Selling into Russia through an agent or distributor is a common first step — and a common way to create a taxable presence you never intended. The model you choose decides whether you have a Russian PE.
The Russian party buys and resells on its own account — generally no PE for you, but you lose margin control and the VAT sits with the distributor.
The agent sells in your name — more control, but a dependent agent concluding contracts can create a permanent establishment, bringing you into Russian tax.
A foreign company wanting to sell into Russia without establishing a local entity faces a choice: use a Russian agent (who acts in the foreign company's name) or appoint a Russian distributor (who buys goods and resells in its own name). The choice has significant tax consequences that are easy to underestimate. The agent route can inadvertently create a Russian permanent establishment — making the foreign company a Russian taxpayer. The distributor route eliminates that risk but changes the commercial relationship in ways that matter. This guide sets out the tax framework for both, and what the structuring options are in 2026.
In an agency arrangement, the Russian agent acts on behalf of the foreign principal — finding customers, negotiating contracts, taking orders — but the legal contracts are between the foreign company and the Russian customer. The agent earns a commission; the foreign company receives the full sale proceeds.
The tax risk: under Article 306 of the Russian Tax Code, and under most bilateral double tax treaties, a foreign company has a Russian permanent establishment (ПП) if it has a "dependent agent" in Russia — an agent who acts on its behalf and habitually exercises authority to conclude contracts. A PE means the foreign company must register with the Russian FTS, file Russian CIT returns, and pay Russian corporate income tax (25%) on profits attributable to the PE's activities.
Calling someone a "representative" or "marketing agent" in a contract does not prevent a PE finding if, in practice, they are the one making the commercial decisions that bind the foreign principal. The FTS examines emails, internal communications and the actual conduct of negotiations — not just the written agreement. A carefully drafted contract with sloppy operational practice is not protection.
Where the agent arrangement is structured correctly and no PE arises:
The agent's commission is Russian-source income for the agent. The Russian agent pays its own CIT (25%) and VAT (22%) on the commission — standard tax treatment for services rendered in Russia.
The foreign principal has no Russian tax obligation on the sale proceeds, provided no PE is created.
Withholding tax on the commission: the foreign principal does not withhold Russian WHT when paying the agent's commission — the agent is a Russian company and accounts for its own taxes. WHT applies to payments to foreign organisations, not to payments from a foreign organisation to a Russian one.
VAT on the commission: the agent charges 22% VAT on its commission to the foreign principal. If the principal has no Russian VAT registration, it cannot recover this as input VAT — the commission VAT is a direct cost. This is often overlooked in agent pricing negotiations.
A distributor buys goods from the foreign company for its own account and resells them in Russia in its own name. The foreign company sells to the distributor; the distributor sells to the end customer. There is no agency relationship.
Pick what applies — we'll tell you the exposure:
No PE risk: a distributor who buys and resells in its own name is an independent legal person conducting its own business. No dependent agent PE is created by the distributorship itself — this is the key structural advantage.
Pricing control: the foreign company controls what it charges the distributor (the transfer price). Transfer pricing rules apply if the parties are related — the price must be arm's length. For unrelated distributors, the foreign company loses direct control over end-market pricing.
No WHT or Russian VAT on the export sale: the foreign company's sale of goods to the Russian distributor is an export in the exporter's home country (0% VAT there) and an import in Russia (import duty + 22% VAT, paid by the distributor). No Russian WHT applies to goods sales.
Transfer pricing: if the foreign company and Russian distributor are related parties (common ownership), the FTS will scrutinise the distribution margin. Related-party distributor arrangements need formal TP documentation and benchmarking.
Where commercial reasons require the agent model, several structures reduce PE risk:
Commissionaire structure: the agent acts as a commissionaire — contracting with Russian customers in its own name but on behalf of the principal. Under Russian law and many treaties, a commissionaire acting in its own name is treated as an independent agent. Requires careful drafting and consistent operation.
Limit the agent's authority explicitly: the agent should have no authority to agree final commercial terms, sign contracts, or commit inventory. Orders should be routed to the foreign company for approval before acceptance. The foreign company should be seen to make the commercial decision.
Multiple principals: an agent who represents multiple foreign principals and earns market-rate commissions from each has a stronger argument for independent status.
Document separately: keep agent marketing/prospecting activities and the foreign company's direct negotiations clearly separated in communications and records.
Foreign companies providing digital services or software to Russian customers are treated differently — they must register for Russian VAT (and pay 22% VAT) regardless of whether they have a PE or agent. This applies regardless of whether sales go through a Russian agent or directly to end users. See our guide to VAT on digital services.
Map every Russia-facing relationship: does the person/entity have authority to commit you commercially? If yes — PE risk exists
Review agent contracts against the PE test criteria, not just their commercial purpose
If using an agent: implement operational controls (order approval workflows, no authority to sign contracts) and document them
Budget for 22% VAT on agent commissions as a direct cost if you cannot recover it
For related-party distributors: ensure TP documentation is in place before the FTS asks
For digital services: check whether the Russian VAT registration requirement applies regardless of your distribution model
It can — if the agent is dependent and habitually concludes contracts in your name, that's a classic dependent-agent PE, bringing you into Russian tax. A distributor buying and reselling on its own account usually avoids this. The distinction is worth structuring deliberately, because a PE changes your whole exposure.
In a distributor model, the distributor accounts for VAT on its resales. In an agency model selling in your name, the VAT position is more complex and may fall on you. Getting this clear at the contract stage avoids a surprise assessment.
It depends on the trade-off you want: a distributor gives simplicity and PE safety but less control and margin; an agent gives control but PE risk. The contract should be drafted so the commercial and tax positions match what you actually intend.
This compares agent and distributor models. The question that decides your tax exposure is whether your Russian arrangement creates a permanent establishment — because an agent acting in your name can, and a distributor buying and reselling usually doesn't.
Practical support for international business in Russia.