Each tenth of a foreign company denied Russian accreditation

From 1 January 2015, we changed the procedure of admission of foreign companies to the Russian market. The amendment refers to the law “On foreign investments in the Russian Federation”: now branches and representative offices of foreign legal entities (except for companies operating in the field of civil aviation and banks, which accredited the Federal air transport Agency and the Central Bank) must obtain accreditation at the Federal tax service (FTS). Accreditation has become perpetual.

For the period from 1 January 2015 to 1 August 2016 for initial accreditation turned in a total of over 2.6 thousand foreign companies, and the number of decision of refusal for the period amounted to 216 reads the response on the request . Thus, more than 8% of companies wishing to start working in Russia, was refused. Including branches and representative offices, which are already present in Russia and received re-accreditation on August 1 successfully accredited 5726 foreign entities. FNS has issued a total of 658 failures, that is more than 10% of companies are unable to be accredited, follows from the data of FTS.

Till 2015 the General register conducted the State registration chamber under the Ministry of justice, the maximum accreditation period of the branch ranged from one year to five years, and representatives from one to three years. In 2014 was 493 accredited representative offices and branches of foreign legal entities, the deadlines for the accreditation of 113 representative offices and branches and 74 representative offices of foreign companies accredited by other authorized bodies, have been made in the consolidated state register of accredited representative offices of foreign companies, said the representative of the Ministry of justice.

Data about failures in 2014 no, said the representative office. The employee a press-services FTS said that the tax has no statistics for accreditation to 1 January 2015. Head of business development, BDO Unicon Outsourcing Tatiana Klimanova and team leader for accreditation of foreign representative offices of the legal company “the Priority” Julia Vasilyeva claim that until January 1, 2015, the company has not encountered failures.

Causes of failure

After a new order, “among our clients in the end, all successfully received accreditation, but about 15-20% of companies passed its only the second time,” says Klimanova. After the first unsuccessful attempt of the company receive a list of observations of the tax authorities to a prepared package of documents to amend its second accreditation are already successful. For re-accreditation must be re-paid and legal costs in full,” she adds.

To gain accreditation, the company must collect the documents and pay a fee of 120 thousand rubles, follows from the information on the website FTS. As explained by the representative of the FTS, the main reason for refusal discrepancy of the submitted documents with the established rules either not provided the full package of documents, or it is submitted with violation of terms, or the documents do not meet the requirements.

In practice, the tax authorities denied for insignificant reasons, says Vasiliev. For example, the client her company was denied because the seal of the legal entity the documents were translated from a foreign language once, and met four times. “We fixed it and again submitted the documents again by paying the stamp duty of 120 thousand rubles,” she says. “In this case, companies are faced with weak regulation and rigid enough requirements. Weak regulation is that in the law on accreditation no clear guidance on the requirements to the design documents. The foreign investment law States that to deny registration to can for the content in the documents of false information. Under this paragraph sums up the little things that make no difference,” she says.

For accreditation meets the Interdistrict Inspectorate of FNS of Russia in Moscow. Its refusal can be appealed in a higher court. But the higher tax authorities usually support the decisions made and not overturned the denial of accreditation, therefore, remains a challenge in court, Klimanova says: “Court costs, usually cost companies much more expensive than the fee for re-accreditation,” she adds.

The main problem is that the rules of accreditation do not address specific rights of other countries that define the so-called personal Statute of a foreign person, says Igor Shikov from “Egorov, Puginsky, Afanasiev and partners”. In particular, the provisions of the law on foreign investments of the Russian Federation focuses exclusively on foreign legal entities. But in other countries involved in business can have organizational form, not involving the formation of a legal entity. For example, a limited partnership company established in Germany.

He adds that the conduct of activities via a representative office or a branch is not a common form of doing business — often for commercial purposes, are subsidiary companies. But the order of accreditation of branches and representative offices “can significantly complicate the withdrawal of foreign companies on the Russian market,” he adds.