Branch of a foreign company.

A foreign company wishing to establish its legal presence in Russia can register a representative office or a branch. According to the Russian law a representative office is a separate subdivision of a legal entity which, in contrast to a branch, only represents the interests of the legal person and engages in their protection. On the other hand a branch is a separate subdivision of a legal entity which can conduct all its functions.

There are several non-tax considerations which may be important in deciding whether or not to operate a branch or a company. A summary of the factors which may influence such a decision is as follows:

- the legal liability of branches is unlimited so that the assets of the foreign parent company may be at risk if the debts of the branch exceed their assets, unless the domestic branch is established by a newly incorporated foreign subsidiary company. If subsidiary companies are used, liability of the parent is limited to the amount of the share capital issued, together with any guarantees given;

- a branch is a non-resident for currency regulation purposes;

- most licences cannot be obtained by a foreign corporation operating in Russia through a branch, but can be available to a subsidiary.