Buying Real Estate in Russia via a Foreign Company: a Stroke of Luck or Hide-and-Seek?.
Why do foreign business owners need to buy and register real estate in Russia in the name of their overseas companies? Let us consider the advantages of this kind of purchase.
The main task that real estate registration in the Russian Federation in the name of a foreign company can help complete is protection of your assets. And what other benefits are there to claim?
Benefits of Owning Real Estate in Russia via Foreign Companies
For business owners, foreign companies are an opportunity to reduce the risks inherent in the ownership of high-priced real estate items in Russia. This way, businessmen tackle a number of issues at once: minimize the risk of property loss, rule out document-related fraud and optimize their taxes and future expenditures.
Confidentiality is an important advantage of owning real estate via overseas companies. Thanks to the foreign structure, the actual beneficiaries of real estate keep their ownership confidential.
If one registers real estate in favor of a regular Russian Federation resident, there is a huge risk of this property being illegally seized, unreasonably encumbered or becoming a matter in dispute, and so on. Anyone can find out the identity of the property owner, the item’s cadastral number and other real estate details by visiting the website of the Federal Service for State Registration, Cadastre and Cartography.
Protection against fraudulent actions aimed at forfeiting the owner’s real estate item is also an immense advantage. A foreign company acts as a protective sheath against unscrupulous buyers. The documents of a foreign company prepared for any transaction are subject to a double check – documents certification in the form of consular legalization or apostilling. Thus, the risk of fraud and document forgery is excluded.
Risk Diversification through Foreign Company Ownership in Russia
Successful businessmen are known to have many assets. As a rule, business owners register their real estate in the name of foreign companies belonging to them. This is done to protect the assets and mitigate the risk of pressure on the part of counteragents and state authorities.
This way, businessmen are capable of differentiating the portion of real estate intended for personal use and the one employed in the business operations, to safeguard against potential charges. This option of real estate ownership via foreign companies minimizes property losses in the event of court proceedings and auction sale of all assets in default of debts. Besides, all the property registered in the name of a foreign company will remain in this company’s ownership even if a hostile business takeover is attempted.
Tax Optimization for Real Estate Ownership via a Foreign Entity
With foreign companies the composition of items subject to property tax is equivalent to the one envisaged for Russian entities. But foreign organizations often have the opportunity to obtain benefits which are not applicable to Russian legal entities.
The Russian Federation laws include a variety of regulations which create advantageous conditions for foreign companies to own real estate in Russia. Business owners are paying huge taxes for their real estate items, not being aware of their lawful exemptions.
The owners’ greatest fear is the need to set up a representative office of their foreign company in the Russian Federation. But this fear is unjustified – you will not need to establish a representative office in Russia if you meet certain conditions.
The profits generated from real estate lease in Russia are not necessarily associated with having a representative office. To ensure that the operations of a foreign company related to real estate lease do not lead to a permanent establishment in Russia, one needs to comply with the following criteria:
- No regular activities (single lease contracts on behalf of the foreign organization);
- Leaseholders are looked for with the help of real estate agents and agencies;
- No direct contracts with construction contractors.
If you want to make sure your real estate is registered the right way and to rule out the issue of creating a permanent establishment in Russia, you should refer to reliable and experienced lawyers. The SBSB experts will help you incorporate a foreign company, and not only that. We are there to support real estate deals with foreign companies involved and to mitigate all the tax and corporate risks inherent in your property.
Owner Confidentiality in the Event of Real Estate Ownership in Russia via a Foreign Company
Using this type of structure for executing transactions can provide for complete confidentiality of the real estate owner and beneficiary. To protect their assets, owners often employ intermediary foreign companies or engage the services of nominee shareholders in the ownership structure. Under these circumstances, the mandatory procedure of company beneficiary disclosure might come up blank.
Furthermore, companies registers are not open to the public in many countries so there is no possibility to track the identity of company director and shareholder. Seeing that the company could be registered in the name of a third party, the actual beneficiary data remains completely confidential.
Thus, provided that all legal details are addressed, you can feel secure about the future of your assets and public disclosures of information about your possessions.
Protection against Real Estate Fraud in Russia
Any transaction related to real estate registration in the name of a foreign entity involves the following stages:
- Preparing the foreign company’s documents, legalization and apostilling thereof;
- Making the real estate purchase transaction;
- Registering the transaction with the Office of the Federal Service for State Registration, Cadastre and Cartography;
- Registering the real estate at its location.
This process offers a double warranty for the real estate owner. During the registration phase, the owner passes through a number of mandatory governmental institutions. Moreover, all documents are certified abroad first, and only then in Russia. This procedure provides maximum security against fraudulent actions.
One may conclude that acquisition of real estate in the Russian Federation in the name of a foreign company offers a multitude of unique advantages. With adequate and competent legal support, it is possible to tackle a number of non-tax tasks, assure full confidentiality and protect one’s assets against illegal disposition. And a good tax consultant can help optimize the taxes and cut down economic costs in an efficient manner.
The team at SBSB consists of experienced legal and tax advisors conducting regular transactions in real estate registration for foreign companies. Our experts will prepare a package of legal documents to protect your company against unscrupulous counteragents and structurize your transaction, keeping your assets intact and your business confidential.