22.03.05

Foreign companies may conduct business in Russia either through a subsidiary or through a branch or representative office. According to the British Business Monitor International, at the beginning of 2004 there were approximately 2000 structures with the branch/rep office structure, representing a range of sectors.

At the beginning of 2005, these offices faced an unexpected problem in that the immigration authorities refused to issue work permits for employees of representative or branch office of foreign companies, claiming that work permits may be issued only for the right to work for an individual or legal entity and that such structures by definition are not legal entities under Russian law.

Representative of foreign rep offices and branches have filed complaints and experts comment that it could be interpreted as a way of forcing foreigners to open subsidiary structures. The authorities have so far refused to comment.

- from Vedomosti

Many companies use the Rep and Branch office structures as it provides a tremendous benefit in moving money in and out of Russia quickly. There are several other benefits as well, such as no VAT payments on rent. One of the benefits had been greater ease in obtaining work permits, and in fact before recent changes in legislation, foreign employees who were accredited to work in a Rep or Branch office, did not even need work permits at all.