2. | 2Ilya Nikiforov Seizing opportunities from increased FDI
RUSSIA: Basic Facts
Business entities
3 845 173
(31.12.2011)
Lawsuits
1 249 069
(31.12.2011)
Internet hosts:
29 400 000
Prisoners:
864 100
Leaders “Mid” Outsiders
Capital More reclaimed Reclaimed zone
“Rich” oil & gas zone
Developed Less reclaimed Reclaimed zone
Reclaimed zone (South)
Less reclaimed zone Border Less reclaimed
zone
Population:
142 905 200
(population census 2010)
Territory:
17 075 400 km²
Time zones: 9
Districts: 8
Subunits: 83
Business entities
3 845 173
(31.12.2011)
Lawsuits
1 249 069
(31.12.2011)
Internet hosts:
29 400 000
Prisoners:
864 100
3. | 3Ilya Nikiforov Seizing opportunities from increased FDI
Investing in Russia (and CIS) is not an easy ride
Casual wisdom:
hire an experienced individual to be the director/head of the business in Russia
pay special attention early to work permit and visa issues
clear special license / certification requirements, if any
every foreign document will need to be apostilled or legalised
Establishing a joint venture with a Russian partner
Advisable:
address the structure of the JV very carefully
establish an off-shore JV (outside Russia)
create a 100% subsidiary of the foreign incorporated JV in Russia for the joint activity
For investments in specific sectors (e.g. bank, insurance, aviation, mass-media, sub-soil
etc.)
Bear in mind:
special clearance from the government is required
TOP TIPS FOR INVESTORS
4. | 4Ilya Nikiforov Seizing opportunities from increased FDI
TOP TIPS FOR INVESTORS
Corporate tax is charged on Russian companies’ profits at a 24% rate. Effective
corporate tax rate may be significantly higher due to the non-deductibility or limited
deductibility of certain business expenses (e.g. hospitality expenses, advertising
costs, travel and accommodation expenses). The Russian corporate or personal
income tax, withheld at source, applies to dividends distributed by Russian
companies at the following rates:
0% in certain cases where the dividends payable to Russian companies qualify for exemption;
9% on dividends paid to Russian companies (with a credit for withholding tax paid on underlying dividends
if such underlying dividends are received from Russian companies);
15% on any dividends paid to foreign companies (with no credit for withholding tax paid on underlying
dividends), unless reduced by an applicable tax treaty (the minimum rate available is 5% for qualifying
participation);
9% on dividends paid to Russian tax resident individuals; and
15% on dividends paid to Russian tax non-resident individuals, unless reduced by an applicable tax treaty
(the minimum rate available under selected treaties is 10%).
VAT is due on import and on most commercial transactions at the rate of 18%.
5. | 5Ilya Nikiforov Seizing opportunities from increased FDI
TOP TIPS FOR INVESTORS
OOO’s
Unlike ZAOs and OAOs, these corporations do not issue shares and are not subject to costly and
time consuming requirements to register their securities with the Federal Financial Markets Service
and notify the same of each capital increase.
OOOs provide considerable flexibility for the distribution of the rights to dividends and the voting
rights: with OOOs, it is possible to distribute the right to dividends.
Representative offices and branches are non-residents under Russian currency
control legislation.
More flexibility in carrying out operations with foreign currency.
Salaries of Russian and non-Russian employees must still be paid in Rubles.
Check the double tax treaty between the Russian Federation and the country of
origin of the shareholders of the company.
Address the Russian thin capitalisation rules established by the Russian Tax Code
6. | 6Ilya Nikiforov Seizing opportunities from increased FDI
Ilya Nikiforov
Ilya Nikiforov is a head of the Dispute Resolution practice that “fully deserves its enviable
reputation”.
The European Legal 500
Ilya Nikiforov “wins plaudits from competitors for the “superb job” he does in litigation and
arbitration”
Chambers Europe 2008
Ilya Nikiforov is a Managing Partner at St. Petersburg office of Egorov Puginsky Afanasiev & Partners.
Arbitration Group of the firm headed by Ilya Nikiforov is the only Russian practice listed in Global
Arbitration Review Top 100 survey (2012). Chambers Europe 2011 ranked Ilya Nikiforov as a Tier 1
disputes lawyer in the market.
Ilya Nikiforov is known for a strong expertise in both litigation and arbitration and is listed as an
arbitrator by prominent arbitration institutions, such as WIPO, ICDR. Ilya has special experience in
international business transactions, commercial arbitration, construction and development projects,
and intellectual property law .
Nikiforov represents client interests at domestic forums at all levels, before Moscow arbitration
institution and other prominent commercial arbitration institutions, such as the ICC, LCIA and SCC. He
is often engaged as a Russian law counsel/expert in connection with commercial litigation and
international arbitration proceedings worldwide.
Since 1997 Ilya Nikiforov serves as an adjunct faculty member at the Law School of St. Petersburg
State University. He frequently speaks at professional conventions. Mr. Nikiforov has published a
substantial number of works on Russian business laws. He has co-authored one of the leading
Commentaries to the Civil Code of the Russian Federation (Parts 1, 2 and 4) that was published in
2004, 2005 and 2007.
Ilya Nikiforov
Managing Partner
St. Petersburg office
Egorov Puginsky
Afanasiev & Partners
T 7 (812) 322 96 81
F 7 (812) 322 96 82
e: Ilya_Nikiforov@epam.ru
Russia post crisis
Emerged out of crisis stronger than any European neighbor:
Over 4% GDP growth.
Budget deficit 5% in 2010, forecast 3% in 2011 despite presidential elections in Spring 2012;
7% unemployment – created 1 million jobs this year alone.
Air traffic up over 30%.
Banking deposits increased 30% in first six months in 2010.
Inflation 13% in 2008, 9% in 2009, 8,8% in 2010 and forecast in 2011 of 6-7% (Минэкономразвития РФ ), 8-9 (World Bank).
Mortgage financing up 30%.
Oil has recovered considerably off its lows (from $32 to $ 116,64)
RTS up 200+% off one-day low hit on Jan 23, 2009
- Pre-crisis high: 2,459.88 (May 30, 2008)
- Crisis low: 498.20 (January 23, 2009)
- Close Tuesday (October 29, 2010): 1,581.5
