Recent changes in Russian legislation

Characteristics of small and medium enterprises

Individual articles of Federal Law No. 313-FZ “On the Introduction of Amendments to the Federal Law ‘On the Development of Small and Medium-Sized Enterprises in the Russian Federation’” entered into force on December 1, 2018. Accordingly, certain characteristics for maintaining the status of a small and medium enterprise (hereinafter referred to as "SME") will change.

New legislation

It should be recalled that previously, the SME status was only available for those companies whose start-up capital included at least 51% Russian capital. Now, this option is also available to companies whose initial capital is more than 49% foreign capital.

At the same time, the so-called “criterion of independence of capital origin” still applies: Russian companies lose their SME status if the total participation of large companies in their share capital exceeds 49%. The origin criterion is not taken into account here. However, the foreign parent company must be classified as an SME under Russian law.

Criteria for the SME status of subsidiaries

For subsidiaries in Russia to receive/maintain the corresponding status, their foreign parent companies must prove the following criteria:

  • The number of employees in the previous year may not exceed 250.
  • The annual turnover may not exceed 2 billion rubles.

According to current legislation, a Russian company is officially considered an SME from the date of registration of the relevant data in the single Register Of Small And Medium-Sized Enterprises of the Russian Tax Administration.

Register entry and evaluation necessary

Russian companies with a foreign participation of more than 49% can only be entered in the above register after the parent company's accountings have been reviewed. Russian auditors who are entered in the register of auditors and auditing companies are responsible for carrying out such an evaluation.

Every year between July 1 and 5, based on the evaluations carried out, auditors submit to the Russian tax authority their lists of companies whose foreign shareholders, as legal entities, meet the SME criteria.

Based on these lists, the Russian tax authority enters the data on SMEs in the Single SME Register each year on August 10.

All enterprises classified as SMEs are entitled to certain preferences and benefits, including:

  • special tax arrangements;
  • simplified accounting rules;
  • simplified tax registration;
  • preferential treatment and quotas for participation in the award of public contracts, etc.

SMEs will also benefit from support measures approved by the Council of Presidents for strategic development in the fall of 2018.

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