A representative office or a branch of a foreign legal entity is not considered to be a Russian legal entity, but rather a body representing the interests of a foreign legal entity in Russia.
A representative office is entitled to carry out liaison and ancillary functions in order to promote the business of its foreign founder. Representative offices are not permitted to engage in commercial activities in Russia. Consequently, most representative offices are not subject to profits tax, unless their activities give rise to a “permanent establishment” for tax purposes, i.e. when a foreign legal entity engages in regular commercial activity through its representative office (for example, the sale of goods or the provision of services).
A branch is a subdivision of a foreign legal entity, which may fulfill all or part of the functions of its foreign founder. These functions include the repatriation of management fees earned in foreign currency, contracting with Russian entities with payments in foreign currency and rubles, and the appointment of a sales force.
The obligations imposed on a branch may include the same obligations as those imposed on a representative office. However, a branch has less flexibility in selecting an accrediting authority in Russia compared to a representative office. This can sometimes affect certain areas such as the effectiveness of visa support.
Source: Doing business in Russia by Baker & McKenzie
