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Sole Proprietorship In Russia

Sole proprietorship in Russia represents the most flexible type of legal entity that investors can establish in the country. The sole proprietorship in Russia is aimed at traders who want to launch small commercial activities where investors are self-employed.

The sole proprietorship Russia tax system differs from the tax system that applies to other legal structures, even if the company is intended for commercial activities. If you are a sole proprietor and want to start a business, you can contact Multiplier in Russia for legal advice.

  • As of 10th June 2022, the Central Federal District of Russia reported approximately 1.93 million MSMEs, the highest compared to other regions of the country. The Volga and the North-western Federal Districts followed suit with nearly 1.06 million and 695 thousand MSMEs, respectively. 
  • The Russian Employment Rate increased from 59.70 to 59.80% in one month – April-May 2022
  • According to the latest World Bank annual ratings. Russia is one of the top ranking countries (Rank 28) among 190 economies in terms of the ease of doing business which has significantly improved from 31 in 2018.

You can register self employed Russia through several types of structures. The sole proprietorship of Russia is a key category, and foreign investors need to be aware that the registration of a company does not require a physical presence, as Russian law firms can handle the procedure through a power of attorney.

Who can be a Sole Proprietor in Russia?

Running a small business in Russia as a foreigner is extremely easy and convenient. As a non-Russian-speaking foreigner, anyone can open and run a small business in Russia, and it is very easy if done correctly.

Suppose you are an investor looking to set up business in Russia. In that case, the country offers you the simplest and most flexible type of legal entity according to sole proprietorship Russia law. The sole proprietorship is intended for entrepreneurs who want to start a small business where the investor works as self-employed. The sole proprietorship Russia tax system differs from that applicable to other types of legal structures.

Foreign investors wishing to open a sole proprietorship in Russia must take several legal steps and follow regulated compliance formats to register.

You must keep all the documents handy and follow the appropriate registration procedure after checking your eligibility criteria which are all mentioned below. First, business people will need to obtain residency in Russia to legally open a sole proprietorship, where our team of company registration agents in Russia can provide legal representation.

Only after this aspect is exhausted foreign entrepreneurs can start the company registration procedure in Russia, which provides for the definition of a commercial activity that will be carried out through the sole proprietorship. Companies registered as sole proprietorships can develop a wide range of commercial activities, which can be consulted with the Government of the Russian Federation.

Benefits of Sole Proprietorship in Russia

Russia has a population of 145 million, 12 cities with a population of over 1 million, and 201 cities across Russia with a population of 100,000 to 1 million. Russia spans 11 time zones and covers one-fifth of the earth’s land.

Sole proprietorship or ownership is the easiest way to start a business in Russia, with no minimum equity capital requirements or operational management structure. According to Russian authorities, sole proprietorships are not considered legal entities but must be registered for tax purposes.

As a sole proprietor, you are responsible for the debt of the company’s private assets. Russian sole proprietors have full control over their business, have the right to all profits, and can hire others. Some of the benefits of starting sole entrepreneurship in Russia are:

  • Low sole proprietorship Russia tax rate
  • Numerous stay options
  • Access to resources
  • Well-trained workforce
  • The Russian RUR is a big advantage. With considerable capital, Russia has many opportunities with little or no competition.
  • Russia is undoubtedly an attractive business center for international players and those who want to succeed by doing business in eastern Europe or North Asia.
  • Recent state business policies promote the ease of doing business as a foreign entrepreneur in Russia, allowing individual entrepreneurs to establish activities in most areas.
  • In just a few steps, you can transform your private business into a Russian SME and benefit from a wide range of sole proprietorship Russia tax exemptions, experienced employees, and many opportunities.

Documents Required for Registering Your Business in Russia

Setting up a sole proprietorship in Russia for an individual entrepreneur requires a lot of paperwork that must be presented for approval.

  • People in business are required to submit Form R21001 certifying their registration as sole proprietors.
  • If the investor submits the registration documents directly, there is no need to witness these documents in front of a Russian notary public.
  • Investors are required to submit the following documents:
    1. A copy of the document certifying the applicant’s nationality
    2. A copy of the document certifying residence in Russia
    3. An official document that provides information about the official address of the applicant living in Russia
    4. Proof of payment of state tax
    5. Applicant’s criminal record document.

Other Criteria for Registering a Sole Proprietorship in Russia

Foreign investors setting up a sole proprietorship in Russia as the sole trader will have to go through some legal proceedings to register self employed Russia here.

  • First, people in business need to acquire a place of residence in Russia to open a sole proprietorship legally. It can be provided by a team of Russian business registration agents like Multiplier as a statutory agent. Only when this aspect is completed can foreign people in business begin the process of registering a company in Russia.
  • Secondly, it requires a definition of the commercial activity carried out by the sole proprietor. Companies registered as individual entrepreneurs can develop a wide range of commercial activities that can be consulted with the Government of the Russian Federation.
  • Anyone, Russian or non-Russian, can start a small business in Russia and can establish a fully/partially owned Russian sole proprietorship. In most cases, you can also set up other legal entities regardless of your citizenship or residence status. Russia requires a visa to visit the country, but setting up a sole proprietorship in Russia is allowed without a residence permit.
  • To get the right to work in Russia and receive a salary, you need a work permit and a work visa in Russia. Sole proprietorship Russia requires a legal residence. According to sole proprietorship Russia law, sole proprietors are legally responsible for dealing with personal assets.

    Therefore, this type of business requires temporary or permanent residence in Russia. If your long-term goal is to get permanent residence in Russia and you plan to run a small business, registering as a sole entrepreneur is a cheap option.
  • You must set up a settlement account that allows sole proprietors to pay sole proprietorship taxes in Russia, wireless remittances, pay social security contributions, or receive remittances from other businesses.

    A clearing bank account for sole proprietorship Russia is usually a business bank account different from a personal one. Pay attention to the bank account used by your company to meet your tax requirements and avoid overcharging.
  • Foreign investors need to pay attention to the conditions for full-time residence in Russia. This is the document you need to start working as an individual entrepreneur in this country which is confirmed by foreigners using an identification document displaying the domicile in the city which has been picked for business. Investors from abroad must have all their documents translated and notarized before they apply for registration as sole proprietors.
  • It will take approximately 5 days from the date the documents are submitted for the authorities to respond to your case. If everything is going well and the terms of use are met, all the documents will be registered, and the sole proprietor will be able to start a business.

    Being a one-stop-shop procedure, the procedure is not complicated, and foreign entrepreneurs can enjoy the absence of a strict bureaucracy and start their business immediately.
  • At this stage, a tax certificate, an excerpt from the common state register of Russian individual entrepreneurs, and a state registration certificate certifying that an entrepreneur can act as an individual entrepreneur are issued by the registration office through the regional office.
  • You can also register online, so future individual entrepreneurs will be able to receive documents at the company’s address. You can use the services of Multiplier to help you with compliance and registration procedure for a sole proprietorship in Russia.

How to Register a Sole Proprietorship in Russia?

Step-by-Step Guide to Starting a Business as an Individual Entrepreneur in Russia

If you are a foreigner and you wish to do business in Russia without establishing a legal entity as an individual entrepreneur, you will need to complete the following steps:

Step 1. Obtain a partial or full-time residence in the Russian Federation

Documents confirming the residence of foreigners in the Russian Federation are as follows:

  • An ID card containing information about the address of your place of residence in the Russian Federation.
  • Residence permit in Russia (for foreigners and stateless persons staying on the territory of the Russian Federation)
  • Refugee Certificate (for certified refugees)
  • Temporary residence permit (for foreigners and stateless persons without ID)
  • Landing Permission for Temporary Asylum Certificate of the Russian Federation (for foreigners and stateless persons granting temporary asylum).

Step 2. Define the scope of your business

Some business activities in Russia require entrepreneurial activities in youth sports and culture, education, training and upbringing of minors, organizing rest and recreation, health care, social security, and social welfare. The Government has approved the list of such activities in the Russian Federation.

Step 3. Preparation of a set of documents required for registration

You need to prepare some documents to submit to the registration body. This includes:

  • Declaration of state registration for the sole proprietor’s individual signed by the applicant (Form R21001) – If the applicant submits the documents directly to the registration body and presents identification simultaneously, the notary does not need to prove the applicant’s signature. In all other cases, the applicant’s signature on the application must be notarized.
  • A copy of a document certifying your identity as a foreigner or stateless person. You will also need to provide a copy of the birth certificate or another copy of the document confirming the place of birth.
  • A copy of a document confirming your right to permanent or part-time residence in the Russian Federation.
  • The original or copy of the document confirming the address of your place of residence in the Russian Federation (the provided copy of the document confirming your identity or the right to live part-time or full-time in the Russian Federation. If so, it does not contain information about this address).
  • Documents on government tax payments
  • A document stating whether or not you have been convicted and have been prosecuted or suspended from prosecution (if you plan to engage in particular business activity, the list is from the Government of the Russian Federation).

The state fee for an individual’s state registration as an individual entrepreneur is 800 RUR. Details on how to pay government taxes can be found on the FTS website. Documents must be submitted concerning the following requirements:

  • A copy of the submitted documents must be notarized. The exception is when the applicant himself submits a copy of the document directly to the Registrar and at the same time verifies the correctness of the copy of the relevant document in the original. These documents will be returned to the applicant with notification from the Registration Authority.
  • Documents containing multiple sheets should be stapled and numbered.
  • The number of sheets must be verified by the applicant’s signature or notary on the back of the last sheet at the insertion point.
  • Applications and attachments must be manually entered or filled in with ink or a dark blue or black ballpoint pen.
  • If the application section or section is not completed, the section with strikethrough is included in the appropriate chart.
  • The document is written (issued) in Russian. Foreign language documents require an apostille or consulate certificate and subsequent translation into Russian. The translation should be notarized.
  • The authenticity of the applicant’s signature on the application should be notarized. The document, in which a foreign notary public has proved the authenticity of the applicant’s signature, requires apostille or consulate proof and subsequent translation into Russian. The translation should be notarized.

Step 4. Submit the required documents to the registration office

A set of prepared documents must be submitted to the registered tax authorities in the place of residence of the Russian Federation. You can submit the required documents in the following ways:

  • Submit the registration to the Resident Registration Office (either directly or through an agent)
  • Submit the registration by mail
  • Electronic submissions over the Internet, including a single portal for public and municipal services.

Within 5 business days of receiving the document, the registration authority will examine the submitted document and make an appropriate entry in the state register to decide to register the state as an individual entrepreneur or refuse to register.

Step 5. Receipt of corporate establishment documents

If you pass the examination of documents, you can issue the following documents on the day decided by the registration body:

  • Certificate of personal registration as an individual entrepreneur
  • Tax Certificate (Name is a certificate of registration with the tax authorities)
  • Extract from the common state registration of individual entrepreneurs. If you have not contacted the registration authority to obtain the documents, they will be sent to your company’s official address.
    At registration, you can choose how to send the document. After completing these measures, you can act as a sole proprietor without forming a legal entity.

Step 6. Create a Seal

When you receive the registration documents for the sole proprietorship registration, you have the right (not obligatory) to affix the seal. The commercial organization of your choice does the seal’s creation.

Step 7. Open a bank account for sole proprietorship Russia

The procedure for opening an account and a list of required documents are specified in the Central Bank of Russia Instruction N28I dated 14th September 2006. Please note that you must submit this information to the tax authorities within 7 days of opening your sole proprietorship Russia bank account.

If you are registering as a private entrepreneur, information about the validity of the document confirming the right of a foreigner or stateless person to reside part-time or full-time in the Russian Federation is entered into the state register. If the document confirming the right to housing of a foreigner or stateless person in the Russian Federation expires, his state registration as a private entrepreneur will automatically expire from the document’s expiration date.

The exception is when the applicant himself submits a copy of the document directly to the Registrar and at the same time verifies the accuracy of the copy of the relevant document in the original. It will be returned to the applicant when the registration authority receives the receipt notice.

Conclusion

It is possible to open and run a company in Russia as a foreigner without any knowledge of Russian. To do this, you need to know the skills that every competent person in business already has: how to delegate effectively.

Many day-to-day tasks such as financial reporting and government reporting can be delegated to administrative staff, greatly reducing the language barrier. There are no restrictions on who can start a small business in Russia, how much they can own, and what business areas they can engage in.

The advantage of running a small business in Russia is that, in most cases, employer and employee sole proprietorship taxes in Russia are more affordable than in the West, which outweighs the cost of running a sole proprietorship in Russia.

Contact Multiplier, which is a top-ranked global employment solution. At Multiplier, we will help you make the process of initiating your Sole Proprietorship Russia smoother, easier, hassle-free, informative, and convenient. We offer reliable PEO and EOR solutions to simplify HR processes, manage payroll, subsidiaries, onboarding, taxation, and following legal compliances.

If there is any update in the compliance or legalities of the country, Multiplier promptly acts on and helps you understand the relevance of every modification. You can completely rely on us when recruiting and management of international employees.

From managing employee payroll, sole proprietorship taxes Russia, and benefits to onboarding and other HR-related activities, Multiplier takes care of it all. At the same time, you focus on running your sole proprietor business successfully in Russia.

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Frequently Asked Questions

The sole proprietorship Russia tax filing is from 1st January to 31st December. New Russian companies established before 1st October of any year are required to file a tax return for that year. Companies starting on or after this date will submit their first declaration the following year.

The Registration Certificate is a necessary document that must be presented when opening a sole proprietorship Russia bank account. You need to report the details of your company’s bank to the tax authorities. There is no sealing requirement, but this should be considered. Social security registration is the next thing to do, and the sole proprietors in Russia are advised to hire an accountant for the business.

Volgograd, Moscow, Kaliningrad, St. Petersburg, Kazan, and Vladivostok are some of Russia’s major cities and are the best business destinations for many foreign entrepreneurs.

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