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Liquidation of a foreign company on the territory of the Russian Federation: everything you need to know about the procedure

Publication date: 10.12.2022
Liquidation of a legal entity in legal practice is to be understood, first of all, to mean the complete termination of the company's operation when the right to own it is not transferred to other entities. Most often, owners make a voluntary decision to close the company, sometimes it comes by court decision. The liquidation process also applies to foreign companies that operate in Russia within the open representative offices or branches. In this case, the procedure of liquidation of a foreign legal entity has its own peculiarities and nuances. First of all, it is important to remember that this process is long but easier than the procedure of opening and accreditation of a foreign enterprise.
The very reasons why the parent company dismisses staff and closes a foreign company in Russia can vary considerably. Differences depend on voluntary or forced termination of the work of a branch of a foreign organisation in the territory of our country. With regard to voluntary elimination, the Administration may do so based on the following considerations:
  • 1
    Total liquidation of the parent company registered abroad and, as a result, the closure of all its subsidiaries.
  • 2
    Annulment of an intergovernmental agreement between the Russian Federation and another country, under which a branch of a foreign organisation has started work.
  • 3
    An independent decision by a foreign organisation to voluntarily withdraw from the Russian market for geopolitical or economic reasons.
When it comes to the closure of foreign companies by court order, this applies above all to various violations by the firm itself. The Federal Revenue Service may order the liquidation of a foreign legal entity if:
  • 1
    In the 12 months prior to the order, the foreign enterprise did not report on the taxes and fees paid in Russia in accordance with the domestic legislation.
  • 2
    There were no cash flows in any accounts opened in the name of a legal entity.
  • 3
    Over the past year, registered letters sent by the Tax Service to the company's address have been returned due to the expiration of the mailing deadline. This effectively means no activity on the registered legal address.

Closure of a foreign company's office: preparations

For the most part, the liquidation of a foreign legal entity is almost the same as for a domestic company. However, there are a number of nuances that need to be known and considered.

Procedure for closing the representation of foreign companies in Russia:
  • 1
    First of all, the management of the domestic branch needs to prepare a resolution of the foreign company on liquidation of the representative office operating inside the Russian Federation.
  • 2
    Make staff reductions in accordance with the Labor Code of the Russian Federation. Namely, to send an official warning to each employee not later than two months before the dismissal with payment of all necessary severance payments. It is important to emphasize here that legal acts do not regulate a certain time to reduce the team of specialists of the branch. Nevertheless, this must be done before the withdrawal of accreditation that is the main confirmation of the legality of work inside our country.
  • 3
    Check the presence of tax debts, as well as overdue obligations to extra-budgetary funds of the Russian Federation - pension and social insurance fund. In the event of arrears, it should be paid in full.
  • 4
    Write an application to the banks for the closure of all current accounts registered for the Representation. After that it is necessary to order a statement from the personal account, as well as a certificate of closure.

Closing a foreign company's branch step by step: the list of required documents

The list of required documents for liquidation of any form of legalization of foreign business in the territory of our country - branch, representation, bureau, agency - does not differ. According to paragraph 1 of the Order of the Federal Tax Service of the Russian Federation of 22.12.2014. MMB-7-14/668, the main body that is engaged in activities for the closure of such companies is by Interdistrict Inspection of Federal Tax Administration No. 47 in Moscow.

In accordance with the order of the Ministry of Finance of Russia dated 28.12.2018 No. 293n It is required to provide the following set of documents to the tax authority:
  • 1
    A completed application for deregistration of a legal entity in the registry.
  • 2
    An official decision of the foreign organization on liquidation of its representation in the territory of Russia. The document shall have legal force 15 days after its signature.
  • 3
    Extracts from the register of the state, which is the registrar of the foreign company, which would prove the fact of the company leaving Russia. It is important to know that such extract or other legal significance business paper is necessary at the complete closure of the parent company.
  • 4
    Prepared and correctly executed tax returns, as well as reports on insurance contributions that must be transferred by a foreign firm.
  • 5
    Prepared calculations on transfers to the account of the Federal Tax Service of Russia, which must be made during the liquidation of the company.
  • 6
    Official paper from the financial institution on the closure of all current accounts.
  • 7
    Certificate of registration of the representative office.
One of the nuances is that the reports listed in the last paragraph should be issued within the last tax or reporting period, which goes before the date of departure of the representative office of a foreign company from Russia.

It is important to know, in the absence of at least one of the above documents, the tax authority has the right to return the application for liquidation of a foreign legal entity.

The good news is that additional official business papers will not be required. This confirms the judicial precedent in the case concerning the closure of a branch of a foreign company (No. A40-14078/02-33-152 of 7 June 2002), when the Arbitration Court considered unfounded the claims of the Federal Tax Service of the Russian Federation to request additional documents. Court account inaction of the fiscal authority violating the rights of the legal entity under liquidation.

However, there are a number of conditions under which the tax authority has the right to refuse to close pending the elimination of all violations. It's about:
  • 1
    A complete lack of staff at the company;
  • 2
    There are no open current accounts in any bank;
  • 3
    the taxpayer made a mistake in the legal address.
Therefore, if all documents are collected and decorated correctly, as well as provided that the terms are fully respected by representatives of the foreign legal entity, within three working days, tax officials provide all necessary information on the closure of the representative office of the foreign company with step-by-step instructions to the various extra-budgetary funds to terminate the registration. Complete liquidation takes place within 10 working days from the date of acceptance of the corresponding application for deregistration. Nevertheless, provided that the tax audit is carried out, the liquidation process cannot end before it.

If the procedure of closing foreign companies in Russia is successful, representatives of the parent organization receive from the Federal Tax Service an information sheet with information about the cancellation of accreditation of the representative office of such foreign company. A similar notice is also issued after the cancellation of the accreditation.

In fact, this is the result of the termination of the existence of a foreign subsidiary on the territory of our country - the closure of accreditation and the deletion from the general state register of foreign enterprises that can officially operate on the territory of the country.

When closing foreign companies in Russia in 2022, it is necessary to take into account the fact that foreign documents and official papers will be accepted for consideration provided that they have authentic symbols on legalization of the document by the consulate. It is allowed with an apostille notary or consulate if there is a copy translated into Russian. However, if the state registrar is a party to The Hague Convention, the business papers are stamped «Apostille», confirmed by the signature of the employee of the organization that issued the document.

Features of tax audits when closing a foreign entity

Cases when after registration of an application for liquidation of a foreign representation in our country, tax authorities initiate an exit tax inspection are not rare. And for the arrival of tax officials should be properly prepared.In fact, during the procedure of liquidation of a foreign company, the employees of the Federal Tax Service will give the management of the organization or another authorized person an advisory list indicating the departments that will check the enterprise. First of all, taxpayers will be interested in documents related to the accrual and payment of taxes and fees for a certain period of operation of the branch. Employees may also be interested in any premises owned or leased from the company, as well as other property. However, the procedure itself does not differ much from the verification of the Federal Tax Service of Russian legal entities.

Nevertheless, tax inspection is not always carried out. This procedure is avoided by those foreign missions to which there are no questions in the tax.

As a rule, you need to have no debts for taxes and other contributions, as well as to hand in liquidation fiscal statements.

If the tax inspection still decides to come to the branch office, it is important to remember that in this case, the timing of the closure of the foreign company will increase. The minimum liquidation period will be about three months, with a maximum of approximately one year.

Closure of a foreign subsidiary: the required period

As a rule, the terms of termination of registration of a branch of a foreign legal entity are individual: from a month to a year. Finally they are affected by a number of factors:
  • 1
    measures to reduce staff in accordance with the norms of the Labour Code of the Russian Federation;
  • 2
    the availability of the necessary documents or the time required to obtain them;
  • 3
    the duration and success of the tax inspection;
  • 4
    the time taken to apply to public authorities;
  • 5
    the presence of staff using the right to childcare leave up to 1.5 or up to 3 years.

Cost of closing a branch of a foreign organization and associated costs

When opening any branch or representative office of a foreign company management pays the state fee of 120,000 rubles to the treasury of the Russian Federation. Another 200 rubles are charged for providing information from the state register of accredited branches of foreign legal entities.

Unlike the registration phase, the liquidation of a company does not involve the payment of any government fees. Thus, the closing of a foreign firm's branch can be done without additional funds. However, the liquidation process itself may prove to be time-consuming and difficult for individual firms because of the peculiarities associated with all bureaucratic formalities. In this case, representatives of the branch often turn to intermediaries.

DVP Audit provides assistance in liquidation of representative offices of foreign companies in Russia. Our qualified lawyers and auditors will help to collect and prepare a complete set of documents, as well as to bring them to the requirements of Russian legislation. Among other advantages of outsourcing the procedure of branch liquidation can be highlighted:
  • 1
    assistance in the successful completion of the tax inspection;
  • 2
    maximum reduction of terms of liquidation of a branch of a foreign legal entity;
  • 3
    preparation of accounting and tax reports in a short time;
  • 4
    assistance in translation and certification of copies of statutes;
  • 5
    exchange control compliance.

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