Branch and representative offices are “under control.” Reform of accreditation procedure in Russia
In May 2014, Federal Law No.106-FZ “On introducing amendments to certain legislative acts of the Russian Federation” (the “Law”) was adopted. The Law aims at reforming the procedure for accrediting branch and representative offices of foreign legal entities in Russia (the “Separate Subdivisions”) and filling the gaps that have existed since 1999 in the regulation of such Separate Subdivisions.
The Law enters into effect on January 1, 2015, save for the provisions affecting representative offices of foreign credit organizations which came into effect on May 3, 2014.
It should be noted that until recently there has in fact been no legal regulation of the accreditation procedure applicable to the Separate Subdivisions. In practice, such accreditation procedure was established by the State Registration Chamber under the Ministry of Justice of Russia and was described only on its official web site. Therefore, the Law substantially changes the existing practice.
In particular, the Law provides for the following material changes:
1.1. Operations through Separate Subdivisions
Lawmakers have now allowed foreign companies to carry out activities in Russia through representative and branch offices starting from the date such Separate Subdivisions are accredited. The accreditation date of the Separate Subdivision is deemed to be the date when the respective entry is made into the state register of accredited branch and representative offices of foreign legal entities (the “Register”).
Pursuant to the Law, accreditation of the Separate Subdivisions will be vested in the authorized federal executive body (the “Accreditor”).
At present, the body in charge of accrediting representative and branch offices of foreign legal entities in Russia depends on the status of the foreign company and the type of separate subdivision (branch office or representative office). The State Registration Chamber under the Ministry of Justice of Russia accredits both branch and representative offices, and the Chamber of Commerce and Industry of Russia accredits representative offices only.
Starting from January 1, 2015, for the first time there will be a single body authorized to accredit all Separate Subdivisions of foreign companies in Russia.
It should be noted that prior to February 1, 2015, all documents of the Separate Subdivisions accredited in Russia as of January 1, 2015 must be transferred to that body.
The Law does not specify the name of the Accreditor. Moreover, this likewise has not yet been determined by other legislative or regulatory acts of Russia. Pursuant to the Law, the body to accredit and register the Separate Subdivisions will then be defined by the Government of Russia. Considering the comments of representatives of the Federal Tax Service, we believe that accreditation functions will be vested in the Federal Tax Service.
It is important to note that functions on accreditation of representative offices of foreign credit organizations and representative offices of foreign legal entities conducting civil aviation operations will be performed by the Central Bank of Russia and the Federal Air Transport Agency of Russia respectively.
1.3. Accreditation procedure for Separate Subdivisions
It is now established that an application for accrediting a Separate Subdivision (a branch office and/or representative office) in Russia must be filed by a foreign company with the Accreditor within 12 months after the resolution on establishing (opening) such subdivision is adopted. The application is to be submitted together with a set of documents required for such accreditation.
It is important to note that in accordance with the Law the exact list of documents to be submitted will be determined by the new Accreditor, and there are grounds to expect that the respective legislative and regulatory acts will soon be adopted in furtherance of the Law.
1.4. Notice of “existence”
Since accreditation functions and all issues associated with accredited Separate Subdivisions will be vested in the new state body, all Separate Subdivisions accredited before January 1, 2015 or with accreditation period expiring after April 1, 2015 must submit to the Accreditor information on their activities by April 1, 2015. The list of details to be submitted will be determined by the Accreditor.
It is important to note that a Separate Subdivision’s failure to submit such information to the Accreditor by April 1, 2015 as required by the Law, will serve as grounds for early termination of its accreditation (starting from April 1, 2015) and as a result termination of activities of the foreign company in Russia.
1.5. Personal accreditation of foreign employees
Pursuant to the Law, foreign citizens invited to work in the Separate Subdivisions within the permitted number of employees can undergo personal accreditation with the Chamber of Commerce and Industry of Russia. The Law determines that all issues related to the procedure for personal accreditation of foreign citizens and establishing the form of the personal accreditation certificate will fall within the competence of the Chamber of Commerce and Industry of Russia.
Subject to such changes in the laws affecting regulation of activities and accreditation of the Separate Subdivisions in Russia, it should be noted that at present there are no legislative and regulatory acts adopted and in effect which set exact requirements for actions of foreign companies with respect to accreditation (in particular, the procedure for extending accreditation of the Separate Subdivisions) and reporting on activities of the Separate Subdivisions in Russia. Subject to the above, the Separate Subdivisions with the accreditation period expiring before the middle of 2015 are recommended to extend their accreditation with the State Registration Chamber under the Ministry of Justice of Russia before their documents are transferred to the new Accreditor (i.e. prior to January 1, 2015).
You can find the full text of the Federal Law here.
Should any questions arise in connection with the above or if you need any additional materials, please contact Anastasia Fomicheva or Anna Chaykina, St. Petersburg Office of Capital Legal Services.
This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.
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