Right now, there’s about 26 special economic zones in Russia, distributed all across the country. You may be wondering: what´s so special about these special economic zones?

Well, we could start by telling you they’re made to last for 49 years, and are used to develop technological economic areas such as tourism, port and transport infrastructures, spas, the development of technologies and the commercialization of their results, and the production of new types of products. According to the Russian Ministry of Economics and Development, there are more than 730 foreign investors from 38 different countries already working in these special zones, where more than 32,000 jobs have been created.

In each special economic zone, there are typically leading companies that make important economic attractions. You have, for example, the case of the Titanium Valley Special Economic Zone, in the Urals, which has two Ural Boeing manufacturing plants producing titanium parts for all Boeing’s civilian aircrafts. Within this same economic zone, there is another company that produces composite materials for the Russian aviation industry.

You might be glad to know there is a special tax regime in the Titanium Valley, with import duties and VAT amounting to 0%, and income tax to 2%. Pretty low, right? The state also created the infrastructure for this economic zone all by their lonesome, which is no small feat. But, if you can believe it, there’s even more good news: the preferential regime not only applies to large companies! Just look at the neighbor of the Ural Boeing Manufacturing plant, a very small company where investors from South Korea have set-up a production center for titanium instruments. Even the little guy has a place in the Titanium Valley.

Special Economic Zones operate in Russia’s capital regions: the Technopolis Moscow Special Economic Zone has become the beating heart of new industry in the city. It was created to develop the city’s innovation ecosystem and more favorable conditions for the setting up of Russian and foreign high-tech companies. In order to protect the production of Technopolis, an infrastructure composed by 5 industrial areas was created. This zone provides benefits to its residents that can reduce their tax burden by 49%, which, you have to agree, is a pretty interesting option. There is a similar project in St. Petersburg, and, in addition to innovative and high-tech companies, there are special economic zones of a more traditional nature, aimed at agriculture and tourism activities. Each economic zone establishes its own benefits and the cooperation sequence independently. This means they can be considered pretty complex but effective tools in terms of investment in the real sector of the economy.

Another golden rule for doing business and investing in Russia is the “one-stop shop” principle applied to all areas of business for foreign investors: this principle minimizes problems with Russian law and communications with the state; it also resembles a bank concierge service, only in this case it is the Russian state that provides the service to your company.

So, you might be asking yourself, is it possible to work in Russia through a foreign company’s separate unit? The short answer is “yes:” Russian legislation allows you to open representative offices and branches for foreign companies. Representatives limit themselves to just advertising and marketing, while branches can also carry out full activities with the same benefits as Russian legal entities. But that’s not all, there’s more: from here on in it starts to get a tad complicated, but we’ll try and make it easy!

Basically, it’s the branches and representations the ones that are allowed to open and close accounts in Russian and foreign banks, carry out transactions and even sign contracts. Both branches and representative offices are managed by the appointed heads of these divisions. The head company or each of the branches, is able to keep the accounting records of one or more divisions, and submit the documents to the tax service when they’re asked to. When opening a branch or representation, the foreign company will be seen as non-resident and its taxation will be governed by a bilateral agreement to avoid double taxation, as long as such agreements exist between the two countries, of course.

Meanwhile, the Tax Code of the Russian Federation states that, when renting a branch or a representative office in Russia, the leasing amount does not include VAT. So, who keeps the branches and representations up-and-running? That’d be the parent company, using its own assets and property to do the job. Any “transfers” of goods and assets between the parent company and the branches or representations will take place within the company itself.

These transfers are much easier than in the case of transfer of goods from a foreign company to a branch hosted in the Russian Federation. Same goes for bank transfers, which means a foreign company will be able to transfer funds more quickly to costs related to its activities in Russia.

Ready to start working in Russia yet?

Before you start, there are a couple of more things you should consider.

First you must go through an accreditation procedure, which takes from 25 to 30 working days, and pay a tax of 120,000 rubles. Sounds like a tough deal, but don’t forget, branches and representative offices are a way to show some presence for the popular Russian market in front of medium and large foreign companies.

By the way, you might want to remember this: for business management and work, there is a well-developed system of outsourcing of document flow, accounting, tax and other reporting, which can be done remotely. Considering that the Russian bureaucracy can be a little tough, this represents a huge advantage.

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