BUSINESS IN RUSSIA - types

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❓ TAX RESIDENTS OF RUSSIA:    • Personal Income Tax for non-residents in R...  

0:00 BEGINNING
0:21 WHAT BUSINESS CAN A FOREIGNER START?
1:04 COMPARISON
2:01 REGISTRATION AND CLOSING
2:27 TAXES
3:47 HIRED WORKERS
4:11 INVITING FOREIGN WORKERS
4:23 FINES
4:30 QUITTING BUSINESS
5:03 IF YOU AREN'T WORKING
5:33 RESTRICTIONS

Setting up a company is not the only way to do business in Russia. Individuals can also become an individual entrepreneur or self-employed.

WHAT BUSINESS CAN A FOREIGNER START IN RUSSIA?

Any foreigner residing in Russia on a legal basis (it means he/she must have any Residence Permit) is eligible to register as an individual entrepreneur and conduct business. And basically any person can become an owner of a Russian LLC, but cannot become the director, and any company must have a director. A foreign director must have a residence permit or work permit. As for self-employment, it is available only for citizens of the Eurasian Economic Union countries - Armenia, Belarus, Kazakhstan and Kyrgyzstan; as well as Ukraine, the Donetsk People's Republic and the Lugansk People's Republic.

COMPARISON

The main difference between these forms is that an individual entrepreneur and a self-employed person are liable for debts and obligations to creditors and counterparties with his/her personal property, while an LLC is only liable with its authorized capital.

An LLC can be incorporated by several people who act as partners in the new enterprise, in contrast to an individual entrepreneur and self-employed person, where only one private person is the «owner».
The share in the business is distributed among the partners in proportion to the share in the authorized capital of the company.

REGISTRATION AND CLOSING

To create a company, one should complete extensive paperwork, and closing an LLC takes no less than 6 months. Registering as an individual entrepreneur is easier, as well as deregister. The simplest procedure is to register as self-employed - through the Tax Service app, without any filing fees; and deregister takes place in the same manner.

TAXES

There are many nuances, but in short, things are like this:

Usually, if the income of an individual entrepreneur is less than ₽5 mln per year, the entrepreneur calculates the tax amount at a rate of 13%. If the annual income exceeds this amount, the entrepreneur must pay 13% of ₽5 mln and 15% of the amount over 5 mln.
And if you are not a Russian tax resident, you pay 30%. Entrepreneurs also must pay insurance premiums for him/herself and for the employees.

There are several taxation systems for companies (which are impossible to be covered in a video), the two most common are simplified and general. A company pays insurance premiums to different funds too.

The self-employed have one their own taxation system called «professional income tax» (4% when dealing with individuals, and 6, with legal entities), but their income must not exceed ₽2,4 mln annually. They do not pay anything to any funds.
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HIRED WORKERS

An entrepreneur can operate without hired workers; while an LLC is meant to have employees, which entails, in addition to taxes on the income received, insurance contributions to off-budget funds from the employees' wages. Self-employment does not involve employees.

INVITING FOREIGN WORKERS

Both entrepreneurs and companies have the right to invite employees from abroad.

FINES

Fines imposed on legal entities are usually higher than on entrepreneurs or self-employed persons.

QUITTING BUSINESS

A legal entity can be sold if necessary, but individual entrepreneur or self-employed status is not considered an entity, you can only deregister. If you are a co-owner and want to withdraw from your LLC, sell your share to the other members or anybody else.

IF YOU AREN'T WORKING

Individual entrepreneurs pay mandatory insurance contributions (currently ₽49,500) every year, regardless of whether they were actually doing a business. Companies don't pay it if they don't operate; however, they are required to maintain accounting records, which will most likely require the involvement of a specialist, which will result in additional costs. The self-employed don't pay anything if they don't have any income.

RESTRICTIONS

Individual entrepreneurs, unlike companies, can't engage in certain types of activities (selling alcohol etc.). The self-employed have more restrictions, e.g., they're not allowed to resell goods and sell mineral resources.