Legal Aspects of Business Investment in Russia

Together with Canada, Russia is one of few countries around the globe with a single national database of registered companies valid throughout the whole country. In addition, Russian companies do not need to reserve a commercial name because their unique registration number is sufficient.

Business relationships in different countries exist at different levels. For an example, in Russia it exists at the individual and company level. Nevertheless, introducing a person from known company into an existing business relationship is accepted as a valid business partner. It is essential to emphasize the common ground to build up the trust. For example, expressing distrust towards authority or bureaucracy when there is an opportunity for it.

The performance of any business assumes the existence of a specific legal framework. This differs from country to country. In Russia, stiff formalism is a distinguishing feature. Therefore, before investment in a business or starting up a business, it is necessary to understand the obligatory requirements that effective legislation imposes on a specific activity by consulting a Russian attorney.

A number of business establishments, for example, construction, pharmaceuticals, etc., presume that a party has a special permit (license) or requires an access permit to carry out investment work, which may take several months to obtain, and lay down that the applicant complies with the terms and conditions established by law. The precise standards or technical regulations might have a number of special necessities.

Russia has adopted and established tax concession regulations for investors. Presently, the bulk tax concessions on investment relate to profits tax and property tax. Investment tax concessions are generally granted for a certain time period, which does not exceed the project payback period, and the sum of the tax saving is not more than the amount of initial investment of the project

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To run a business in Russia, it is assumed that the business conforms to Russian legal realities. But, in practicality, things do not always run smoothly for the below reason:

Foreign investors usually have extensive experience of doing business abroad and tend to be accustomed to other countries’ public and legal realities. Accustomed to a practically focused and rational approach, it is nearly impossible for an investor to understand and accept the legal formalism encountered in the country.

This can be a faltering obstruction for the investor, as the rules established by law represent the only legal option for running a business and the protection of investor’s rights in Russia. Accordingly, consideration of the mandatory requirements of effective legislation is must, which must be met when engaging in investment activities. For this, it is essential for every outsider considering investment in the Russian market to consult a Russian Attorney for comprehensive and detailed inputs about business legalities and liabilities.

Apart from establishing an additional company for distribution, appropriate contractual certification is essential. However, when business relations develop between partners, it is often the case that a number of understandings are reached orally and are not confirmed by supporting documents. This must be avoided. When registering contractual relations, it is required to consult a Russian Attorney to decide on the governing law. Russian legislation allows the business parties to select the law that applies to their contractual relations, where one is a foreign party.

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