Employment and
commercial agency in
Russia
May 2015
Table of content
 Secondment
 Employment contract under the Russian law
 Commercial agency
 Common terms of Distributorship agreement
 Antitrust regulation of distributorship in Russia
 Customs Requirements. Quality Compliance
2
SECONDMENT IN RUSSIA: RECOGNIZED BUT
SUBSTANTIALLY RESTRICTED
Secondment arrangements will be allowed as of 1 January 2016 if the
personnel will be seconded by:
•
Private recruitment agencies subject to the following requirements:
 They are Russian companies duly accredited in Russia
 They do not apply special tax regimes
 Their charter capital is at least 1 million RUR
 Their CEOs conform to certain special requirements, etc.
•
Legal entities other than private recruitment agencies in the following cases:
 A legal entity is affiliate of the seconding party
 A legal entity that is a joint stock company if the seconding party is party to
shareholders’ agreement on the exercise of rights certified by the shares of
such a joint stock company
 A legal entity that is party to a shareholders’ agreement with the seconding
party
3
SECONDMENT IN RUSSIA: RECOGNIZED BUT
SUBSTANTIALLY RESTRICTED
Secondment arrangements will be
prohibited in the following cases:
Liability of the host party

For replacement of the employees on
strike

Organize investigation of incidents
occurred with seconded employees

Insolvency of the host party


Replacement of employees who
stopped working in cases provided
by law (e.g. non-payment of salary
for a period exceeding 15 days)
Bear subsidiary liability for all
employment – related obligations of
seconding
party
to
seconded
employees, in particular
all
payments
due
to
seconded
employees (salary, leave payments,
etc.)

Performance of job duties in the
period of work stoppage

Part time working regime is
established in the host company in
order to avoid massive dismissals
4
EMPLOYMENT CONTRACT
Requirements
 Written form
 Should be signed within 3 business days upon
hiring
 Governed by Russian law
Term of Employment Contract
 Fixed term (max for 5 years and only in certain
cases)
 Indefinite term (most common)
5
WHAT TO INCLUDE IN THE EMPLOYMENT CONTRACT?
Mandatory provisions
 names and details of the
parties
 place and date of signature
 place of work
 the employee’s job description
(labour function)
 start date
 term (if fixed)
 salary
 social security
 work conditions
Optional provisions
 probation period
 training
 confidentiality
 additional benefits
 etc
Changing the employment
contract requires the employee’s
written consent
6
HIRING A HIGHLY-QUALIFIED SPECIALIST?
Work Permit
Work Visa
Arrival in Russia,
registration
at an address
Invitation letter
issued
by FMS
Registration
with Tax
Inspectorate
Notification of
FMS on tax
registration
Notification of
Tax Inspectorate
on hiring
7
WANT TO WORK IN RUSSIA? TAKE AN EXAM, PLEASE
As of 1 January 2015 when applying
to work permit foreign nationals will
be
obliged
to
confirm
their
knowledge of Russian language,
history and key laws in the following
forms:
 Document confirming graduation from
educational organization in Russia (or
USSR prior to 1991)
 Certificate issued after sitting for an
special exam
The exceptions from this obligatio
are made for:
 Highly – qualified specialists
 Individuals aged under 18 y.o.
 Male and female foreign nationa
aged 65 y.o. and 60 y.o. respectively
 Foreign nationals studying
educational organizations in Russ
etc.
8
COMMERCIAL AGENCY IN RUSSIA
Available options:
Sale and purchase agreement;
Agency agreement;
Service agreement
Distribution agreement.
Even if agreement is governed by Italian law, provisions of the Russian law shall be kept in mind in part
of:
-Imperative norms of the Russian law
-Law On state regulation of trade
-IP provisions
-Taxes
-Antitrust
-Currency control rules
Often parties conclude distributorship or agency agreement as framework agreement and supply goods
under separate contracts of sale or orders
9
TERMS OF AGENCY AGREEMENT
If Agent undertakes to act on its own behalf or on behalf of Seller and at the
expense of Seller, we should apply Agency agreement concept regarding such
relations.
Agency provisions:
 Remuneration for the agency acts is the must;
 Unilateral termination at any time;
 Limitation of territory for agency activity;

Obligation of Agent not to act in interest of Seller’s competitors.
IMPORTANT: The restriction of competition may apply only to respective agency rights
and obligations (See slide “Antitrust regulations”).
10
COMMON TERMS OF COMMERCIAL AGENCY AGREEMENTS
Agreement customarily contains the following material provisions
Goods to be supplied
and sold
Specification of goods; agreed minimum sales
Method of price
calculation and payment
terms
The final price shall be prescribed in the contract of sale; discounts;
advance payment or grace period
Remuneration of agent
Fixed amount, percentage of purchase price for final customer, target
bonuses
Entrusted territory
exclusive / non-exclusive distributorship
Specific conditions
Limitation of territory; list of customers; resale price fixing; non-compete
obligations
Advertising and
marketing
Advertising activities including budgets; participation in exhibitions;
promotion
Supply conditions
Ordering process; delivery basis; transfer of title and risk of loss
IP issues
Right to use logos; know-how; commercial names
Technical support and
repair
Allocation of costs for maintenance and repair; warranty period;
replacement of defective goods
11
ANTITRUST REGULATION IN RUSSIA
•

Russian effective antitrust legislation prohibits the following restriction of competition:

Market-sharing regarding:



 Territory;
 Volume of sales or purchases;
 List of sellers or purchasers.
Not economic based refusal from entering into the agreements with other sellers or purchasers.
Prevention to entering the market;
Resale price fixing.
Vertical agreements (where Seller and Distributor do not compete with each other on one
market) may fix resale prices or impose obligation not to sale competitors’ goods if the market
share of each party in any market does not exceed 20 %.
12
TAX ISSUES
Sale of goods is subject to:
Profit tax (Tax base - amount of received income decreased by amount of expenses;
Tax rate - 20%)
VAT (Tax base - amount of sold goods; Tax rate - 18%)
Fees for the rendered by Agent services are subject to:
Profit tax (Tax base - total amount of fee; Tax rate – 20%)
VAT (Tax base - amount of fee for rendered services (e.g. merchandising, product
promotion, marketing, advertizing, etc.); Tax rate - 18%)
Bonus for proper fulfillment of agreement is subject to:
Profit tax (Tax base - total amount of bonus; Tax rate – 20%)
no VAT since bonus is not connected with rendered services (e.g. supporting of
distribution area, growth and volume of turnover, timely payments, etc.)
License of IP rights:
If agency agreement provides license of IP rights the remuneration should be stipulated.
Use of IP rights without its compensation (gratuitous use) entails taxable income of the
Agent
License of trade marks and right of its use is subject to VAT (18%). License of exclusive
rights to know-how, inventions, useful model, industrial sample, computer program,
database and rights of its use are non-VATable operations
13
CUSTOMS CLEARANCE AND QUALITY CONFORMITY
If commercial agent is responsible for customs clearance, then
•
Agent shall act as an importer in the customs. Only Russian entities might
import goods into the territory of the Russian Federation.
•
He shall assure availability of duly executed shipping documents including
the contract of sale and purchase, as well as the documents confirming
products’ conformity documents
Quality Conformity
•
The products to be sold in Russia shall pass quality conformity procedures
(certification or declaration of conformity) otherwise they will not be released
by the customs service.
•
Declaration of conformity might be issued in favor of Russian entity only,
therefore producer of goods shall nominate a Russian entity (distributor or
other entity) as its representative for compliance needs
14
THANK YOU FOR YOUR ATTENTION!
My contact details:
Maria Ostashenko
[email protected]
Tel.: +7 495 234 96 92
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