Doing business in Russia - SCHNEIDER GROUP...AUS: 53,800 Population 1/6 RUS: 149.9 mln AUS: 25.3 mln ... 2010 2018 2019 2019 Starting a Business 106 28 32 7 Trading Across Borders

Doing business in Russia

Christopher Schagerl

Director, SCHNEIDER GROUP

Moscow, April 22, 2019

Key facts

2

Area in km²

RUS: 17,075,400

AUS: 7,692,000 2,2x

GDP total

in trillion USD

RUS: 1.469

AUS: 1.380

1/1

GDP per capita

in USD

RUS: 10,743

AUS: 53,800

1/6 Population

RUS: 149.9 mln

AUS: 25.3 mln

6x

market entry | accounting | ERP | import | legal | tax

Industry & population centers

3 market entry | accounting | ERP | import | legal | tax

Population > 10 mln

Population 1-10 mln

Population ≤ 1mln

Oil extraction/

refinery

Machinery

Mining

Textiles

Port

Agriculture

Novosibirsk

Moscow

Almaty

Tashkent

Rostov

Yekaterinburg

Minsk

Kazan

Yerevan

Astana

St.

Petersburg

Kaliningrad

Kiev

Omsk

Novosibirsk

Samara

Volgograd

Odessa

Murmansk

Aktau

Perm

Nizhny

Novgorod

Kharkov

4

Category 2010

2018

2019

2019

Starting a Business 106 28 32 7

Trading Across Borders 162 100 99 103

Paying Taxes 103 52 53 26

Enforcing Contracts 19 18 18 5

Getting Credit 87 29 22 8

Registering Property 45 12 12 50

Construction Permits 182 115 48 9

Overall 120 35 31 18

Source: World Bank

WB Ease of Doing Business Index


Ruble and oil price

5 market entry | accounting | ERP | import | legal | tax Source: OECD Economic Outlook

USD/RUB rate

6 market entry | accounting | ERP | import | legal | tax Source: Western Union

AUD/RUB rate

7 market entry | accounting | ERP | import | legal | tax Source: Western Union

Indexed metal price


Inflation

9 market entry | accounting | ERP | import | legal | tax Source: OECD Economic Outlook 104

database; and Thomson Reuters

Where does Russia depend

on imports?


Road construction

Telecommunication

Transport

Energy, electrical engineering

Machinery

Chemical products

Aviation

Contract manufacturing (CMO)

Manufacturers wanting to use CMO:

• Pharmaceutical/chemical products 50%

• Automotive 50%

• Industrial facilities 56%

11

Ingredients,

Technical Documentation

Finished product

Local legal

entity of the

foreign

company

CMO Partner • Production

facilities

• Gear

• Qualified

personnel


FIFA World Cup

12

Pension Reform

Increase VAT from 18% to 20%

VAT registration for services


Serialization - background

13

Customs

Manufacture Warehouse Distributor Pharmacy Sale

Registration

Condition database for drug tracking

Tax inspection Customs service Roszdravnadzor

(Health inspection)


End customer

14

Serialization & marking

Existing systems

Alcohol

Furs

Federal Agency for Alcohol

Market Regulation

The Federal Tax Service

Pilot projects

Medications

Tobacco products

Wood

Products of

animal origin

Footwear

Roszdravnadzor (Health

inspection)

Ministry of Industry

and Trade of Russia

Federal Agency of Forestry

Ministry of Agriculture

Ministry of Industry

and Trade of Russia

Jewelry

Perfume and toilet water

Knitted blouses

Coats and short coats

Cloaks and jackets

Windbreakers and Storming

Linens

Table linen

Dressing and kitchen linen

Photocells and flashes

Tires and tires

Ministry of Finance

Ministry of Industry and

Trade of Russia

Future projects


15

High data volume on less space

Readable, even if partly damaged

Visual

Scannable via mobile phone

Label will be placed: • On secondary packaging/box, if

available

• If no outer package on the product itself

Markings as of July 1, 2019


Major trends in Russia

Localization policy

Trade relations in all directions

(China, Iran, Arabian countries, etc.)

Local initiatives in agriculture, payment

systems, civil aviation

Waste management, renewable energy

Diversification or still oil & gas dependent?

Improved tax collection, checks from authorities

Checks of business partners


Certification and import

Import to EEU

18

E-customs declaration

Max. 4h for processing

Documentation only upon request


Technical regulations product

certification

19

TR EAEU conformity documents

Required for all products for which the respective TR has already come into effect

TR national conformity documents

Replacement by technical regulations of the EAEU

GOST R conformity documents

Replacement by TR still required for all products for which the respective TR has not yet come into effect


http://progost.ru/wp-content/uploads/str3.jpg

http://www.nwcert.ru/images/1363775077.jpg

Product certification

Conformity documentation in the EAEU:

Sanitary and epidemiological control (State registration of

goods)

Other prohibitions and restrictions (permits from State

Authorities)

3 types of conformity documents:

Conformity declaration, Conformity certificate, State registration

certificate

National certification requirements of EAEU members:

Certification in accordance with national legislation


Product certification step by step

Which products are subject to certification?

• Checking sanctions list and other restrictions for import and

circulation in Russia

• Check which certificates, registrations, or conformity documents are

required for the import of the respective goods

21

Harmonized System code (customs code)

Field of use

Technical characteristics


Product certification step by

step: Samples

Actions before sending:

• Determining quantity and value

• Labeling in accordance with legislation

• Preparation of supplement documentation

• Preparation of set of documents for

customs clearance

Obligatory procedure :

• Customs import document

• Control by State Authorities

Testing laboratory:

• Delivery to place of testing

• Receipt of testing protocols

• Return of samples (if applicable)

22

Preparation of

samples for delivery

Customs clearance of

samples

Testing of samples


Duties and taxes

Customs

• percentage

• amount in kg/ volume/ pieces

• mixed (i.e. volume & percentage)

Import-VAT

• Russia 10 - 20%, Kazakhstan 12%, Belarus 10 - 20%

• Basis: sum of customs value + customs duties

Handling customs authorities fees


Russian sanctions

Decree No. 778 of August 7, 2014 to prohibit

import of:

• Meat of cattle, pork, poultry

• Fish

• Milk and diary products

• Vegetables, fruits and nuts

• Sausages

• Prepared products as cheese

• Salt


Australian sanctions

Restrictions on the export or supply of specific goods

Restrictions on the export or provision of specific services

Restrictions on the import, purchase, or transport of goods (arms)

Restrictions on commercial activities

Targeted financial sanctions against designated persons and entities

Travel bans against declared persons


Market entry

27

Market Research

Market Analysis: • Individual for every client

• Clients provide us some specific points for market research (e.g. target market segment, desired sales volume, price segment)

Market Representation: • Engagement of an industry insider for representation on the client’s behalf

• Active sales approach

• Initial phase – 3 months

Partner Search: • Long list (market overview)

• Short list (contacting potential Russian partner to clarify their interest in further discussions regarding client’s specific product)

• Especially relevant for CMO search in pharmaceutical industry

Market Due Diligence: • When a client’s Russian subsidiary is struggling and the client’s foreign

management has no idea why, we analyze the business and provide helpful feedback for improvement based on best market practice


28

Representative

Offices

Branch Office Distributors Agents

Distribution channels

What’s best for your business?

Local Legal

Entity


29

Australia Russia

Authorities Your

company

Employees

Technical

management

of the

employee

Control

Reports

All HR

documents

Outstaffing contract

Tax/ social

security

dues

Service

providers

Outstaffing procedure

de jure

coat and

back-office

function

Works only

for you


30

Important!

Business

address Outstaffing

Work Permit/

Visa

Market research/

Distributors

Search for

personnel

Import/DDP

Workplace

Important factors

Business Partner

Checks


General

Director

31

Christopher Schagerl

Director

[email protected]

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armenia

belarus

germany

kazakhstan

poland

russia

uzbekistan

ukraine


Documents

Doing business in Russia - SCHNEIDER GROUP...AUS: 53,800 Population 1/6 RUS: 149.9 mln AUS: 25.3 mln ... 2010 2018 2019 2019 Starting a Business 106 28 32 7 Trading Across Borders