- What are the main characteristics of the tax and accounting system in Russia, in contrast with that in the West?
- If we’re talking about small business, then it is worth paying attention to the fact that in Russia, apart from the General Taxation System (OSNO), there is the Simplified Taxation System (USN) in operation also. Such a thing does not exist in the West. The “Simplified” is convenient for those working in provision of services because there are not, essentially, any production costs in this area insofar as there are no goods being produced. The “Simplified” system takes two forms. In one, the tax basis is all income; in the other, it is income minus expenditure. The corresponding tax rates are 6% and 15% respectively. But, the revenue limit for USN is 60m roubles (around $2m) per year. So, if a company estimates that this figure will be exceeded, then it is initially inadvisable to apply the simplified taxation system. Under the general taxation system, there are two taxes payable: the tax on profit (20%), and VAT (18%). There are specified categories of goods where VAT rates differ. For pharmaceuticals, for example, VAT can be zero. Correspondingly, the accounting basis is also different. And if, let’s say, a company is about to engage in one kind of activity, but in different fields, then accounting for each field may be different: each field will have its own form of tax assessment.
- Does each field need its own legal entity?
- Not at all. But the accounting, of course, gets markedly more complicated.
- In which instances does outsourcing of accounting become preferable, and why?
- In small to medium-sized ventures, the entrepreneur is usually directly involved in multiple business processes. He has to deal with strategic and administrative issues. Setting up and monitoring an accounts department is no small extra burden. Whereas outsourcing is very convenient. Furthermore, there are different types of outsourcing. So, you can outsource certain workloads without having to hand over all areas. This goes for other things too, not just accounts. Outsourcing then becomes very worthwhile. If you take on a staff accountant, you have to provide him with a workplace, all of which creates costs: on an office, office equipment, as well as taxes on wages. For the small business, outsourcing works out cheaper. You can’t take on an accountant at 5,000 roubles a month. With outsourcing, you can.
You can’t take on an accountant at 5,000 roubles a month. With outsourcing, you can.
- How do you go about outsourcing accounting in Moscow? What do you need to look out for when picking an outsourcing organisation?
- The market for accountancy outsourcing in Moscow is sufficiently developed. Large international consultancy companies operating in Russia also offer these services. But their clients are commensurable.
- As is the price tag…
- Precisely. There are smaller companies which work for small to medium-sized businesses. They all post adverts on the internet, and they are not hard to find. These companies, in the main, have been operating on the market for a long time, with qualified staff, and are reputable. There are also specialists on the Moscow accountancy outsourcing market providing private services as individuals. But you should bear in mind that, for these specialists, outsourced accountancy is purely an extra form of income. They generally have their basic work which will always be their priority. It’s no good expecting high quality service from them. What is more, they are not bound by any formal obligations. They could go under at any time, leaving your company in the lurch.
- How does pricing work on the Moscow accountancy services market? What is a typical price scale at the moment?
- Prices depend on the number of work areas outsourced. There are a lot of variations. In principle, the cost is determined by the number of accountancy tasks carried out. An agreement is signed and then, each month, the outsourcing company adds up the number of tasks carried out, and presents the client with an invoice.
- How much does it usually come to?
- You can’t say straight away. This is an issue we constantly come up against. Clients call us and ask: how much will the accounting cost me? But how many tasks are you planning on having completed? – we ask in reply.
- Let’s say it’s 20 operations a month. What would be the cost?
- 20 operations is very little, the bare minimum. That’s the “simplified”, a few payments per month, one salary assessed, a report submitted… The price for that is in the order of 3,000 roubles. For that, there is a certain scale in operation. For up to 50 tasks – 7,000 roubles. Over 100 – from 15,000 roubles. These are the basic rates for making calculations. There could be some kind of additional dealings with the company, for example to do with overseas trade activity. If we take on client banking operations, making payments, dealing with currency exchange, then the cost, of course, increases. Also, a lot depends on personnel records: how much salary is being paid, whether we put together timesheets, and other such things. The cost for drawing up personnel records for three employees is 3,000 roubles a month.
There is a lot in Russian record keeping which appears to be irrational. But a good outsourcing company can save you the need to drive yourself mad over it.
- And, in conclusion, a general question. What in Russian record keeping could turn out to be an unexpected and unpleasant surprise to the Western businessman? What is worthy of especial attention?
- Obviously, Russian paperwork is substantially different to that in the West. Unfortunately, in terms of greater bureaucracy. This is difficult for Westerners to grasp. There is a lot in Russian record keeping which appears to be irrational. But a good outsourcing company can save you the need to drive yourself mad over it. And it can also take on dealing with the Russian tax authorities, the Pension Fund, the National Insurance Fund where there are more than enough particular headaches the Westerner will not be used to. Then, you can concentrate entirely on your business without having to worry about any kind of unpleasant surprises.