Russian Federation

Ease of Doing Business Rank: 37

Overview

 

Geographic location

The Russian Federation, or Russia, is a transcontinental country in Eastern Europe and North Asia.

It is bordered by Azerbaijan, Belarus, China, Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania, Mongolia, Norway, Poland and Ukraine.

The Barents, Kara and East Siberian Sea lie to the north and the Sea of Okhotsk in the east.

Spoken language

Russian is the only federally-recognized language in the Russian Federation. However, Russia recognizes many languages within its constituencies and allows its republics to establish state languages.

Between 13 and 15% of Russians have foreign language knowledge with English being the most common (80%), followed by German (16%), French (4%), and Turkish (2%).

Population

The 2019 population estimate is 145.88 million.

Russia’s three largest cities are Moscow (11.50 million), St. Petersburg (4.87 million) and Novosibirsk (1.47 million). Another 12 cities have populations over 1 million. A further 150 cities have populations between 100,000 and 1 million.

Popular industries

The top industries in Russia are oil and gas, mining, processing precious stones and metals, aircraft building, aerospace production, weapons and military machinery manufacture, electrical engineering, pulp-and-paper production, automotive transport, road and agriculture machinery production and foodstuffs.

Education

The Times Higher Education World Rankings lists 15 Russian universities in the top 1,000 in the world.

The Legatum Prosperity Index ranks Russia’s education system 15th out of 149.

Popular entity types

The most common type of business entities in Russia are the limited liability company and joint stock company.

The overwhelming majority of businesses are in the form of a limited liability company.

Russian incentives for business

Russia offers many incentives for foreign business. These include regional and local corporate, property and transport tax reductions for large investors or in certain industries.

Companies may also enjoy non-tax incentives. These may include budget subsidies, partial compensation of capital expenditures, guarantees to banks, simplified access to infrastructure facilities, reduced rents, and administrative and legal support.

The Russian Federation also has designated special economic zones for industrial businesses, scientific technical research and implementation, tourism and recreation, and port development or reconstruction. Residents may also enjoy reduced social contribution rates and customs-free zones.

Additionally, Russia has established Advanced Development Zones to encourage development in particular industries the Russian Far East in areas such as Komi and Smolensk. Incentives include regional and federal corporate and property tax reductions or eliminations, significantly reduced social contributions, customs-free zones, financing, and simplified rules for hiring foreign employees.

Vladivostok offers substantial tax incentives including no federal tax for five years and reduced regional corporate tax (maximum 5%) for the first five profitable years and 10% the following 5 years. Social contributions are also much lower (7.6% instead of the standard 30%) for ten years.

Specific activities also qualify for incentives. These include reduced corporate tax and social contribution rates for IT in several regions. Particular R&D services may enjoy VAT exemptions, expense deductions and accelerated depreciation on fixed assets.

Companies concluding regional or special investment projects directly with the Russian Federation may enjoy a reduced CIT rate and many non-tax incentives such as reduced rent.

The Russian Federation also grants tax relief for foreign taxes paid up to the amount of the Russian tax liability.

History & Features

 

Main cities for business

The main cities for business are Moscow and Yekaterinburg.

Moscow is the capital and financial center, while Yekaterinburg is the seat of industrial activity.

Popular historical & tourist attractions

The Russian Federation includes 29 UNESCO World Heritage sites. By far the most popular is the iconic St. Basil’s Cathedral on Red Square built from 1555 to 1561 on orders from Ivan the Terrible.

Moscow’s Kremlin was the center of the Orthodox Church and Russian political power since the 13th century. It was once the home of the Great Prince and is protected by miles of high walls.

The prestigious Bolshoi Theatre in Moscow features world-renowned ballet and opera performers and was once a part of the Imperial Theatres of the Russian Empire.

The historic center of Saint Petersburg is home to the Admiralty, the Winter Palace, the Marble Palace and the world-class State Hermitage Museum. Its canals and bridges started in 1703 were the handiwork of Peter the Great; however, architectural styles span the Baroque and neoclassical periods.

Russia’s parks are also nothing short of spectacular. The country offers 48 across the nation including easily accessible Elk Island in the heart of Moscow. One thousand miles away you’ll find Sochi national park with waterfalls, caves, canyons, snowy mountains, and sandy beaches on the Black Sea. It hosted the 2014 Winter Olympics.

Vladivostok to the east has spotted leopards in the area from Amur Bay in the Sea of Japan to Russia’s border with China and beyond. Shorsky National Park in Siberia offers the towering Altai Mountains, waterfalls, crystal clear lakes, horseback riding, glacier climbing, white water rafting, mountain trekking and Russian steam baths.

Kamchatka is almost untouched and very geologically active. You’ll find volcanoes, hot springs, geysers, and an acid lake in the area. Kamchatka’s peninsula has the world’s southernmost section of arctic tundra too.

History

While many tribes lived in the area for centuries, it isn’t until the 9th century that written records appear in the Slavic alphabet.

By the early 13th century, Mongol-Tatar tribes under the leadership of Genghis Khan occupied a huge portion of Central Asia. However, Slavic tribes began a unification process in the last half of the 14th century.

Nearing the end of the century, Moscow became the center for a nationwide struggle to overthrow the Mongol-Tatar forces. During the 16th century the region unified under a Tsar, but Swedish kingdoms threatened the area for 21 years during the Northern War.

Russia won the battle, but the country was greatly impoverished. Peter the Great encouraged modernization and reformed the government, administration, military, industry, trade, finance, education, foreign policy, and the church.

The Russian Empire became a great European power during the late 17th and early 18th century with a formidable monarchy. Art, architecture and culture flourished.

Russia was at war with Germany by 1914. They formed a huge army and forced workers and peasants to join. However, they were ill-equipped and casualties were enormous. The Russian people blamed the Tsar for their losses.

In 1917, the Bolsheviks led by Vladimir Lenin ousted the Tsar and created a new communist government during the Russian Revolution. Eventually they formed the Union of Soviet Socialist Republics, or the Soviet Union, in 1922.

During the following decades, the Soviet Union remained opposed to western interference. They focused on a collective society, increased industrialization, and improved the educational system.

However, by the mid-eighties the country was clearly struggling. Mikhail Gorbachev assumed power in 1985 and encouraged openness, more freedom of expression, and a new restructuring program to move the country forward.

During the next decades, republics within the Soviet Union clamored for independence. Many rebelled and by 1991 the former superpower was replaced by 15 independent republics.

The Russian Federation was the largest of the fifteen republics and widely accepted as the USSR’s successor state. The new leadership faced many challenges including hyper-inflation, a decimated military force and social unrest. For ten years, the country was in a state of upheaval.

Vladimir Putin came into power after the 1998 economic crisis. He was re-elected in 2004 and again in 2011, although under protest. The controversial leader remains in power.

Today, Russia has a semi-presidential democratic government with a mixed economy and state ownership in strategic areas. Reforms have led to industrial and agricultural privatization, except in the energy and defense sectors.

Other relevant facts

The majority of Russians are Christians (47.1%). A further 25% claim they are spiritual but not religious, 13% claim to be atheists, 6.5% Muslim and 1.2% Pagan or Tengrist.

According to the 2010 census, ethnic Russians make up 81% of the total population. The remaining number with populations exceeding 1 million include Tatars (3.9%), Ukrainians (1.4%), Bashkir (1.1%), Chuvash (1%), Chechens (1%) and Armenians (0.9%).

Additional Information for Business

According to Forbes’ 2019 Best Countries for Business, Russia is the 55th best country in the world for conducting business.

The 2019 Index of Economic Freedom rates Russia 98th globally and states, “The private sector has been marginalized by structural and institutional constraints caused by ever-growing government encroachment into the marketplace. Large state-owned institutions and an inefficient public sector dominate the economy.”

World Bank’s “Doing Business” rankings rate Russia 31st for ease of doing business in the world.

Russia Entity Support Services by Blueback Global

Blueback Global provides a one-stop integrated solution to managing all aspects of your global operations. We can take the burden off you or your company’s internal resources by managing Entity Setup, Local Payroll, Accounting, Tax Reporting, HR Admin and Regulatory Compliance matters associated with operating in a foreign country. Our services are designed to be flexible and customized, so whether you are starting from entity registration, or have already registered but need support in setting payroll or hire employees, we can help at every point of the process.

The common scenarios that may give rise to the need for Blueback Global’s services include the following:

With our integrated approach, you can expect the following experience:

We have an initial complimentary meeting to discuss the scope, objectives and plans for your expansion plan into Russia. After this meeting, you can expect a follow-up proposal from Blueback Global within 1 to 3 business days, that outlines that the approach, scope of work and expected deliverables and outcome. Thereafter, our implementation team will then work closely with your team to register the local entity, set up payroll, accounting process, employee social security and benefits. We will then develop a mutually agreed timeline and approach for ongoing payroll, accounting, tax reporting and HR support. Blueback Global will set up a compliance calendar so that you know exactly what and when compliance items such as tax reporting and payroll returns are due. We will of course facilitate all of these, so you do not have to keep track of the compliance dates.

Our goal is to make the process as smooth, simple and successful as possible, and remove the anxiety of operating in a foreign location, to deliver a great customer experience.

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