These days, there are many foreigners here in Moscow who are self-employed, intentionally or not. You may be one, or planning to be one. Either way, your options are limited if you want to stay in Russia legally. If you are here on a work visa, your visa is dependent on your employment. If you change your job your employer has to give you a new visa. However, if you decide to start out on your own â what do you do?
Starting a limited company (an OOO) is always an option but there is a simpler alternative. One solution is to become a registered Individual Entrepreneur â if you have the intention to carry on a business in Russia without forming a legal entity as a sole proprietor. Essentially, the process of registering as Ð¸Ð½Ð´Ð¸Ð²Ð¸Ð´ÑÐ°Ð»ÑÐ½ÑÐ¹ Ð¿ÑÐµÐ´Ð¿ÑÐ¸Ð½Ð¸Ð¼Ð°ÑÐµÐ»Ñ is:
â¢ Proving your part or full-time residence in the Russian Federation. I covered obtaining this in the previous two articles
â¢ Defining the scope of your business
â¢ Preparing the set of required registration documents
â¢ Filing the required documents at the tax registration office
â¢ Receiving the incorporation documents
â¢ Opening a bank account
And away you go. Individual Entrepreneurs in Russia pay 6% tax on gross revenues, or 15% on net. One big negative for many people is that you are liable for your obligations to the extent of the property that you own. If you are not a home-owner, though, this should not present you with any issues. Also, if your business is not going to put your property at risk, you might consider this an acceptable risk to take. As always in these articles, I write from the point of view of my own experience, not as an expert or specialist in the subject.
1. Proof of part or full-time residence in the Russian Federation.
The document confirming the address of residence of foreign citizens and stateless persons in the Russian Federation may be:
â¢ An identification document that contains information about your registered residential address in the Russian Federation. Usually the stamped pages in your passport.
â¢ A residence permit in Russia (for foreign citizens and stateless persons, if they reside in the territory of the Russian Federation); your Ð ÐÐ or ÐÐ½Ð, which of course are also in your passport.
â¢ Certificate of refugee status (for recognized refugees).
â¢ A temporary residence permission (for foreign citizens and stateless persons who do not have an identity document).
2. Criminal Record requirements and business definition.
For some business activities in Russia, a document confirming âabsence of convictionâ is required. This will be the criminal record document from your home country. For Brits, and perhaps others, this is a serious pain. As with all foreign legal documents, the criminal record document has to be apostilled and then translated and notarised. Not everyone will need this though. Basically if you will be working with children, you need it. A list of all included activities has been published by the Government.
Outside of these restricted activities, you will not need to get your criminal document. You only need to then define your business scope in a very simple way within predefined categories.
3. Preparing the required documents for registration.
You should prepare a set of documents to be submitted to the registering authority, including:
â¢ A copy of the document certifying your identity as a foreign citizen or stateless person. For most expats, thatâs the passport, of course.
â¢ A copy of the document confirming your right for part or full-time residence in the Russian Federation.
â¢ The original or a copy of the document confirming the address of your residence in the Russian Federation.
â¢ Documentation certifying the payment of state taxes.
â¢ The document which determines the presence or absence of a conviction, if that applies to you.
â¢ Simultaneously with filing the package of documents for state registration, you may apply to move to a simplified tax system (form 26.2-1).
â¢ The application form for state registration (form R21001).
Witnessing the signature of the applicant by a notary is not required if the applicant submits the documents directly (in person), with their passport. If your Russian is passable, you can probably do this yourself. In other cases, the signature of the applicant on the application needs to be certified by a notary.
Cost â the state duty for the state registration of a person as an individual entrepreneur is 800 RUR. Details concerning the payment of the state duty are on the Federal Tax Service web site.
â¢ Submitted copies of documents must be certified by a notary, unless you submit personally. If you submit in person, you just certify the documents yourself. These will be returned to you when the registration authority issues notice of the documents receipt.
â¢ Each document containing more than one sheet should be attached and numbered.
â¢ Number of sheets should be proved by the signature of the applicant or the notary on the back of last sheet on a signature space.
â¢ Application and the appendices need to be typed or written in black ink.
Documents are completed in (and issued) in Russian only.
4. Filing the required documents to the register office.
You need to file a prepared set of documents to the registration tax authority at your place of residence in the Russian Federation.
You can file the required documents by the following ways:
â¢ Paper filing by hand in the registration office (personally or through your authorised representative);
â¢ Paper filing by post;
â¢ E-filing via the Internet â although Iâve found this to be unreliable in the past.
Within no more than 5 working days from the receipt of the documents the registering authority should examine the documents submitted and let you know the outcome. Hopefully itâs good and you move on to the next stage.
5. Receiving the incorporation documents. If all goes well, on the day appointed by registering authority you will receive;
â¢ State Registration Certificate of a person as an individual entrepreneur.
â¢ The Tax Certificate (full name is the Certificate on registration in tax authority).
â¢ Extract from the Common State Register of Individual Entrepreneurs.
You can also have them sent to your registered office address if you have one. Once you have these, off you go â youâre in business, without forming a legal entity. You can choose whether or not to have a seal (or stamp).
With a certificate of registration and company seal, you are entitled to open an account in any bank at your choice. Within seven days from the date of a bank account opening you must notify your tax authority with this information. The account should be encoded as an IE account.
The tax situation for mere mortals, not taxation accountants, is quite complex for the uninitiated. Iâm no tax specialist, so at this point I would tell you that the simplified tax system is 6% and the ordinary tax system is 15%. You need to check the category you want or fall into, particularly if you employ people. Deeper detail than this, you need some specialist support, or you need to study the FTS (Federal Tax Service) web site.
So that is the process and the technicalities, but there are some other points to mention about Individual Entrepreneur status. One is particularly interesting for property owners. Once you have IE status, you can apply for a license to rent out your property. For a one-off annual fee around 35,000 Roubles, (depending on your floor area) you can collect rent and not pay any tax. Obviously your decision is going to be based on your tax liability on your income against the fee for the license. Itâs a particularly attractive option for those with high-rental income properties.
Another point is the filing of your accounts. These days, this can be done on line, via web sites specialising in this service. One such provider is âÐÐ¾Ðµ ÐÐµÐ»Ð¾â (My Business). Personally I have found this site and its Customer Service staff really helpful. Simply by keying in your revenue for the quarter, your accounts are compiled and tax automatically calculated. You can then pay your tax through your bank. That process will depend on your bank, of course, but my understanding is that most allow you to create a template with the relevant tax account and references.
NB! Itâs important to realise that your registration as an Individual Entrepreneur is dependent on your residency status. If you change it or allow that to lapse, amongst other horrors that will befall you is removal of your Independent Entrepreneur status. So if you decide to become an Individual Entrepreneur, good luck, and I hope it all goes well. If nothing else, you will join the 6 percenters and be able to look forward to your Russian pension when the time comes. You definitely wonât be retiring on it though.