Russia

Russia

Report Topics:

1:- General Information

2:- Cooling-off Period

3:- Pyramid Schemes

4:- Multi-Level Marketing

5:- Prohibition on Products

6:- Credit Restrictions Country

7:- Money Collections

8:- Licenses

9:- Status of Direct Sellers

10:- Earnings Claims

11:- Taxes and Fees

12:- Social Security

13:- Others

GENERAL INFORMATION

There are no additional requirements to general incorporation procedure necessary to setup Direct Selling and MLM company in Russia.

The direct selling industry in Russia is regulated on the basis of the following:

The Civil Code of the Russian Federation;
The Law of the Russian Federation “On Consumer Rights’ Protection”;
The Law of the Russian Federation “On Fundamental Principles of State Regulation and Development of Trade Operations in the Russian Federation”.
The Russian legislation considers direct selling as a variety of peddling trade that regulated by the Resolution of the RF Government “Rules for the Sale of Goods under a Retail Sale Agreement”

Antiseptics, medical devices, dietary supplements, dairy products, beverages, bottled water, beer and beer-based beverages, medicines, tobacco, wheelchairs, consumer goods manufacturing, footwear, fur, perfume and eau de toilette, tires, photo cameras and flashbulbs, sturgeon caviar and salmon fish are subjects to obligatory labelling. Selling of these products requires additional equipment for labels scanning and usage of cash register.

COOLING-OFF PERIOD

Article 26.1 “Distance Selling of Commodities” of the Federal Law “On Consumer Rights’ Protection”

is in force from the beginning of 2005
gives a definition of Distance Selling as sales that are performed on the basis of the description of a commodity that was provided in catalogues, advertisements, booklets or presented with the use of photos, through communication means (television, postal, radio and other means of communication) or in other ways that do not provide consumers with an opportunity to get familiar with a commodity.
introduces a cooling-off period for Distance Selling equaled 7 days after delivery of the commodity. But if the consumer is not provided with information on cooling-off period rights in writing the cooling-off period duration shall be expanded till 3 months.
PYRAMID SCHEMES

PYRAMID SCHEMES

Code of Administrative Offences of the Russian Federation.
Criminal Code of the Russian Federation

The laws define financial pyramid as an organization of activities relating to attracting funds and/or other property of individuals and/or legal entities in a large amount, at which the payment of revenues and/or provision of other benefits to persons, whose funds and/or other property were attracted earlier, is carried out at the expense of the attracted funds and/or other property of other individuals and/or legal entities, in the absence of the investment and/or other legitimate entrepreneurial or other activities related to the use of the attracted funds and/or other property, in amounts comparable with the amounts of the attracted funds and/or other property.

Legislation foresees penalties on pyramid organizers and administrative responsibility (for members of pyramid schemes) right at the stage of emerging of financial pyramid (not after its final collapse). Also, criminal responsibility is foreseen for organizers who manage to attract more than 1.5 million rubles.

MULTI-LEVEL MARKETING

No legislation.

PROHIBITION ON PRODUCTS

It is not allowed to sell food products without consumer packaging, as well as medicines, medical products, jewelry and other products made of precious metals and (or) precious stones.

CREDIT RESTRICTIONS COUNTRY

No legislation.

MONEY COLLECTIONS

No legislation.

LICENSES

No legislation.

  1. STATUS OF DIRECT SELLERS
It is highly important that direct selling companies ensure that those who are involved in their activities are self-employed wholly independent entrepreneurs. Otherwise they will be treated as direct selling companies’ employees – with the inevitable consequence that companies have to meet social security and employment protection legislation.
Direct Sellers should register with the tax authorities as a person (Individual Entrepreneur) engaging in an individual business activity. All entrepreneurial activities without registration are subject to sanctions in accordance with the Criminal Code.
A company’s relationship with its registered and non-registered distributors in Russia will influence the company’s Russian tax withholding obligations with respect to commissions paid to such distributors. Companies are subject to tax withhold and social security payroll obligations with respect to the commissions payable to Russian distributors. In such cases, if they are not registered as individual entrepreneurs, each distributor’s Russian income tax must be withheld from the distributor’s pay and remitted by the payer to the Russian tax authorities.
Russian direct selling companies are not obligated to report registered distributors’ earnings on a regular basis, but if companies receive inquires from Russian tax authorities, they must provide these authorities with corresponding information concerning the commission paid to the distributor.

EARNINGS CLAIMS

No legislation.

  1. TAXES AND FEES

GENERAL TAXATION SYSTEM

PROFIT TAX rate (max) is 20% (for legal entities).
PERSONAL INCOME TAX: From the beginning of 2025 the five-stage progressive scale of personal income tax will be applied. A rate of 13% will apply to individuals with an annual income of up to and including RUB 2.4 million, a rate of 15% — for the part of annual income above RUB 2.4 million and up to and including RUB 5 million, a rate of 18% — for the part of annual income above RUB 5 million and up to and including RUB 20 million, a rate of 20% — for the part of annual income above RUB 20 million and up to and including RUB 50 million, a rate of 22% — for a portion of income above 50 million rubles per year. The increased rate will not apply to all income, but only to the amount in excess of the threshold levels.
The tax rate for the self-employed will remain the same – 4% of the income of citizens without the status of individual entrepreneur or 6% of the income from individual entrepreneurs and companies with an annual limit of 2,400 thousand rubles.
VAT rate is 20% (recoverable).
From January 1, 2025, organizations and individual entrepreneurs on the simplified tax system are recognized as VAT payers. VAT rate for annual income:
over 60 million rubles, but less than 250 million rubles – 5%
over 250 million rubles, but not more than 450 million rubles – 7%
Those whose income does not exceed 60 million rubles are exempt from VAT.
Taxpayers on the simplified tax system, exempt from VAT, do not have to issue invoices.
CONTRIBUTION TO THE PENSION FUND AND MEDICAL INSURANCE FUND: Annual contributions to Pension Fund and to Medical Insurance Fund for individual entrepreneurs are fixed and equal to 53 658 RUB in 2025. For those individual entrepreneurs, which annual turnover exceeded 300 000 RUB an additional 1% of the excess amount must be paid, the maximum amount is 300 888 RUB.
PROPERTY TAX rate (max) is 2.2% (regional authorities may introduce lower tax rates as well as grant tax exemptions).
LAND TAX rates vary from3% to 1.5%.

SIMPLIFIED TAXATION SYSTEM

(Chapter 26.2 of the RF Tax Code)

This system is voluntary. Applicable for individual entrepreneurs and legal entities with turnover up to 200 million Rubles.
Replaces 3 taxes (including VAT, personal income tax or profit tax, property tax)
Two options for a taxpayer:
1st option – Unified Tax is 6% from revenues
2nd option – Unified Tax is 15% from revenues minus expenses

If the income in the reporting (tax) period, determined by the cumulative total from the beginning of the tax period, amounted to more than 150 million rubles, but did not exceed 200 million rubles and (or) the average number for the reporting (tax) period exceeded 100 people, but no more than 30 employees are provided for an increase in tax rates:

8% from revenues
20% from revenues minus expenses “.
Unified Tax should be paid on quarter basis
Taxpayer should file once a year
Annual contributions to Pension Fund and to Medical Insurance Fund for individual entrepreneurs with an annual turnover that did not exceed 300 000 rubles fixed and equal to 49 500 RUB in 2024. For those individual entrepreneurs, which annual turnover exceeded 300 000 RUB Pension Fund contributions should be calculated on the basis of fixed rate plus 1% to the sum that would exceed 300 000 RUB but with a maximum limit of 268 010 RUB. Those contributions are recoverable from the Tax for the 1st option and can be deducted from revenues for the 2nd one.

AUTOMATED SIMPLIFIED TAXATION SYSTEM

(Federal Law  № 17 from 25.02.2022 “On Conducting an Experiment to Establish a Special Tax Regime “Automated Simplified Taxation System”)

Individual entrepreneurs and legal entities whose income does not exceed 60 million rubles per year and the average number of employees does not exceed 5 people can use ASTS.

Tax rates are proposed as follows:

∙ 8% for the object of taxation “income “

∙ 20% for the object of taxation “income reduced by the amount of expenses “.

Tax calculation will be produced by the tax authority and taxpayer will pay tax on a monthly basis. The good think is that transition to this system or return to self-calculation of tax is voluntary. Taxpayers will be exempt from filing tax returns and book keeping. Also, they should not pay contributions to non-budgetary funds.

By the end of the March, 2025 taxpayers of 63 Russian regions can switch to this special tax regime. Individual entrepreneurs, organizations of the simplified taxation system or the professional income tax payers can switch to the Automated Simplified Taxation System from the following calendar month. 

PROFESSIONAL INCOME TAX (PIT)

(Federal Law No. 422-FZ of 27.11.2018)

The PIT payer transfers only 4% of their income if the revenue is received from individuals, and 6% if the clients are legal entities.

Contributions to Pension Fund are transferred on a voluntary basis.
Health insurance contributions automatically receive part of the tax paid on income.
Registration of the PIT payer is carried out online, without visiting the tax office and paying a fee.
Cash register to receive payment for services and work not required, a receipt for the customer is formed in the free app “My Tax”.
PIT payer does not need to keep records and calculate the tax himself; the accrual is automatic.
If there was no income in a certain month, then PIT payer does not need to pay anything. It is possible to apply the PIT in parallel with employment.

Limitations

The received income should not exceed 2.4 million Rubles per year.

In addition, PIT payer must comply with the following conditions:

He/she cannot hire employees under an employment contract, i.e. the PIT payer must personally provide services and perform work.
PIT payer cannot engage in trade, intermediary activities, lease non-residential real estate, provide services of a notary, mediator, lawyer, appraiser, or arbitration manager.

SOCIAL SECURITY

Individual entrepreneurs are entitled to get pensions if they are properly registered and paying Pension Fund contributions.

MANDATORY LABELLING

(Federal Law No. 487-FZ of 31.12.17, Federal Law No. 488-FZ of 25.12.18)

The requirements for mandatory labelling of consumer goods with unique identification means (barcodes) have been in force in Russia from March, 2019. The purpose of this legislative requirements is a ban on the import, sale and even storage within the Russian Federation of unlabeled goods that are currently recognized as counterfeit by Russian legislation.

Labelling is a control and identification sign (CIS) that is placed on packaging, labels or containers. It can only be created by a single labelling operator – the Center for the Development of Advanced Technologies CDA’s).  With the help of CIS, you can identify a product and track its path from production to sale or write-off: business is obliged to transfer data about the product to the CDAT track & trace digital system.

All trade turnover participants (manufactures, distributors, wholesalers, and retail outlets) are involved.

As soon as the code is released, the state begins to track everything that happens to the product using it. Information about production, imports, movements, sales and any other operations enters the labelling information system – CDAT’s track & trace digital system. Using the mobile application for digital marking, consumers can verify its legality.

Products are marked in different ways: using Data Matrix barcodes and RFID tags.

In 2024 products with mandatory labelling are: antiseptics, medical devices, dietary supplements, dairy products, beverages, bottled water, beer and beer-based beverages, medicines, tobacco, wheelchairs, consumer goods manufacturing, footwear, fur, perfume and eau de toilette, tires, photo cameras and flashbulbs, sturgeon caviar and salmon fish.

In 2025 products with mandatory labelling are: canned goods, toys, grocery, textbooks, seed-oil, construction materials, radiotronics, motor oil, soap and detergents, home care, hair products, shaving products, cosmetics, toothpastes. Exceptions: small forms (volume up to 5 ml or weight up to 5 g, primary packaging diameter of less than 10 mm, products without individual packaging (bar soap).

Initially, the requirement for mandatory labelling was intended to combat counterfeit goods and was a means of protecting the rights of consumers. At the same time, labelling became an additional expense for the companies themselves and led to an increase in the cost of products. It has affected adversely small companies and entrepreneurs due to obligatory requirement to use cash register equipment. As a result, for small and medium-sized businesses, the labelling requirement is more like a “barrier” for entering the market and successful entrepreneurship.

The WFDSA International Guide to Direct Selling Legislation is a guide and is not exhaustive either in terms of subjects presented or for all areas of concern to direct selling companies. It is intended to cover general areas of concern. The Guide is not a substitute for legal counsel but only intended to alert you to the general nature of laws and regulations affecting the direct selling industry in a particular country. Consequently, before beginning an operation in any foreign country, it is strongly recommended that competent legal counsel be consulted. While every effort has been made to insure that the information contained in this Guide is accurate, the variety of sources used makes absolute verification difficult. Further, laws and regulations also can change from time to time without notice. Therefore, the WFDSA cannot be held liable for the information included in this publication.

LIST OF LAW ENFORCEMENT AGENCIES RESPONSIBLE FOR SUPERVISING DIRECT SELLING AND/OR REGULATING/FIGHTING AGAINST PYRAMID SCHEMES IN RUSSIA

Ministry of Industry and Trade of the Russian Federation (Minpromtorg)
Federal Service for Surveillance on Consumer Rights Protection and Human
Wellbeing (Rospotrebnadzor)
Central Bank (Bank of Russia)
Federal Service for Financial Monitoring (Rosfinmonitoring)
General Prosecutor’s Office
Ministry of Internal Affairs
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