Separate division or branch: what is the difference between them?

A newly created LLC quite often does not have its own or rented office and is listed only at its legal address. This may be the home address of the manager (founder) or an address with postal and secretarial services. While no real activity is being carried out yet, and correspondence intended for the LLC, especially from official bodies, arrives in a timely manner, this situation is normal. But, sooner or later, the LLC begins to work, which means it must “materialize” somewhere in space.

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Sometimes the nature of the activity allows you to conduct business from home or with the help of remote workers, but if an LLC opens a store, warehouse, office, production facility, or in some other way begins to operate at an address other than its legal address, then it is necessary to create and register a separate division .

There is an important condition here - the criterion for creating a separate unit is the presence of at least one stationary workplace , and it is recognized as such if it is created for a period of more than one month. The concept of a workplace is in the Labor Code (Article 209), from which we can conclude that:

• an employment contract must be concluded with the employee;
• the workplace is under the control of the employer;
• the employee is constantly in this place in accordance with his job duties.

Based on this, a storage warehouse that does not have a permanent employee will not be considered a separate unit. Vending machines, payment terminals, ATMs, etc. are not considered as such. Remote (remote) workers also do not fall under the concept of a “stationary workplace”, therefore concluding employment contracts with them does not require the creation of a separate unit.

Please note that individual entrepreneurs should not create and register separate divisions . Individual entrepreneurs can operate throughout the Russian Federation, regardless of the place of state registration. If they work under the UTII regime or have purchased a patent, they only have to additionally register for taxation at the place of business.

What should a separate division be like for an organization to have the right to the simplified tax system?

Article 346.12 of the Tax Code of the Russian Federation prohibits the use of a preferential simplified taxation system for organizations that have branches (the requirement for the absence of a representative office has already been abolished). Of course, the question arises - how to register a separate division so that it is not recognized as a branch, and at the same time the organization retains the right to the simplified tax system? To understand this, you will have to refer to the provisions of three codes: Tax, Civil and Labor:

1. The Tax Code (Article 11) gives the concept of a separate division of an organization as “... any territorially separate division from it, at the location of which stationary workplaces are equipped.” However, the Tax Code of the Russian Federation does not provide a description of the types of separate divisions.
2. The Civil Code (Article 55) characterizes a separate division only in the form of a representative office and a branch . That is, from these provisions it is also unclear what other separate divisions, besides a representative office and a branch, can be.
3. The Labor Code (Article 40) indicates that “... a collective agreement can be concluded in the organization as a whole, in its branches, representative offices and other separate structural units .” Thus, only here can one see that separate divisions can be something other than a branch and representative office.

As a result, we are dealing with some elusive concept of another separate division, therefore, when creating such a division, we must simply avoid the criteria that characterize it as a branch or representative office. These characteristics in the law are more than meager:

• a representative office is a separate division of a legal entity located outside its location, which represents the interests of the legal entity and protects them;
• a branch is a separate division of a legal entity located outside its location and performing all or part of its functions, including the functions of representative offices;
• representative offices and branches are not legal entities, and information about them must be indicated in the Unified State Register of Legal Entities, and therefore in the organization’s charter.

It is no coincidence that we understand this issue in such detail, because non-compliance with these requirements (sometimes implicit) can deprive an organization of the opportunity to work on the simplified tax system, and unexpectedly. For example, the manager believes that the created separate division is not a branch, so the organization continues to work on a simplified system, although it no longer has the right to do so.

In such cases, the organization will be recognized as operating under the general taxation system from the beginning of the quarter in which a separate division with the characteristics of a branch was created. And the loss of the right to simplification leads to the need to charge all general taxes: profit tax, property tax, VAT, and it is with the latter that the most problems can arise. VAT must be charged on the cost of all goods, works and services sold for the current quarter, and if the buyer or customer refuses to pay it additionally, then the tax will have to be paid at their own expense.

Where to pay taxes for separate divisions: table

Signs of a branch and representative office

Considering what unpleasant consequences recognition of a separate division as a branch can lead to for the simplified tax system payer, you need to know what its signs may be:

1. The fact of the creation and commencement of activities of a branch or representative office is reflected in the charter of the LLC (from 2020 this is not necessary).
2. The parent organization approved the regulations on the branch or representative office.
3. A head of a separate division has been appointed, who acts by proxy.
4. Internal regulatory documents have been developed to regulate the activities of a separate division, as a branch or representative office.
5. A branch or representative office represents the interests of the parent organization before third parties and protects its interests, for example, in court.

Thus, in order to retain the right to the simplified tax system, it is necessary to ensure that the created separate division does not have the indicated characteristics of a branch. In addition, it is necessary to indicate in the Regulations on a separate division that it does not have the status of a branch or representative office and does not conduct the business activities of the organization in full (for example, a store is engaged only in the storage, sale and delivery of goods). The creation of a separate division is within the competence of the head of the LLC; it is not necessary to include information about this in the charter.

Differences between a branch and a separate division

We have reflected the main differences in the table:

Important! The head of the organization must also keep in mind when opening a structural unit the fact that the presence of a branch or representative office prohibits the organization from using the simplified taxation system, which does not apply to other OPs.

We inform the tax office about the opening of a separate division

According to Article 83(1) of the Tax Code of the Russian Federation, organizations must register for tax purposes at the location of each of their separate divisions. An additional requirement to report to the tax inspectorate about all separate divisions (within a month) and changes in information about them (within three days) is established by Article 23(3) of the Tax Code of the Russian Federation.

Thus, when creating a separate division (that is not a branch or representative office), the LLC must:

• report this to your tax office using form No. S-09-3-1, approved by order of the Federal Tax Service of Russia dated 06/09/2011 No. ММВ-7-6/ [email protected] ;
• register with the tax authorities at the location of this unit, if it was created in a territory under the jurisdiction of a tax office other than the one in which the head office is registered.

The tax inspectorate at the place of registration of the head office, to which message No. S-09-3-1 was submitted, itself reports this fact to the Federal Tax Service at the location of the created separate division (Article 83(4) of the Tax Code of the Russian Federation), that is, from the LLC you do not need to register yourself.

If several separate divisions are located in the same municipality, but in territories under the jurisdiction of different tax inspectorates, registration can be carried out at the location of one of the separate divisions, at the choice of the organization. For example, if in one city an LLC has several stores open in the territories of different Federal Tax Service, you do not need to register with each of them, you can select one inspection, indicating this choice in the message.

If the address of a separate division changes, it does not need to be closed and re-opened (such an obligation existed until September 2010), but only to submit a message in form No. S-09-3-1 to the tax office at the place of registration of the division indicating the new address.

Opening a branch or representative office

Opening such a separate unit has now become easier, but it still requires some preparation. Our step-by-step instructions will help you navigate.

Step 1: Making a decision

The owners of the organization, and in some cases the collegial executive body, must decide that a branch or representative office is created. For example, in an LLC this issue must be raised at a general meeting of participants, and at least 2/3 of their number must vote “for”. At the same time, the charter may provide for a provision that more votes are needed to make such a decision.

If a company has created a supervisory board or board of directors, then the issue of creating an OP may fall within its competence. However, this must be stated in the charter.

The decision made is documented. In an LLC, a protocol is drawn up based on the results of the general meeting of participants. If there is only one participant, he draws up a written decision to create a unit.

Step 2. Development of the Regulations on the OP

This Regulation is a document in accordance with which a branch or representative office conducts its activities on behalf of the company. The document indicates the address of the unit, its functions, rights and obligations, the procedure for vesting it with property, exercising management and terminating its activities. There is no single form of the Regulations, so it is being developed by the parent company. The document must be approved by the head of the organization.

Step 3. Completing an application for the Federal Tax Service

As we have already noted, information about a branch or representative office is entered into the register of legal entities. To do this, you need to send form P14001 to the Federal Tax Service. There is currently no need to include a separate division in the charter, but the organization has the right to do so if it wishes. In this case, form P13001 is submitted, in which the following is filled out:

• Title page;
• Sheet K – you need to indicate the name of the OP and its address;
• Sheet M – information about the applicant is entered.

But an application to open branches/representative offices without specifying them in the charter sometimes causes difficulties. The bottom line is this: on sheet O of form P14001, which must be filled out in this case, it is still indicated that data on the OPs appearing in the constituent documents is transferred to the register. The problem is that the form was never brought into compliance with current legislation. You should not pay attention to this wording, that is, as the reason for changing the information in the Unified State Register of Legal Entities, you need to select point 2 - “entering information about a branch/representative office, information about which is contained in the constituent documents.”

In addition, on sheet O you must indicate the name and address of the branch, and also fill out sheet P with information about the applicant. Form P13001 or P14001 is certified by the director of the parent organization by a notary.

Step 4. Sending documents and receiving results

Depending on which option is chosen for creating a subdivision—whether this information is included in the charter or not—a set of documents is generated. If information is not included in the charter, it is enough to submit form P14001 and the protocol or the participant’s decision to create an OP. If it is decided to indicate separate divisions in the charter, the following are sent to the Federal Tax Service:

• protocol or decision on the creation of a unit;
• form P13001;
• a new edition of the charter or a sheet of changes in two copies;
• receipt of payment of state duty 800 rubles.

Documents must be sent to the tax service within 3 working days from the date of the decision to create an OP. They should be submitted to the Federal Tax Service where the parent organization is registered. A common mistake is to send forms to the tax office at the location where the branch will be registered. If you do this, they will simply be returned.

Amendments to the Unified State Register of Legal Entities must occur no later than the sixth working day. No further action is required from the applicant - the Federal Tax Service will itself register the unit based on information from the register.

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Registration with funds

Previously, registration with the Pension Fund when opening a separate division was carried out on the basis of an application from the LLC; now this data is automatically transmitted by the tax office. However, the obligation to independently register with the Social Insurance Fund remains.

To register with the FSS, notarized copies are submitted:

• tax registration certificates;
• certificate of state registration of a legal entity or Unified State Register of Legal Entities;
• notice of registration as an insurer of the parent organization, issued by the regional branch of the Social Insurance Fund;
• information letter from the State Statistics Service (Rosstat);
• notifications about tax registration of a separate division;
• opening order, Regulations on a separate division, documents confirming that the separate division has a separate balance sheet and current account;
• original registration application.

A single simplified tax and insurance premiums for employees employed in a separate division must be paid at the place of registration of the parent organization, and personal income tax from these employees must be withheld at the location of the separate division.

Registration depending on type

Separate units (SU) are of three types:

1. Representative offices. Such an OP is created in order to represent the interests of the company. It has the right to enter into contracts on its behalf, but cannot carry out business transactions.
2. Branches. They are given broader powers, including the functions of representative offices. The branch can not only negotiate and execute transactions, but also carry them out.
3. Other separate divisions. The functions of such OPs may be different - this is not specified in the law. This type of division is also called simple.

Information about branches and representative offices must be entered into the Unified State Register of Legal Entities. Previously, the law required that such information be written down in the charter, but this is no longer relevant. Simple divisions are not included in the register of legal entities.

However, any OP, no matter what type it belongs to, must be registered in the prescribed manner. The process for registering a separate unit of different types differs:

• when opening a branch or representative office, it is necessary to make changes to the information about the organization contained in the Unified State Register of Legal Entities;
• It is enough to notify the tax service about the opening of a simple separate division.

In terms of legal status, OPs of different types do not differ. All of them are not legal entities, do not have their own property and are managed by management appointed by the parent company.

Responsibility for violation of the procedure for registering a separate subdivision

Violation of the deadlines for submitting messages and applications for registration of a separate division entails the following fines:

• violation of the deadline for filing an application for registration - 10 thousand rubles (Article 116 of the Tax Code of the Russian Federation);
• Conducting activities as a separate division without registration - a fine of 10 percent of the income received as a result of such activities, but not less than 40 thousand rubles (Article 116 of the Tax Code of the Russian Federation);
• violation of the deadline for registration with the Social Insurance Fund - 5 thousand rubles or 10 thousand rubles if the violation lasts more than 90 calendar days (Article 19 No. 125-FZ of July 24, 1998).

How to register a separate division in another city?

The procedure for opening an OP in another city is not fundamentally different from that described above. The package of documents depends on the category of the EP, but it still needs to be submitted to the tax office at the address of the organization's head office. Tax officials themselves will pass on the information to colleagues in the city where the OP will work.

If a company decides to open several OPs in another region, then it can choose one of the inspectorates through which all these divisions will work (Clause 4 of Article 83 of the Tax Code of the Russian Federation). To do this, along with the standard package of registration documents, you also need to submit a corresponding notification (f. 1-6-Accounting).

Action plan for creating a separate unit

1. Determine that the organization is creating a separate division that is not a branch or representative office (since they have a different registration procedure).
2. Make sure that the created workplace is stationary, that is, created for a period of more than a month, the employee is present at it constantly, and this is related to the performance of his official duties. If the employee is remote, there is no need to create a separate unit.
3. Within a month after creating a permanent workplace, inform the tax office where the LLC is registered about the creation of a separate division using form No. S-09-3-1.
4. Register with the social insurance fund within 30 days.
5. If necessary, report a change in the address or name of a separate division to the Federal Tax Service at the place of registration of the division within three days using Form No. S-09-3-1.

A separate division requires a power of attorney

A separate division is created with the purpose of performing the functions of the organization (all or part of them) or representing the interests of the organization and protecting them at its location. However, an OP is not an independent legal entity and therefore, in order to enter into any legal relations on behalf of the parent organization, it is necessary that all powers are spelled out not only in the constituent documents and regulations of other OPs, but also in a properly executed power of attorney. For example:

• carrying out transactions and other actions related to the current activities of the division. In this case, you can set restrictions. For example, to provide the right to enter into contracts only of a certain type or contracts whose maximum price is limited, etc.;
• opening bank accounts, performing operations to manage funds in these accounts;
• disposal of property with which the unit is allocated, or certain types of property (for example, with the exception of real estate);
• conclusion and termination on behalf of the organization of employment contracts with persons hired to work in a separate unit;
• the right of first signature of various documents drawn up in a separate division: accounting, financial documents, invoices, reporting, etc.;
• representing the interests of the organization in government bodies;
• the possibility of transferring certain powers to third parties, since the head of a department cannot always independently perform his functions for various reasons (for example, a business trip, illness, etc.).

Unlike branches and representative offices, the emergence of another separate division is not accompanied by changes to the constituent documents of the organization, except for documents that actually confirm the creation of a stationary workplace (for example, a lease agreement and an order to hire a person who will be located there). Moreover, when creating a separate division, it is not necessary to approve the Regulations on this separate division, and you can also do without appointing the head of a separate division, without issuing a power of attorney to him (for example, you just hired several additional ordinary employees who will be located in a remote office). However, in practice, as a rule, an order from the head of a legal entity is still issued (there is definitely no need to hold a general meeting of participants for this). It seems to us that it is most appropriate to issue an order to make changes to the staffing table and organizational structure of the legal entity (if there is one).

Other clarifications

An important point for carrying out the legal activities of an OP is registration with the regulatory authorities for accounting and transfer of taxes and contributions. In practice, it often turns out that open OP does not work as the enterprise planned, so many nuances must be provided for in advance.

Registration and registration

It is necessary to register with the territorial branch of the Tax Service at the location of any OP. If the OP is on a dedicated balance sheet, then he will need to submit reports in the future.

A notification about opening a simple OP must be submitted to the tax office within a month. Documents on a branch (representative office) are submitted immediately after the authorized body makes a decision on opening and writes it down in the constituent documents.

To the territorial office where the main enterprise is registered for tax purposes, you must submit an application for the creation of a branch (representative office), as well as certified copies of:

• minutes of the meeting of founders or participants;
• Regulations on the branch (representative office);
• the charter of the enterprise with entries on the formation of a new structure indicating its name and location;
• powers of attorney for the appointed manager;
• others on request.

Within 5 days, the Tax Service is obliged to make changes to the Unified State Register of Legal Entities and register in its databases information about the new structural division of the enterprise. After registration, the company will receive a notification about amendments to the charter, an extract from the Unified State Register of Legal Entities, and a certified charter.

All necessary information about the new structure will be sent by the tax office to the territorial branch of the Tax Service at the location where the branch (representative office) is located, where it will be registered. If the OP will continue to maintain a separate balance sheet, then you will have to submit reports and pay taxes at the place where the branch (representative office) is located. Also, the new structural unit is assigned separate Goskomstat codes.

If in one territory, which is under the jurisdiction of different branches of the National Assembly, several OPs are opened within the same municipality, then you can choose one of them for registration.

The main enterprise must report any changes in relation to an open OP within 3 days, otherwise penalties will be imposed on the manager. When a simple OP is opened, the tax office is only notified that a complex of places is being created remotely at such and such an address, the work of which will be controlled by the main organization.

When it is assumed that the OP will open a current account, independently maintain a balance, accrue and pay salaries to employees, this means the obligation to submit reports to the Pension Fund and the Social Insurance Fund, other budgetary and extra-budgetary funds. The branch, and in some cases the representative office, will need to register with the Funds within a month from the date of opening. All necessary documents are certified by a notary before delivery.

The following is submitted to the territorial branch of the Pension Fund at the location of the branch (representative office):

• information about registration with the Tax Service;
• notification of registration of the main enterprise in the Pension Fund;
• confirmation from the bank about an open current account;
• application for registration;
• others on request.

Together with the application for registration and a letter from Rosstat, information about:

• state registration of the main enterprise in the tax and Social Insurance Fund;
• registration with the National Tax Service;
• the decision of the meeting of founders to open an OP;
• availability of a current account.

Advantages and disadvantages of forms of organizations

Comparative characteristics

The concept of types of EP is absent in the Tax Code, because for taxation the very fact of opening and operating a unit is important, and not the powers that the enterprise will assign to it. The Civil Code provides differences between OPs in Art. 55, where the functional purpose of each of them is indicated. If, for example, a representative office negotiates with participants in civil transactions to conclude transactions before and after, but it, like a branch, cannot represent the interests of the company in court on its own.

The branch directly concludes transactions, negotiates on behalf of the enterprise, performs actions to fulfill contractual relations, and can conduct any activity that the legal entity is engaged in. face.

Article 55. Representative offices and branches of a legal entity

With regard to a simple OP, we can say that in fact this is an addition to those jobs that are already organized by the enterprise at its main location. All individual OPs cannot be independent participants in the turnover, but only enter into labor, civil, tax and other relations on behalf of the legal entity. faces. Therefore, the enterprise that opened it bears responsibility for the activities of any OP.

For example, the difference between a branch and a separate division is that the former can file a lawsuit on behalf of the enterprise, but it must be accompanied by a power of attorney for the manager, confirming his authority. An ordinary OP cannot do even this, and he does not have a manager at all. Any of the OP cannot be brought to tax liability separately from the main enterprise, despite its actions contrary to the law.

The territorial isolation of the EP, which the Civil Code speaks of, implies location in another subject of the Russian Federation, i.e. belonging to another municipal entity, and not the presence of another postal address. But in practice, tax authorities are guided by the Tax Code and do not attach much importance to this concept, therefore they are allowed to open an OP in any place other than the location of the main enterprise, even, for example, in a neighboring house or entrance.

If the head of a branch (representative office) acts on the basis of a power of attorney, then the person is responsible for the work of a simple OP in accordance with the job description. The first are appointed by the founders of the enterprise, and the second by the general director. The work of the branch is regulated by a separate Regulation, and the work of the complex of workplaces is regulated by internal local acts.

What needs to be done to close

The instructions directly depend on the status of the separate unit. If it is recognized as a branch or representative office, and information about it is included in the constituent documents, then the closure procedure becomes more complicated. If the OP of an organization is closed without a dedicated balance sheet and current account, the procedure is simpler.

Liquidation of a division and liquidation of an organization are completely different procedures. For example, when liquidating an activity, a liquidator is appointed, a notice is published in the media, work with creditors to pay off debts, lay off employees, and approve the liquidation balance sheet. And only after fulfilling all the mandatory conditions, they contact the Federal Tax Service with a request to deregister.

Basic actions, or what is needed to close a separate division in 2020:

1. Make the appropriate decision by a majority vote of the participants.
2. Issue an order to liquidate the OP.
3. Notify employees about the termination of the OP's activities.
4. Pay the state fee if information about the branch or representative office was reflected in the constituent documents.
5. Exclude information about the branch or representative office from the constituent documentation.
6. Submit a notice of closure to the Federal Tax Service.

But there are nuances at every step.

Is it possible to avoid registering an OP?

As you already understand, almost any activity through an OP is subject to mandatory state registration. The only exception can be the situation when an OP (not a branch or representative office) is created for a period of less than a month.

Violation of this order will require you to pay a fine. The question is its size. Yes, Art. 116 of the Tax Code of the Russian Federation provides for significant sanctions for activities without registration: 10% of income, but not less than forty thousand rubles.

One of the disputes regarding the registration of a separate property that arose between the taxpayer and the controllers reached the Supreme Court. The company insisted that Article 116 of the Tax Code of the Russian Federation should be applied only if the organization as a whole was not registered. The tax authorities had a different view of the situation.

The Supreme Court of the Russian Federation supported the businessmen (ruling dated June 26, 2017 No. 303-KG17-2377). And the tax authorities even had to prepare the corresponding letter No. SA-4-7/ [email protected] and “send” it to lower departments.

Let us remind you that today a businessman only faces a fine of 200 rubles for untimely registration of an OP. (clause 1 of article 126 of the Tax Code of the Russian Federation).

But you need to keep in mind that local tax authorities may still try to apply sanctions under Art. 116 of the Tax Code of the Russian Federation. In this case, you can safely go to court, which will most likely support the taxpayer’s position.