• obtain a work permit or patent — if a foreign founder plans to take a position in the company or does not have a temporary residence permit/residence permit;
• it is mandatory to register the TIN (individual taxpayer identification number) with the tax authorities;
• apostille, translate and notarize all documents provided to the registrar if they are drawn up in a foreign language.

Russian legislation does not provide for any other features, procedures or registrations specifically for foreign beneficiaries and entrepreneurs. The remaining procedures, from filing an application, registration deadlines and methods to reporting to funds and the tax service, are carried out in the same way as for Russians.

Restrictions for foreigners

Foreign companies can open any business, with the exception of forestry, fishing, security activities, fruit and vegetable processing, weapons production, banking and some other areas. If it is planned to open a company that will work with children or transport people, the founder will need to provide additional certificates of no criminal record in their home country and in Russia.

The main ways to do business in Russia

Creating a company (LLC)

• Foreigners or foreign companies can establish a limited liability company (LLC)
• For LLCs with foreign founders, there are restrictions on certain types of activities (for example, handling radioactive waste)
• A foreign investor can own 100% of the shares of an LLC
• If the share of a foreign company exceeds 25%, the simplified taxation system (STS) is not applied, and it is necessary to use the general taxation system (GTS), which may be less favorable
• And if the share of a foreign company exceeds 49%, the company loses the benefits of small business

Foreign citizens can be directors of an LLC if they have:

• Russian citizenship
• Temporary residence permit or permanent residence permit
• Work permit
• Patent

To open a company, foreign investors must provide the following additional documents:

For an individual:

• notarized translation of the passport.

For a foreign company:

• Extract from the trade register,
• Certificate of registration,
• Business certificate (if applicable),
• Notarized translation of the director's passport.

The first three documents must be apostilled or legalized by a consulate.

The package of documents for registering an LLC can be submitted in the following ways:

• Through a notary,
• In person at the tax office
• By mail

The LLC registration process takes 3 business days (the day of filing the application is not taken into account).

Upon registration, the tax authority issues:

• Registration sheet confirming the establishment of the LLC
• Certificate of taxpayer registration
• Charter of the LLC

Acquisition of a share in an existing LLC

A foreign individual or legal entity can acquire a share in an existing LLC. This allows them to quickly integrate into an existing business. In addition, the participants of an existing LLC may have knowledge of Russian legislation.

However, restrictions may apply, especially for enterprises operating in areas of strategic importance to the government.

The charter of an LLC may contain a ban on the sale of shares to third parties. In this case, it is necessary to first make changes to the charter and register them with the tax authority. Only after this can a share purchase and sale agreement be concluded.

When drafting an agreement, it is necessary to take into account the provision of the Charter on the preemptive right to purchase a share. For LLCs with several participants, as a rule, the consent of the other participants to purchase a share is required.

In some cases, foreigners need approval from the Federal Antimonopoly Service to purchase a share in an LLC.

A foreign investor can purchase a share through their representative under a notarized power of attorney, which eliminates the need for a personal visit to Russia.

This power of attorney must be apostilled or legalized.

If a foreign citizen does not have Russian citizenship, a residence permit or a temporary residence permit, they can still open a company, since these documents are not required to register an LLC.

Creating a branch or representative office

Foreign companies can open a branch or representative office in Russia. In this case, a legal entity is not registered, and the company is not merged with an existing LLC.

• Representative office: represents the interests of the company in Russia. Activities include market expansion, customer search and advertising.
• Branch: has broader powers and can engage in commercial activities similar to those of the parent company.

Opening branches or representative offices increases mobility, reduces costs and increases profitability of foreign companies.

Accreditation is required for legal activity.

Accreditation requires a large package of documents, all of which must be apostilled or legalized. A state fee for accreditation must be paid. The process takes 15 working days from the date of submission of documents.

This option is not suitable for companies planning to import/export goods, obtain licenses or operate in regulated industries. In such cases, it is necessary to create a legal entity.

Registration as an individual entrepreneur (IE)

Foreigners, like Russian citizens, can register as individual entrepreneurs (IE) in Russia.

This opportunity is available to foreigners who have citizenship, a temporary residence permit (TRP) or a permanent residence permit (PRP). Persons with the status of "temporary resident" cannot register as an IE.

In practice, registration takes from 1 to 3 days.

Partnership with a Russian distributor

This approach involves finding a partner in Russia who will purchase and distribute the products of a foreign company on the Russian market. A dealer agreement is concluded between the foreign company and the Russian partner.

This is the most convenient and cost-effective option, since it does not require registration with government agencies. In addition, it eliminates the need for initial capital, government fees, office rent, employee salaries, and taxes.

Joint-stock company

One of the options for registering a foreign business is opening a joint-stock company. A distinctive feature is that the authorized capital in this case is converted into shares owned by shareholders. A joint-stock company can be public; in this case, its securities are in free circulation and are acquired by a wide range of people. Shareholders, as in an LLC, are liable for obligations only to the value of their shares and do not bear property liability.

Joint-stock companies are usually created for large and medium-sized businesses, but due to the complexity of the registration and issue of shares, they are not popular.

It is vital to consider the legal requirements and restrictions associated with each option to ensure compliance and maximize business potential in Russia. With the right approach, foreign businesses can successfully integrate into the Russian market and take advantage of the many opportunities for growth and profitability.