December 2016 Credit Management magazine

COUNTRY FOCUS
Breaking
Adam Bernstein concludes his look at Russia and explores the potential
opportunities ahead on the World Cup 2018
THE Russian telecoms market is growing at two
percent a year and is Europe’s largest market
for mobile phones. As with the West, there is
demand for high speed mobile broadband
and also for help in improving communication services
in distant regions. That said, the fixed line network
still only covers about 28 percent of the population.
But where it is in situ, the World Bank the average
broadband speed is 7.4MB which is twice the global
average of 3.8MB.
WORLD CUP 2018
Despite the controversies, Russia is set to host the
World Cup in 2018 and the Government had given it a
budget $11.8 billion to stage the event. But the budget
has been cut more than once and it’s now down to $8.15
billion (February 2016) – a still not inconsiderable sum.
Opportunities include the design and construction of
new stadiums, training grounds, hotels,broadcasting
and media centres, the modernisation of airports and
other transport infrastructure.
BUSINESS FORM
While there are three types of business entity in Russia
– limited liability companies, joint-stock companies
and partnerships, many firms choose to work in Russia
via direct sales or distributor contracts because they
are not subject to Russian taxes, need no physical
presence in Russia via any corporate structure, and are
not responsible for Russian customs processes, taxes
and fees.
However, other options include opening a
representative office which is accredited for one to
three years, but can only carry out activities aimed
at generating profit, such as research. A branch of a
foreign legal entity is accredited for one, two, three
or five years and it can carry out all the functions of a
company.
It is possible to open a Russian subsidiary, of
which there are several forms, each of which has
different taxation, legal obligations, regulating bodies,
registration requirements and information disclosure
procedures.
LEGAL CONSIDERATIONS
Foreign investment in Russia is overseen by federal law
and it prohibits foreign investors from getting control,
or substantial stakes in Russian strategic industries,
and specifies that foreign entities are treated equally
with Russian firms. However, it does protect investors
against unfavourable changes in tax, customs and other
legislation for up to seven years.
Investors also have protection by being able to
recover damages resulting from illegal actions, or
inactivity of government authorities, local government
bodies or officials,protection from property seizure,
protection from adverse changes in tax and customs
legislation during the payback period of an investment
project, and a right to an unimpeded transfer of profits,
income etc. from investments.
The Unified State Chamber of Registration is the
major registering authority for most legal entities
operating in Russia. But there are a number of other
government bodies with responsibility for foreign trade
regulation and licences to operate may be required on
both the federal and regional level.
32 December 2016 www.cicm.com
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