I am looking to Export to Russia to a Sister company

Question posted by Ian Mears

I am looking to Export to Russia to a Sister company .
My Finance Department don't want us to set up a VAT registration in Russia but us to deliver and clear the goods into Russia
Is this legal ?

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Is your sister company VAT registered? If they are then, your finance team shoould be able to handle it from there.

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Rufina Baybulatova, on behalf of UK Trade & Investment Russia in Moscow, Russia.

Dear Ian,

Your question requires advice from the professional legal firm. If you contact me at Rufina.Baybulatova@fco.gov.uk, I'll be able to send you a list of the UK law companies based in Russia who can help with the information.

Kind regards

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Dear Ian,

For foreign companies making taxable supplies in Russia, there may be a statutory obligation to register as a taxpayer. There is no separate registration for VAT purposes in Russia, however the general registration as a taxpayer covers VAT. Once registered, non-resident traders must comply with local filing rules (see below).

Typical situations requiring a Russian VAT registration include:

Where goods are delivered within Russia;
Where goods are imported into Russia;
Export of goods from Russia;
Supply of services where the place of supply is Russia.

If you do not want to register for taxes in Russia and remain as a representative office of a foreign entity no trading can be done by this company. All trading must be done by the parent company. The only goods you can import in this case are office supplies for company use such as furniture, telephones etc. No trading commodities.

However there are ways round this whereby a third party company can make imports on your behalf

If you would like to discuss in more detail here is my email address gary@blackthornetransport.co.uk

Gary O'Grady

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Aside from the legal issues there are also practical issues.

Whilst it is possible to require charges for transport, clearance, duty etc. to be directed to the sender a Russian based company still has to be the importer of record. It is usual for this company to be tax registered in the country of import so that it can take legal responsibility for the payment of local import duty / taxes.

If your finance team don't want to go as far as creating a subsidiary or sister company etc. to become tax registered then you really need to find a partner company who will take this role on your behalf.

For further information please go to www.morley-consulting.co.uk

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David Cant, on behalf of Albion (Overseas) Limited in TN9.

The advice given above is sound. Perhaps the only thing I would add is you need to be a little careful not to create by accident a taxable entity. However, the rules on this are pretty clear and so it's just a matter of not "sleepwalking" into it. I would thoroughly recommend contacting Gary on this subject, as he is very knowledgeable. If you are looking for a Russia based company to act as your importer, this is something we do for other companies, and we would be happy to explain how this could work. My email is: david@albionoverseas.com

And Good Luck!

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Philip Owen, on behalf of Volga Trader in Bridgend, Mid Glamorgan.

I'll endorse what has been said above. It is very clear that the importer of record must be a Russian entity. Only a registered Russian entity can pay for any duty collectable. Registration involves paying a small deposit. The Incoterm DDP cannot be applied in Russia.

Sister company implies common ownership. Your sister company will be VAT registered. Russian VAT repayments take time but their input VAT will ultimately be recoverable so why do you need to concern yourself about VAT? There are some complicated situations involving capital equipment where no VAT is due but the Russian Customs Service (whose priority task in their guiding documents is explicitly to raise revenue not enable a smooth flow of goods) add so many other additional charges that it is generally not worth attempting.

Gary, David & I all offer services to deal with imports for companies that do not have a legal entity in Russia able to trade.

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