Doing business in Russia
Main tool for those who want to learn about Russia and its business climate
General information on Russian Federation
- Official name
- Russian Federation
- System of government
- Federational state with semi-presidential system of government.
- Geeographic location
- Russia occupies vast territories of Europe and Asia.
- Russia borders 14 countries and an ocean (to the north-west and south-east):
Azerbaijan — 284 km, Belarus— 959 km, China (south-east) — 3,605 km, China (south) — 40 km, Estonia — 294 km, Finland — 1,313 km, Georgia — 723 km, Kazakhstan — 6,846 km, North Korea — 19 km, Latvia — 217 km, Lithuania — 227 km, Mongolia— 3,485 km, Norway — 196 km, Polland — 206 km, Ukraine — 1,576 km
- The total area of Russia is 17,075,400 square kilometres ( (6,592,800 square miles). Russia is the world's largest country, occupying more than one eighth of the earth's populated area.
- Physical geographic characteristics
- Big part of Russian territory consists of vast areas of valleys, predominantly steppes in the south and dense forests in the north, with tundras along the northern coast. Russia owns 10% of the world's arable land. Mountain chains are located along the southern border - the mountain summit of Elbrus in the Caucasus with the height of 5633 is the highest mountain peak both in Russia and Europe; the Altai mountains, the Verkhoyansk range and volcanoes, the Kamchatka Peninsula - and Europe and Asia converge in the central parts of the Ural mountains.
- Because of the large territory and diverse landscape, there're various types of climate in Russia - from a dry and hot climate in the southern steppes and a humid continental one in the European part of the country to a subarctic climate in Siberia and an arctic one in the tundra on the Northern Pole. Summers in the cold steppes and along the Arctic coast are mild; winters on the Black Sea coast are cool and extremely cold in Siberia. Overall, Russia is the coldest country in the world.
- Natural resources
- The Russian Federation can be considered the world's most diverse and richest country in natural resources. Main natural resources are: oil (Volga-Ural Region, West Siberian Plain, Caspian Depression), natural gas, coal (Pechora basin, Yenisei and Lena), iron ore (Ural, Valdai Hills), precious metals (Ural and Siberia), diamonds, gold and uranium (Central Siberia, Altai).
- 143.5 million
- Demographic structure
- Russian Federation is a multinational country. There're more than 160 different ethnic groups and native peoples living on its territory.
- Official language
- Russian is the official language of the Russian Federation, although there're more than 140 different languages and dialects throughout the whole country. Over 81% out of the whole population speaks only Russian. The majority of those speaking minority languages are also bilingual and speak the Russian language.
- Local time zone
- There're nine time zones in Russia, the current time zone varies within UTC+03:00 and UTC+12:00. UTC+05:00 is no longer applied.
- Russian Orthodox Christian, Islam, Judaism, Catholicism, Protestantism, Buddhism etc.
- Currency code (ISO 4217) for ruble — RUB. Currecny symbol — руб. Ruble is subdevided into kopeks; 1 ruble = 100 kopeks.
- Dynamics of the currency rate
- Official rates for foreign currencies in relation to the ruble are defined by the daily order of the Central Bank of Russia.
- Moscow. The number of Moscow's population according to the data of ''Rosstat'' (Russian Federal State Statistics Service) is 12 377 205 people (2017).
- Other significant cities
- Saint Petersburg, Novosibirsk, Nizhny Novgorod, Tver.
- Metric and weights system
- There is an international metric system in Russia. The main units of measurement are a meter for length, a cubic metre for cubage, a kilogram for weight, a square meter for square area
- Administrative division
Russia is a federation that gained its independence (after the collapse of the USSR) on August 24, 1991 and adopted a new constitution on December 12, 1993.
The federation is divided into eight federal districts (established on May 13, 2000), consisting of the subjects of the Federation. The subjects of the Federation are 21 republics, 7 territories, 48 regions, 2 cities of federal significance (Moscow and St. Petersburg), 1 autonomous region and 6 autonomous regions.
- National holiday
The Day of Russia is a national holiday of Russian Federation. It's celebrated annually since 1992.
- Other official holidays
According to the law the official holidays are established from January 1 / New Year / till January 5. January 6 and 8, along with Christmas (January 7) were included into the official New Year holidays. By law, these days are the off-duty holidays.
The Roman Catholic and various Protestant churches celebrate Christmas on December 25 , but is not a state holiday in Russia.
February 23 - Defender of the Motherland Day, March 8 - International Women's Day, May 1 - Labor Day, May 9 - Victory Day, November 4 - National Unity Day, August 22 - National Flag Day, but this day is not a day off.
- International membership
Russia is a permanent member of the United Nations Security Council (UN) and has the right of veto. Russia is an active member of many UN system organizations, including the UN General Assembly and the Security Council; The Food and Agriculture Organization; The United Nations Conference on Trade and Development; The United Nations Educational, Scientific and Cultural Organization; The Office of the United Nations High Commissioner for Refugees; The United Nations Industrial Development Organization; The United Nations Economic Commission for Europe. Russia takes part in some of the most important UN peacekeeping missions. Russia is a member of many international organizations, including the World Trade Organization.
Telephone communication services — the calling code of Russia is +7.
The Internet services - according to statistics, more than 14 million people in Russia have access to the Internet, which is about 10% of the population. Approximately 30% of them live in Moscow, while the other 20% live in St. Petersburg. Direct Internet access is provided by wireless communication in the cafe, or by mobile phones, or by a telephone line in hotels and apartments.
Post services — Post service in Russia is rather inexpensive and its reliability depends on the price.
- External trade
Oil and oil products, natural gas, metals, wood and timber, chemicl products as well as a large number of goods of civil and military production.
Main export partners
The Netherlands , Germany , China, Italy, Ukraine , Turkey, Belarus, Japan
Consumer goods, machinery, transport facilities, pharmaceutical products, plastics, metal prefabrications, meat, fruits and nuts, optical and medical tools, iron, steel.
Main import partners
China, Germany , Ukraine , Belarus, Italy, USA
- Exported goods
Trade policy of Russian Federation
In the field of non-tariff regulatory instruments, a special role is played by the countervailing and anti-dumping measures. These measures are aimed at preventing any unfair competition (dumping and specific subsidies). In addition, special protective measures are applied to mitigate the negative consequences of import spikes. In accordance with the federal legislation, special protective measures can be applied in the case of proven imports of certain types of goods into the Russian Federation in quantities and conditions, adversely affecting a particular Russian industry or generating the risks of such impacts.
Special protective measures should be applied in a non-discriminatory manner, regardless of the country of origin of the goods. Unlike the special protective measures, the compensatory and anti-dumping measures should be applied selectively – as a protection against the goods imported from the countries from which the national exporters deliver the goods to the customs territory of the Russian Federation using the dumping prices or providing the government subsidies in the course of production, export or transportation of the goods.
Currently, the use of such a specific instrument in Russia is of a predominantly political nature: the import quotas are set for beef, pork, poultry meat, white and raw sugar. The effectiveness of the instrument itself and its practical application (tenders, etc.) is highly questionable, and it only confirms the existence of the industrial lobby - a negative, but almost inevitable, phenomenon - in Russia.
Food import prohibition is a common instrument used by Russia. As a rule, some minor inaccuracies on the part of suppliers constitute a pretext for Russia to impose an embargo. In many cases, the main purpose of the embargo is to protect the domestic market from infections (for example, the prohibition on poultry import of from Poland and the UK is associated with the threat of an epidemic of avian influenza, the prohibition on import of pork from Mexico and a number of US states is due to swine flu or poultry and the prohibition on import of pork from Germany was imposed after detection of dioxins in them). Nevertheless, often the disproportionate and selective nature of these prohibitions proves that they are also used as an instrument of Russia's foreign policy.
Economic sanctions of EU
The restrictive measures were imposed by the EU against the Russian Federation in response to the illegal annexation of the Crimea and the deliberate destabilization of a neighboring sovereign country. The "economic sanctions" are the measures aimed at restriction of the exchanges with Russia in specific sectors of the economy.
In July and September 2014, the EU established the economic sanctions aimed at restriction of the exchanges with Russia in specific sectors of the economy. In March 2015, the leaders of the EU countries decided to associate the existing regime of sanctions with the full implementation of the Minsk agreements, which was envisaged before the end of December 2015. In accordance with this decision, on June 22, 2015, the Council extended the sanctions for six months, until January 31, 2016. Due to the impossibility of complete implementation of the Minsk agreements until December 31, the EU Council extended the economic sanctions until July 31, 2016.
These restrictive measures include: - russky_info - February 17, 2017, 14:55
- the restriction of the access to the primary and secondary capital markets of the EU for five large Russian financial institutions with controlling participation of the state and their subsidiaries established outside the EU, as well as for the three major energy and three defense enterprises of Russia; - russky_info - February 17, 2017, 14:55
- the establishment of an export and import prohibition on the arms trade; - russky_info - February 17, 2017, 14:55
- the establishment of the prohibition on export of dual-use goods for military use or for military end-users in Russia; - russky_info - February 17, 2017, 14:55
- the restriction of the availability for Russia of the certain secret technologies and services that can be used for oil exploration and production.
The measures aimed at restriction of the economic cooperation
The measures aimed at restriction of the economic cooperation were introduced by the EU leaders in July 2014:
- The European Investment Bank was instructed to suspend the conclusion of new agreements on financial transactions in the Russian Federation;
- The EU countries agreed to coordinate their viewpoints in the EBRD's Board of Directors also with a view to suspend the financial support of new operations;
- The measures aimed at restriction of the economic cooperation were introduced by the EU leaders in July 2014:
The state regulation of trade in the Russian Federation and the types of business entities
In 2014, some major changes were made to the legislation on companies in respect of corporate governance, classification of legal entities etc.
Depending on the types of activities of the foreign companies, the following main forms of their presence in Russia can be distinguished:
- Branch offices and representatives
- Judicial faces
- the joint venture agreements, also known as the simple partnerships
Branch offices and representatives
In accordance with the Civil Code of the Russian Federation, the branches and the representative offices are the independent units of a foreign legal entity (FLE) located outside its place of location. The branches and the representative offices are established and endowed with property by the legal entity and operate on the basis of the procedure approved by this legal entity.
The main feature distinguishing the representative offices from the branches is the nature of activity that they are entitled to fulfill. The representative office represents the interests of the legal entity, and, as a rule, performs non-commercial activities such as marketing or information gathering. The branch, on the contrary, can exercise all or part of the functions of the legal entity, including (but not limited to) the functions of the representative office. However, as is known, some representative offices are engaged in commercial activities and their activities have never been questioned by the authorities, on the pretext that they properly complete their accounting for the Russian taxes.
In accordance with the latest changes in the legislation, the representative offices currently are entitled to hire highly qualified specialists. The right, that used to belong only to the branches.
It is believed that due to the wide scope of their powers, the branches are engaged in commercial activities for tax purposes and, thus, they are subject to income tax. Because of the limited scope of activities carried out by the representative offices, they are usually not subject to income tax, but some representative offices do engage in commercial activities, such as negotiating and signing contracts. In such cases, this representative office is subject to income tax in the same way as the branch.
According to the law, the representative offices and the branches should be accredited by the appropriate government organization, as a rule, by the Federal Tax Service, but it may differ depending on the nature of the main office. For example, the accreditation of the representative offices of the foreign banks is carried out by the Bank of Russia. Regardless of the state body that issues the accreditation, the branches and the representative offices must be added to the State Register of Accredited Branches and Representative Offices of Foreign Legal Entities, the maintenance of which is a function of the Federal Tax Service.
The accreditation procedure for both branches and representative offices includes the following stages:
- The accreditation of a branch / representative office and entering the information about a branch or representative office in the State Register of Accredited Branches and Representative Offices of Foreign Legal Entities
- Production of a seal
- Registration with the tax authorities (irrespective of taxability of the activity)
- Registration with the State Committee on Statistics and Social Funds (the Pension Fund of the Russian Federation and the Social Insurance Fund of the Russian Federation)
The procedure usually takes from four to six weeks from the date of submission of the documents to public authorities.
Significant changes in the performance regulation of the economic entities in the Russian Federation entered into force on 1 September 2014. In accordance with the amendments, all legal entities are now divided into corporate (corporations) and unitary, depending on whether their founders have the right to participate (to be a member) in them and to establish the executive body.
In accordance with Russian corporate legislation, the joint-stock companies and the limited liability companies are the two most common types of legal entities. They are regulated by the Civil Code of the Russian Federation in combination with the Law on joint-stock companies (LJSC) and the law on limited liability companies (LLLC), respectively. Only the joint-stock companies are entitled to issue the shares. Thus, they become the subject to the Russian Securities Act.
The shareholders of JSCs and the members of the LLCs are not liable for the obligations of the companies and bear the risk of losses only within the limits of the contributions made by theym (ie the limited liability).
A Russian company can not be 100% owned by another legal entity (wherever it is included), which itself is 100% owned by another shareholder. In other words, a holding company owing 100% of a Russian company must have more than one shareholder or member.
In accordance with the latest changes, the joint-stock companies are now divided into "public" and "non-public" (prior to 01.09.2014 the Civil Code of the Russian Federation classified them as open and closed joint-stock companies). A public joint-stock company is a legal entity whose shares and securities, convertible into its shares, are publicly allocated (by open subscription) or publicly circulated under the conditions, established by the Securities Act.
The rules on public companies are also applied to the joint-stock companies that do not meet the requirements of public companies, but the company's name and brand name indicate the public type of the company.
Public joint-stock company
Basic features of a public joint-stock company:
- The company is entitled to conduct the open subscription to the shares issued by it and to offer them for the acquisition to the unlimited number of shareholders.
- Minimum size of the authorized capital of a public company is 100 000 rubles.
- A public joint-stock company establishes a collegial management body whith the number of members not less than five.
- The responsibility for keeping the register of shareholders of a public joint stock company and performing the functions of a counting commission are exercised by an independent organization with a statutory license
- The number of shares, the total nominal value, as well as the maximum number of votes provided to one shareholder can not be limited in the public limited company.
- No person can be granted the right to preferential acquisition of shares in a public joint stock company offered for sale by an outgoing shareholder (with the exception of additionally issued shares or other securities convertible into shares)
- The Charter of the Public joint-stock company can not attribute to the exclusive competence of the general meeting of shareholders the settlement of the issues not related to it in accordance with the Civil Code of the Russian Federation and the law on joint-stock companies.
The eestablished joint-stock companies, meeting the requirements to public companies, are recognized as such, regardless of whether their names contain an indication of this status.
Non-public joint-stock company
Basic features of a non-public joint-stock company:
- The shares and securities of a non-public joint-stock company are distributed only among the founders or among a predetermined circle of persons (there is no open subscription)
- The company is not obliged to establish a Board of Directors
- The number of shares belonging to one shareholder, their total nominal value, as well as the maximum number of votes provided to one shareholder are limited by the law.
- The Charter of the non-public joint-stock company can attribute to the exclusive competence of the general meeting of shareholders the settlement of the issues not related to it in accordance with the Civil Code of the Russian Federation and the law on joint-stock companies.
Limited liability Company – LLC
LLC is the most flexible type of company with the least burdensome legal obligations.
This type becomes the main choice for subsidiaries, fully owned by the parent company, including those belonging to the foreign investors.
The participation of the owners is determined by their contribution to the charter capital of the company. The capital of the limited liability company is divided into "shares" (technically, they are not the stocks, thus exceeding the scope of the Russian Securities Act).
Main features of LLC:
- LLC is not entitled to issue the shares.
- The “members” of LLC contribute to its authorized capital, although the financing is also possible in the form of contributions to the company's property
- The minimum amount of the authorized capital of the LLC cannot be less than 10 000 rubles.
- The members of the company have the preferential right to purchase the share or the part of the share offered for sale by the outgoing participant
- The number of members of the company can vary from one to fifty
- The Charter is the instrument of incorporation of the Limited Liability Company.
- The member of the company has the right to withdraw from the company at any time, regardless of the consent of its other members:
- The member shall submit an application for withdrawal from the company, if this is stipulated by the company's Charter.
- The member shall apply to the company for acquisition of its share in cases provided for by the Law.
The incorporation procedure includes:
- National and taxation registration
- Production of a seal
- Registration with the State Committee on Statistics
- Registration with the social insurance funds
Due to the bureaucratic nature of the incorporation, the procedure usually takes three to four weeks from the date of submitting the documents to the state authorities. Moreover, the joint-stock companies are required to register the issue of shares with the Main Board of the Bank of Russia, which prolongs the time required for registration for a period of one to two months.
A simple partnership or a Joint Venture Agreement
Foreign companies are entitled to participate in a simple partnership with a local partner. Under a simple partnership agreement (joint venture agreement), two or more persons (partners) undertake to join their contributions to run the joint business without forming a legal entity. The running of a joint business, as a rule, is assigned to one or several of the partners responsible for accounting and statutory reporting required by law.
A lot of amendments have been made to the Russian tax legislation during past few years. Many of these changes entered into force on January 1, 2015. The key changes are aimed at taxation of the controlled foreign companies to create an effective mechanism to protect Russian businesses from the misuse of their tax jurisdictions and receipt of the unreasonable tax benefits.
In accordance with the general increase in fiscal pressure, a new tax – the sales tax - was introduced at the local level. Now the regional authorities are entitled to impose a new tax at the local level; For example, it has already been imposed in the federal city of Moscow.
On January 1, 2015 a new format for the VAT tax declaration and a new obligation to file tax returns on VAT in electronic form were approved. These changes are the additional administrative pressure on the taxpayer.
Some changes were introduced in the rules of profit taxation aimed at harmonizing the rules of tax accounting with the requirements of the legislation on accounting.
The income tax is paid both by Russian and foreign companies that carry out their activities in the Russian Federation through permanent representative offices or receive income from the sources located in the Russian Federation. From January 1, 2015, the foreign companies, the place of actual management of which is the Russian Federation are recognized as the tax residents of the Russian Federation in accordance with the criteria specified in the Tax Code of the Russian Federation (for more details, please refer to the chapter "Taxation of Foreign companies").
In Russia, a legal entity must be registered with the tax inspection agency corresponding to the location of the registered address of the company, as well as with the agencies corresponding to any branch or division of the company.
The company is responsible for paying the income tax in respect of each of these places. For more information on taxation of foreign legal entities, please refer to the chapters "Taxation of Foreign Companies" and "Taxation of Foreign Companies Receiving Revenues from Sources in the Russian Federation" and to the chapter "Tax Benefits" for the information on the reduction of income tax and benefits .
The maximum income tax rate is 20%, of which:
- 2% - are payable to the federal budget
- 18% - are payable to the local budget
The regional authorities are entitled to reduce their share in the income tax by up to 4.5%. For more information, please refer to the chapter "Tax Benefits".
The tax base is defined as the total amount of the income received by the taxpayer, less the costs associated with their extraction, and other allowable deductions.
The basic income tax rate of 20% is one of the lowest among the largest economies.
Tax and other incentives become more popular. Many incentives are aimed at the development of the innovation and the modernization of the industry.
Taxation of foreign offices
A foreign legal entity running its business in Russia through a "independent subdivision" (a term, including the representations, branches, construction sites and other business locations for a period exceeding 30 days per calendar year) must be registered with the tax authorities of the Russian Federation within 30 days from the commencement of such activities. The registration is mandatory, regardless of taxability of the activity. If the foreign legal entity conducts business activities in more than one place, each place must be registered individually at the place of its location. Each real estate project or construction site must also be registered individually.
Although the taxation of the independent subdivision of a foreign legal entity is similar to that of a Russian legal entity, there are a number of differences that can make this an attractive form of doing business in Russia.
In general, foreign legal entities are subject to taxation in Russia in the following cases:
- If they are recognized as tax residents of the Russian Federation on the basis of certain criteria
- If their business require the establishment of the permanent representative office in the Russian federation
- If they receive income from a source located in Russia that is not related to the activities of the permanent representative office but is subject to income tax at the source, as described in the chapter "Taxation of Foreign Companies Receiving Revenues from Sources in the Russian Federation".
The companies recognized as the tax residents of the Russian Federation
Starting from January 1, 2015, the companies that comply with at least one of the following conditions are recognized as the tax residents of the Russian Federation:
- Most of the meetings of the Board of Directors are held in Russia;
- The executive body of the company regularly carries out its activities with respect to this company from the Russian Federation;
- The main officials (managers) of the company (the persons authorized to plan and monitor the activities, to manage the activities of the enterprise and to bear the responsibility for this) primarily carry out the management of this foreign organization in the Russian Federation;
If none of the criteria 1-2 above is fulfilled or only one of them is met by this company, the foreign company can be recognized as the tax resident of the Russian Federation on the basis of any of the facts listed below:
- The financial or management accounting of the company is carried out in the Russian Federation;
- The record keeping of the company is carried out in the Russian Federation;
- The operative management of the personnel of the company is carried out in the Russian Federation.
The economic life of Russia takes place in two competing centers: in Moscow, with a population of 10.4 million people (16 million unofficially) and in St. Petersburg with a population of 4.6 million people (6.5 million unofficially). About 80% of Russia's population lives in the European part. The number of economically active population in Russia is 75.5 million people, the proportion of women is 49%. The level of unemployment reaches 6.8% (as of 2012).
The largest Russian employer is the private family sector (the proportion of the able-bodied population employed by it is 57%). The second place is occupied by the public sector (up to 32%). As a result, these "two employers" give jobs to 90% of the economically active population.
Among top management and top executives in the government and regions, a much smaller percentage are women - only 39%. The same applies to the number of specialists and managers with an engineering and technical specialty. The situation in other sectors (including education and health care) at the management level and qualified specialists differs dramatically. Women dominate at many enterprises at the level of highly qualified specialists and mid-level managers. For example, women predominate in retail networks. They work as sellers and senior managers of certain groups of goods.
A characteristic feature of the Russian Labor Code is a document called Record of Employment. This document is certified and contains information about all previous and current work activities as well as periods of employment of the employee. The Record of Employment is the main document on the labor activity and the work experience of the employee. In order to work in Russia, a foreign citizen is required to have a work visa, obtain a work permit and register for migration with the FMS of Russia. The labor market in Russia is complex and demanding. It is obvious that the country has huge potential.
The modern labor market lacks the experts in the fields of finance, marketing, trade and IT-technologies. Large networks of shops, mobile operators, software companies and many international companies operating in other sectors of the economy require professionals. It is especially difficult to break through in the energy industry. Oil and gas companies are a traditional area of large, state-controlled companies with numerous personnel.
Undoubtedly, Moscow has become one of the largest financial centers attractive for large business corporations, banks and investors from all over the world. All this provides professionals with attractive opportunities for career growth. Nevertheless, the competition is high. The attractiveness of the market and high wages attract specialists from Western Europe and the United States to Moscow and otherwise.
Importing and keeping goods
Rules and regulations for importation of goods to Russia
The declaration of goods is performed by submitting to the customs authorities the information about the goods and customs procedures of the state of origin of these goods, as well as any other information that may be required for the customs clearance of goods in the customs declaration. The declaration of goods is performed by the declarant or the customs broker (agent) at the discretion of the declarant. The list of information subject to specification in the customs declaration is limited only to the information required for the purposes of calculation and collection of the customs payments, as well as the formation of the customs statistics and the application of the customs legislation of the Russian Federation.
The customs procedures take time and are burdensome. They are carried out by the recipient, which is a company, registered in Russia. The goods are released by the customs authorities after payment of the customs duties and VAT in respect of the goods. Some goods require the submission of the customs declaration prior to their arrival in the customs territory of the Russian Federation. The VAT / import customs duties on certain categories of goods must be paid before the customs authorities allow the container / trailer to cross the border. This is especially true for such goods as perfume and tobacco. The customs duties are paid in rubles at the current exchange rate. According to the customs rules, the customs clearance of goods should not take more than 3 days. If the customs authorities of the Russian Federation refuse to import the goods, the law provides for their return.
Logistic services in Russia
The Russian logistics market is characterized by a lack of competition, transparency and know-how. The storage and transportation services are quite expensive in many companies of this sector. On the other hand, the share of logistics outsourcing is growing, so the demand for specific services and innovative logistics concepts is increasing. The Russian logistics service providers still pay attention to the main classical methods of storage and transportation.
Free trade zones / regions
Special economic zones of Russia
The legal framework for special economic zones (SEZ) with extended tax benefits was introduced by the federal government. Over the past 20 years, three zones have been established to stimulate the industry, tourism, research and development. The financial opportunities vary depending on each type of area. The foreign goods (equipment, raw materials, components and building materials) imported into the SEZ are exempt from customs duties, taxes and non-tariff barriers. The goods produced within the framework of the Customs Union (Russia, Kazakhstan and Belarus) and imported into the SEZ are also exempt from export taxes, any exceptions and restrictions. Since 2017 the SEZ investors will import into the territory of the Customs Union their products manufactured in the SEZ with the use of the imported raw materials, without paying any taxes and duties, if these goods meet the criteria for sufficient processing.
Types of special economic zones
The extensive territories located in large industrial regions of Russia. The proximity to the resource base for production, the availability of the ready-to-use infrastructure and the main transport arteries are only the main characteristics of the industrial (industrial-production) zones, determining their advantages. Placement of the production on the territory of the industrial zones allows to increase the competitiveness of the products on the Russian market via cost reduction.
The location of the innovative (technology-innovative) SEZ in the largest scientific and educational centers with rich scientific traditions and recognized research schools, opens the great opportunities for the development of the innovative business. The package of customs advantages and tax preferences, the availability of the professional human resources along with the growing demand for new technologies and modernization of various sectors of the Russian economy make the innovative SEZ attractive for the hedge funds, as well as for the developers and manufacturers of high-tech products. The advantages for the residents: the access to the market of innovative information technologies, the incubators for beginners.
Tourist and recreational SEZ
Being located in the most picturesque and popular tourist regions of Russia, the tourist (tourist and recreational) SEZ offer favorable conditions for the arrangement of tourist, sports, recreational and other types of business.
Russia is a member of the ATA Convention, but in fact, a relatively small number of customs points are able to cope with this type of books (the documents required to facilitate the entry of certain goods or samples of goods as the temporary importation). The term of temporary importation of goods shall be established by the customs body based on the declaration of the declarant, proceeding from the purposes and circumstances of such importation and may not exceed 2 (two) years from the day of initiation of the customs procedure for temporary importation of such goods. Some goods can be temporarily imported to Russia with full exemption from customs duties (containers, pallets, samples, etc.), while others are subject to a monthly payment of 3% of the total amount of customs duties and taxes associated with them. These amounts are not refundable and may require the opening of a security deposit.
The transport network of Russia includes 87.157 km of railway and 1.16 million km of roads, 41.000 km of which are the federal roads. There is also an extensive network of domestic and international airports, since in many cases the flight is the only effective way of travel through such a vast territory.
Automobiles are widely used in Russia for internal transportation and to transport the goods between Western Europe and Asia. Unfortunately, the condition of the Russian road network has been neglected for many years. Significant investments in the road network are required to achieve Western European standards.
Since the Russian ports are generally competitive internationally, but the length of many Russian ships exceeds the one, authorized by the international standards, the cargo is often transported to Russia on the foreign ships to the foreign ports, and from there it is transported by land to the final point of destination. For example, the ports of Finland often receive the cargo destined for delivery to St. Petersburg, while the ports of the Baltic States - Latvia, Lithuania and Estonia - often accept the cargo destined for delivery to Moscow.
One of the problems facing Russia is that most of its ports are located in the north. The necessary use of the icebreakers in the winter period lead to a significant increase in port charges. In addition, most ports are not capable of handling the heavier cargoes carried by the ships.
The railway network of Russia serves mainly the bulk cargoes such as coal and oil, but it is inappropriate for transportation of food products (for example).
Air transport may be appropriate for relatively small and urgent shipments of goods. Three Moscow airports: Domodedovo, Sheremetyevo, Vnukovo, and Pulkovo airport in St. Petersburg are the busiest airports in Russia.
Rules of entry
The entry of foreign citizens into the Russian Federation is allowed with a visa. The visa is issued on the basis of an invitation submitted to the Russian embassy or consulate in the territory of the country of residence. It is impossible to obtain a visa at the border.
Within 7 days after arrival at the place of residence in Russia, the visa must be registered with the local authorities by the inviting person or company. In case of your accommodation in a hotel or apartment, the registration is performed by the hotel administration or the owner of the apartment or the house of your residence. The lack of registration with the competent authorities (the registration period is up to 7 days) may result in a fine of up to 50 USD or the risk of extradition and prohibition on entry into the Russian Federation.
When entering the Russian Federation, the Russian authorities check passports and visas. The passport must be valid and its validity period, as a rule, should not expire earlier than six months from the date of expiry of the visa. The passport and the "migration card" (entry / exit cards) are stamped with the entry stamp. After putting the entry stamp, the border guards retain the top (detachable) part of the blank. This "migration card" should always be carried with you while you are on the territory of the Russian Federation. You must show your visa both at the entrance to the Russian Federation and at the exit. Moreover, we recommend you to have copies of your passport and the Russian visa, a copy or original of the invitation / voucher / other visas, as well as the "migration card".
If you want to work in the Russian Federation, you must obtain a work permit issued by the authorized bodies. In order to obtain a permanent place of residence (residence permit), a foreign citizen must live in the Russian Federation for at least one year as a temporary resident. To check the specific conditions for entry into Russia in domestic laws, you should be aware of the official data provided by the Russian authorities, for example, the Ministry of Foreign Affairs of the Russian Federation.
Business cards are quite common and often necessary, since the telephone cards are not so popular in many regions of Russia. One side of the business card should be in English, and the other - in Russian (Cyrillic is used). It is considered an advantage to put your university or scientific titles (if applicable) after your name and position. When giving a business card, turn the side in Russian to the recipient.
There is a strong respect for the hierarchy in the business culture of Russia, although currently the state does not dominate the business to the extent that it used to.
You should contact a lawyer, an expert in Russian law. The arrangement of your partner's acquaintance with your personnel is one of the conditions for successful business in this country. It is useful to appear realistic, honest and reliable in today's business conditions. The Russians have a great confidence in the professional skills and experience of the representatives of Western countries. Therefore, you should be ready to encounter some special requirements to you.
As a rule, the Russians consider a compromise as a sign of weakness. Often they continue the negotiations, showing the unusual firmness, only because of their unwillingness to give up until the other side makes enough concessions. Moreover, in some cases, the Russians try to make their opponent lose their self-control by leaving the negotiating room, threatening the negotiations and by other similar incidents. You may encounter some tactical delays, emotional outlets, threats and any other strategies of persuasion that you must counteract. Instead of copying the behavior of the Russian side, insist on the mutual benefits and advantages as the main aim of the negotiations.
All written documents are of extrem importance. Sometimes Russian businessmen ask to sign the "protocol" detailing all the issues discussed during the meeting. At the end of the meeting, the "protocol" is read, agreed and signed by each participant.
The decision-making procedure is very slow in Russia. The contracts should be clear, concise and designed in both English and Russian. It is typical for the Russians to amend the contracts.
Business lunches and invitations
Business breakfast is not part of the business culture in Russia. For the puroses of conclusion of the "initial" agreement, a dinner or a business dinner is usually recommended. The central seats at the table are reserved for the people occupying the most important positions in the company and negotiations. You will be seated on the opposite side of the table in front of the Russian partners. In some, not so refined restaurants they may offer you to share the table with others, when you are alone at the table or just you two or three. Do not start eating before the treat was not offered to all present.
In Russia, the culture of drinking is highly developed. The refusal to drink is considered unacceptable unless you refer to religious or health-related causes. The inviting party always assumes the responsibility for paying the bill. Nevertheless, for the sake of politeness, you can make a gesture, as if you are going to pay the bill. If you are the initiator of this meeting, it is best to pay the bill in advance. If you are a woman, the person who invited you will feel insulted even by a gesture on your part that shows what you are going to pay. Preferably to leave a tip at the restaurant, at a rate of 9-10%.
If you are invited to someone's home - it's an exceptional honor. You may be asked to take off your shoes before entering the house. In this case the slippers will be offered to you. When you are invited to someone's house, it will be polite to bring chocolate, sweets, wine or other alcohol (except for vodka). If the owners have children, it makes sense to bring a separate small gift. Giving the gifts is common, especially for the reception of guests / parties / to thank you for participating or if you spent the night at the organizers of the party.
It can be complicated to make an appointment, so patience and perseverance are crucial in such situations. After the appointment is made, try to do everything possible to avoid its postponement or cancellation. You should avoid traveling to Russia at the end of July or in August, as many people are on vacation. Plan enough time for conversance .
In general, the Russians like to receive and to present the gifts. It is best not to pack the gifts. If you are invited to someone's home, you can bring chocolate, candies, a bottle of quality wine or other alcohol. It is considered a bad luck to bring a gift intended for an unborn child.
Choosing flowers: in Russia, the flowers are given only to women (except for teachers, doctors and celebrities). If you are invited to a family house, it is best to give flowers to a wife, sister or mother. Pink, cream, orange, blue flowers have no symbolic meaning, but avoid giving white or yellow flowers of special symbolism. However, the red flowers (and especially of the flaming red shades) are considered as the expression of love or strong feelings.
The most popular gifts are: wine or other alcohol (except for vodka), chocolate and chocolate sets (when you are invited to someone's house), quality tea or coffee, towels, computers, watches, shampoo, soap, perfume, colognes, Cigarettes, lighters, business calendars, notebooks, diaries, etc.
If you decide to travel to the Russian Federation, keep in mind that medical insurance covering the entire period of your stay is required. You should have a health insurance policy covering all medical expenses in case of emergency and medical expenses in case of illness. The Ministry of Health of the Russian Federation provides the Russian citizens and the foreigners, temporarily staying in Russia, with a telephone line to request the information and medical services.
Customs and currency regulations
In accordance with the Customs Code of the Russian Federation, the individuals are exempted from customs duties when they enter Russia, if the value of goods imported into the country for personal use does not exceed 65 000 rubles, and their weight does not exceed 50 kg inclusive.
In respect of the goods the value and weight of which exceed the established quota, but do not exceed 650 000 rubles and 200 kg, a uniform rate of duties and taxes is applied - 30% of the customs value of goods, but not less than 4 euros per kilogram - in respect of such excess.
There are also some restrictions on import and export of foreign currency. For example, since March 15, 2004, the individuals have the right to export foreign currency from the Russian Federation in the amount of up to 10 000 US dollars. The exported cash funds, in the amount not more than 3 000 US dollars, are not subject to mandatory written declaration by the individuals.
To export the currency from the Russian Federation in the amount from 3001 to 10 000 USD and rubles in equivalent it is necessary to submit a written customs declaration. If the amount exported from the Russian Federation exceeds 10 000 USD, it is necessary to provide the documents confirming the acquisition of this amount from the bank, or the corresponding customs declaration confirming the previous importation of this currency into Russia by this individual.