An extract from The Inward Investment and International Taxation Review, 11th Edition

Tax residence and fiscal domicile

i Corporate residence

All companies incorporated in Russia are deemed Russian tax residents. Companies registered outside of Russia may be deemed Russian tax residents if they have a place of effective management in Russia.

ii Branch or permanent establishment

A foreign entity can establish its presence in Russia via a subsidiary, branch or representative office. Setting up a branch or representative office through which business activity is conducted regularly leads to permanent establishment in Russia unless the functions of such office are restricted to 'preparatory and auxiliary' activity.

In line with an OECD tax treaty, a 'dependent agent' may also lead to a permanent establishment.

As the test for permanent establishment in Russia is not formal but substantial, the only way to avoid its setting up in Russia is not to carry out regular business activity in Russia.

The profits received as a result of activity of a permanent establishment are attributed to this permanent establishment. If there are several permanent establishments, the taxable base for each permanent establishment is normally calculated separately, unless a specific rule allows the taxable base to be calculated on a consolidated basis (e.g., if several permanent establishments are involved in a single technological process).

Most of the double taxation treaties Russia is a party to are OECD-based, and so are the permanent establishment provisions.