Is foreign economic activity possible for individual entrepreneurs? Many domestic entrepreneurs are interested in this issue. In many ways, commercial activity is associated with the supply of products from the manufacturer to the consumer. This also applies to individual entrepreneurs, whose activities involve the production of various goods suitable for sale in our homeland, as well as for export to countries near and far abroad, since for normal business development it is necessary to look for additional sales opportunities.
But here the question arises: can an individual entrepreneur conduct foreign economic activity? To deal with this dilemma, you will need to find out as much information as possible about this type of service. Therefore, we will further examine this issue in detail.
Individual entrepreneur and foreign economic activity
Can an individual entrepreneur engage in foreign economic activity? In connection with the desire of most citizens to open their own business and start doing business, many provisions have appeared in the legal framework of our state that are aimed at creating favorable conditions for this. Particular attention was paid to representatives of small businesses, since without too much initial capital it is very difficult to effectively develop the chosen commercial area.
Several fairly convenient taxation systems have been developed that allow not only to reduce interest rates, but also to get rid of the need to pay a whole set of various taxes that are mandatory for owners of larger organizations. In addition, we were given the opportunity to engage in various types of trade on the territory of the state, and, if we have certain documents, to supply our products beyond its borders.
This has significantly expanded the range of opportunities for individual entrepreneurs who supply agricultural products, produce souvenirs, and transport goods from neighboring countries with subsequent sales in Russia.
In addition, this way of doing business is suitable for all tax systems that are provided for individual entrepreneurs by current legislation. Its provisions also include foreign economic activity.
An individual entrepreneur has the right to conduct business relations with foreign partners, providing the services they need or delivering their products to their retail space. The implementation of this procedure is set out in detail in Article 10 of the Federal Law “On the Fundamentals of State Regulation of Foreign Trade Activities”.
It states that any citizen of the country has the right to engage in foreign economic activity if they have the appropriate registration in one of the federal districts or entities that have issued a permit to engage in entrepreneurial activity in accordance with the legal framework of the state.
This gives the right to carry out export transportation to most countries of the world, and, if desired, supply imported products. At the same time, if an individual entrepreneur is a VAT (additional value tax) payer, then, in accordance with the law, his compensation is carried out by state financial institutions in the volumes and terms provided for by the current regulatory documents.
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Foreign economic activity for individual entrepreneurs
The basic rules of this type of commercial activity are to conduct a transaction with representatives of a foreign company, while observing the terms of the drawn up agreement and taking into account the requirements of legal acts of both parties.
As for the economic feasibility of carrying out this operation for an individual entrepreneur, this definition implies compliance with several main provisions, which include the following:
- Such a transaction is based on the principle of absolute self-financing and self-sufficiency, including when performing foreign exchange transactions. The export-import agreement is based on the principle of self-financing.
- The volume of the transaction must be based on the resources at our disposal. These may well include material, intellectual and currency opportunities.
- Before conducting such a transaction, it is necessary to carry out a full and thorough analysis of the conditions that the current market offers, take into account the features of other proposals and perform a feasibility study. This will allow you to avoid unforeseen situations involving risks.
- A transaction that involves contact with companies located outside our country must be carried out in compliance with bilateral government agreements, international laws and regulations that apply in the territory of all parties to this process.
In most cases, conducting business with other countries for small businesses is associated with a significant number of risky situations in which there is a danger of losing profit from the transaction. This may be a consequence of the legislative characteristics of the country in which the partner is located. Therefore, most businessmen prefer to contact law firms that specialize in international law and provide their services when concluding transactions.
Can an individual entrepreneur engage in foreign economic activity? For example, the individual entrepreneur is on the simplified tax system. He buys goods in Europe from catalogs via email, places an order from an individual entrepreneur, THE FOREIGN ORGANIZATION SENDS HIM AN INVOICE FOR ADVANCE PAYMENT and pays for it through foreign currency accounts, and then receives the goods, it is cleared through customs by a specialized organization here when the goods arrive. Can an individual entrepreneur do this? What restrictions do individual entrepreneurs have regarding foreign trade activities compared to an LLC?
Answer
For an individual entrepreneur there are no special features or restrictions on foreign economic activity compared to legal entities. Changes for an individual entrepreneur applying the simplified tax system will occur in relation to the taxation of import transactions. Payers of the simplified tax system are not exempt from paying VAT when importing goods (work, services).
The rationale for this position is given below in the materials of the Glavbukh System
simplified tax system
The composition of the reporting of those who use the simplification is very small. After all, entrepreneurs under such a special regime are exempt from paying:
- Personal income tax (in relation to your income, not the income of employees);
- property tax for individuals;
- VAT (except for VAT payable when importing or importing goods, * when carrying out operations under agreements of joint activities, trust management of property, under concession agreements).
This is stated in paragraph 3 of Article 346.11 of the Tax Code of the Russian Federation.
This means reporting on personal income tax (in relation to one’s income) and VAT, which is submitted entrepreneurs on the general taxation system, they don’t need to give it up.
Instead of these taxes, simplified businessmen pay a single tax and hand over simplified single tax declaration(Article 346.23 of the Tax Code of the Russian Federation). Prepare reports based on data books of income and expenses.
Oleg Horoshiy
State Advisor to the Tax Service of the Russian Federation, 2nd rank
Before answering the question of how to become a participant in foreign economic activity in Russia, you should first decide what foreign economic activity is. Foreign economic activity (FEA) is the functions of an enterprise oriented towards the world market. In our case, foreign trade will be international trade (foreign trade activities).
Participants in foreign economic activity are both legal entities and individuals (IP) engaged in foreign economic activity. Foreign economic activity participants can be:
- Importers - import into another country;
- Exporters - export from another country;
- Intermediaries - provide assistance in import and export;
- The state - regulates foreign economic activity in the country;
- International organizations - regulate foreign economic activity;
- Currency control agents - monitor compliance with Russian currency legislation.
Russian legislation establishes that all persons have the right to import and export goods into the country. However, to speed up and simplify the customs clearance procedure, it is necessary to register as a participant in foreign economic activity and obtain a UK FEA (registration card for a participant in foreign economic activity). Such a card serves as a means of identifying a participant in foreign economic activity. It is also established by law that the absence of the Criminal Code of Foreign Economic Activity cannot be a reason for refusal of customs clearance. But if you have it, you will not always need to present the entire package of documents. All you need is this card and the documents required for customs clearance of a specific batch of goods.
Registration of the Criminal Code of Foreign Economic Activity
The procedure for obtaining an account card is quite complex and requires the preparation of a large number of documents. You can prepare everything yourself or seek help from a law firm. If all documents are presented, the registration time should not exceed 5 calendar days.
To register the Criminal Code of Foreign Economic Activity, the following documents are required:
- A copy of the Charter;
- Certificate of state registration of the subject (OGRN);
- Certificate of registration with the tax authorities (KPP/TIN);
- The decision to create an LLC;
- A copy of an extract from the Unified State Register of Legal Entities;
- A copy of the certificate from the State Statistics Committee of the Russian Federation;
- Order on the appointment of a chief accountant;
- Original certificates of opening bank accounts;
- Document on the appointment of the General Director;
- Copies of passports of the general director and chief accountant, certified by the seal of the organization;
- A lease agreement for premises at a legal address or a certificate of ownership.
All copies of documents must be notarized.
Can an individual entrepreneur with the simplified tax system receive goods from abroad and clear them through customs?
They must be presented to the customs post at the place of your state registration.
Before starting foreign economic activity on your own, you need to calculate the benefits of such an event and its feasibility, as well as all the nuances that you may encounter. It may be much more efficient to outsource this to another company.
Sometimes ideas for articles for a blog come to mind on their own, articles are written quickly, in one go. The best and most visited, oddly enough, are born with a glass of wine. Like writers in movies J
And sometimes you don’t want to write about anything, but you have to. And then I look for inspiration on forums and search engine services that provide analytics on queries. And I was surprised that in 2016 many people are asking the question “Where to start foreign economic activity?”
There is a lot of information on the Internet, but I will also contribute.
Foreign economic activity is foreign economic activity. Buying something abroad or selling it abroad. Of course, you need to start with market research and analysis, determine demand and possible buyers, but this is not on my blog. It is assumed that you have already decided on the supplier and the purchased product, checked the supplier for reliability, and the product for quality. For example, you found and decided to bring car tires from China for sale in the Russian Federation or for personal use. That's it, you are a participant in foreign trade activities.
- Open a foreign currency account at your bank. On this account you buy currency for purchase.
- You enter into a contract with the supplier. The contract specifies the delivery terms, amount, payment terms, and details of the parties. You can take the template from the Internet and give it to a lawyer to finalize. If the transaction amount is more than 50,000 USD, you need to open a transaction passport at your bank.
- The contract specifies the terms of delivery in Incoterms. You will agree on them with the supplier.
The Chinese mostly work FOB. It's comfortable. In this case, the supplier will process the export in his country and deliver the cargo to your designated port or airport. The cost of services is already included in the price of the product.
- Transfer money from a foreign currency account to the supplier.
You can try to negotiate with the supplier for payment after shipment or 50/50. But in the case of China, you decided to buy there because it is four times cheaper there than anywhere else. Pay 100% before shipment. It will be much easier at customs later.
- Choose a carrier and customs broker in your home country. For me it is often the same company. The carrier will give you the contact details of their agent in China. You forward this contact to your Chinese and forget. They will do everything.
- While the Chinese are packing and shipping, get ready to register at customs.
The broker will ask for a stack of articles of incorporation almost to the ceiling. This is for registration at customs. Give him everything. The list of documents at different customs offices differs slightly, but, as a rule, includes TIN and OGRN certificates, the Charter, a certificate from the bank about open accounts and other constituent documents. Some greedy brokers charge about 5,000 rubles for this, some do it for free.
- Provide the broker with information about the goods. Brief description and country of origin (check with the supplier for country of origin). This will allow the broker to determine in advance the HS code and customs requirements for importation: for example, what permits (licenses, certificates) you will need to obtain.
- If you plan on regular deliveries, make an EDS - electronic digital signature. This is necessary so that you do not have to go to customs to sign each declaration. It is issued by the Federal State Unitary Enterprise Rostek and costs 5,900 rubles. A set of documents for registration: copies of the passport, SNILS, employment contract and employment order. Physically, the digital signature is a flash drive; you hand it over to your broker. Or even ask the broker to issue an electronic digital signature for you.
- Declaration at customs.
To submit the declaration, you will definitely need to provide: contract, invoice, packaging, waybill, technical description of the goods. The rest depends on the terms of delivery and the imagination of the customs inspector. The full list of documents for declaration is easy to Google. I will also publish it on my website soon.
- After customs has pretty much frayed your nerves, you will receive a declaration marked “Release of Goods” and the carrier will deliver the cargo to the address you specified.
- Submit your declaration to your bank's currency control department within 15 business days.
It’s impossible to talk about all the nuances in one article. But this is a rough plan of action.