Every tenth foreign company has not been accredited in Russia
The foreign companies are being red-taped when applying for accreditation with Federal Tax Service for working in Russia, and more than 10% get refused. It was the Ministry of Justice to deal with accreditation before, and there were no refusals, the market players claim.
On the 1st of January, 2015 changes were made to the order of foreign companies’ access to the Russian market. The amendments were relating to the law «On foreign investments in the Russian Federation»: the branches and representative offices of foreign legal entities (except for the companies engaged with civil aviation and the banks being accredited by Federal Air Transport Agency and Bank of Russia) get accredited with Federal Tax Service. Accreditation became unlimited by time.
For the period from the 1st of January, 2015 till the 1st of August, 2016 more than 2600 foreign companies have applied for the primary accreditation and the number of refusals for this period is 216, as the tax office claimed upon RBK’s request. Given the number of foreign companies having had their branches and representative offices re-accredited, 5726 foreign legal entities have been successfully accredited by the 1st of August. Federal Tax Service has issued 658 refusals overall, i.e. more than 10% of companies have failed to get accreditation, as follows from the tax office data.
Before 2015 it was the State Registration Chamber under Ministry of Justice to maintain the registry of branches, the term of accreditation of a branch was ranging from 1 to 5 years, the one of a representative office — from 1 to 3 years. During 2014 493 representative offices and branches of foreign legal entities have been accredited, the terms of accreditation have been prolonged for 113 representative offices and branches, and 74 more representative offices and branches which were accredited with other authorized bodies have been added to the state registry of accredited representative offices of foreign companies, a Ministry of Justice representative told RBK.
There is no data on the refusal in 2014, the office representative said. A member of the press service of the tax office said the tax service itself does not possess the accreditation data for the period until the 1st of January, 2015.
Head of the business development department of BDO Unicon Outsourcing Tatiana Klimanova and Head of the foreign companies accreditation department of the law firm PRIORITET Yulia Vasilyeva claim there was no company having had to deal with refusals until the 1st of January, 2015.
The reasons of refusal
Once the new order has been settled, «all our clients got successfully accredited, but approximately 15-20% of the companies had to get through the procedure for the second time», says Klimanova. After the first failed attempt companies get the list of remarks in regard to the prepared package of documents, make corrections to it, and the second accreditation appears to be successful. «It is necessary to pay a state fee fully for re-accreditation», she added.
To get accredited, a company has to prepare a package of documents and pay the state fee 120000 rubles, as follows from information on the Federal Tax Service website. As the tax office representative has clarified, the main reason of rejection — either inconsistency of the submitted documents to the enacted rules or provision of an incomplete package of documents, or provision of expired documents, or the documents do not meet the requirements for their design.
In practice, the tax authorities are refusing for inconsequential reasons, says Vasilyeva. For example, a client of her company had been refused, because the seal of legal entity in the documents has been translated from a foreign language once, and it appeared four times in them. «We have fixed it all up and submitted the documents once again along with paying the state fee of 120 thousand rubles», she clarifies. «In this case, companies faced a weak legal regulation and quite harsh requirements. Weak regulation lies in the fact that the legal norms on accreditation contain no clear requirements for the design of documents. The foreign investments law sets out that the documents containing false information may be a ground for issuing a refusal on accreditation. Every little non-influencing thing may be put into this paragraph», she assumes.
Inter-District Inspection of Federal Tax Service of Russia in Moscow is in charge for accreditation. Its refusal can be appealed in a higher instance. But the higher tax authorities tend to support the taken resolutions and do not cancel the refusal on accreditation, so all you have to do is to appeal to the court, said Klimanova: «The court expenses are usually many times more expensive for companies than the state fee for re-accreditation», she added.
The main problem lies in the fact that the accreditation rules do not take into account the peculiarities of the laws of other countries, which define the so-called personal statute of the foreign entity, says Igor Shikov of «Egorov, Puginsky, Afanasiev & Partners». In particular, the provisions of the Law «On foreign investments in the Russian Federation» say exclusively about foreign legal entities. But in other countries, participants of entrepreneurial activity may have a form of incorporation which does not imply a legal entity. For example, a limited partnership established in Germany.
He adds that performing activities on the base of a representative office or a branch is not a common form of doing business — subsidiaries are being most often established for commercial purposes. But the accreditation procedure of branches and representative offices «can significantly complicate getting the foreign companies to the Russian market», he adds.