Buying and selling foreign companies is not just about acquiring an asset but opening doors to new markets and foreign currency revenue. If you are looking to invest in foreign stocks, want to purchase an existing offshore company, or set up a foreign trade contract, it’s essential to understand regulations, taxes, and compliance in advance. A well-structured deal helps legally protect capital, while failure to work with the contract or stocks of issuers increases risks and the cost of mistakes.
Buying an existing business abroad saves time and reduces market entry barriers. This is a real alternative to registering a company “from scratch,” a process that could take months.
Entrepreneurs usually opt for such deals if they want to:
- Invest in a profitable company and receive dividends;
- Create an international platform for exports or logistics;
- Diversify assets across currencies and countries;
- Optimize taxes within the law.
Purchasing an existing business provides quick access to partners, registries, and licenses, which reduces trust barriers in B2B transactions. If your goal is to buy an offshore company as a "shelf" solution for a holding, ensure the jurisdiction meets the bank and KYC/AML requirements and that the structure passes the substance test.
Important! Buying a foreign company is a tool, not a loophole. When complying with foreign exchange control laws and notifying regulators, it is completely legal. The key is to plan steps in advance so that every operation is transparent and documented.
How to Choose a Jurisdiction for Buying a Foreign Company
The choice of the country of business registration is a critical step before closing the deal. It affects taxes, banking transactions, property protection, and the ability to reinvest profits. A mistake at this stage can cost more than the company itself.
If the goal is not just tax reduction but building a stable international structure, choose a jurisdiction strategically. Proven countries with transparent regulations offer capital protection and future certainty.
How the Deal Works (SPA, Payments, Escrow)
The process of purchasing a foreign company, including an offshore structure, proceeds step by step. The main goal is to maintain transparency and reduce risks.
Key Steps:
- Company Check (Due Diligence): Assess debts, licenses, reputation, financial statements, and offshore jurisdiction compliance with local requirements and personal data processing policies. Additional checks include active bank accounts, financial transaction history, and the use of nominee services for asset management to eliminate risks like account freezes and KYC violations.
- Preparing the Agreement: The price, payment terms, and arbitration clause are defined. If purchasing an offshore company, it is essential to verify where the transfer of ownership will occur – in the local registry or with a nominee holder. This step also clarifies who the founder is, where documents are stored, and how the ownership change is processed.
- Payments through Bank: Transaction passports are formalized, and payments are made through escrow. Special attention is given to offshore registration and adherence to international tax law to avoid violations during cross-border transactions and confirm the legality of fund sources.
- Transfer of Rights: The ownership is re-registered, tax authorities are notified, and registry information is updated. At this stage, it is critical to ensure all rights are protected and that the necessary documents for ownership change, registration, and notifications to state authorities are completed correctly and submitted on time.
Each step requires attention to detail and documentary evidence. Missing even one detail – especially when buying an offshore business – can lead to legal problems, account freezes, or asset loss.
Foreign Exchange Control: How Not to Violate the Law
For Russian entrepreneurs, the key guideline is the foreign exchange regulation law, banking control practices, and Russian legislative requirements. A foreign trade contract (FEC) is an agreement for conducting foreign economic activities, while an import contract covers the supply of goods or services from abroad with specified price, terms, conditions, and documentation.
In some cases, a bank handling foreign payments will require registration of the foreign trade contract in its system and provide confirmations – invoices, shipping documents, licenses, and certificates.
If the counterparty is from a "hostile" jurisdiction, government commission approval may be required. Allow time for KYC checks and ensure all foreign trade contract documents are correctly processed – otherwise, payments may be delayed. If necessary, our specialists can help prepare the required documents and conduct the deal in full compliance with Russian law.
Important! Even a “white” operation can get stuck in foreign exchange control due to errors in document processing. Write the contract number and stage in the payment purpose field, keep correspondence and bank decisions – this is the best insurance during audits.
Legal Cleanliness and Due Diligence (Corporate, Finance, Sanctions)
Before purchasing, conduct due diligence – legal, financial, tax, and sanctions checks. The results will be part of the warranties and representations section of the main contract.
Risk of Loss of Rights
A quality check reveals not only problems but also opportunities – business strengths, unused licenses, potential contracts. If the deal involves shares of foreign issuers, the check results will affect the conditions and price.
Important! Don’t limit yourself to just a registry extract. Order an audit, obtain tax certificates confirming no debts, and get local legal expertise for the target country.
Investments and Securities: Foreign Issuer Shares and Private Investors
After buying a foreign company, a Russian resident becomes the controlling party and gains ownership rights to the asset. The individual is required to:
- Notify the Federal Tax Service (FNS) about ownership;
- Submit an annual report on the income of the controlled foreign company (CFC);
- Pay taxes on income – dividends or stock sales;
- Keep documents confirming the legality of fund transfers.
If the company is located in a country participating in the international exchange of financial information (CRS), information about the owners is automatically transmitted to the FNS of Russia, including via email registered in the company’s details.
Who is the Tax Agent for Foreign Stock Transactions in Russia?
If stock trading is conducted through a Russian broker, the broker is the tax agent. This means the broker automatically withholds and transfers personal income tax to the budget, calculates the tax, and submits the information to the FNS. The investor does not need to submit a separate declaration – all obligations are fulfilled automatically, even if offshore assets or shares of foreign companies are in the portfolio.
However, if trading occurs through a foreign broker, the tax obligations fall on the investor. In this case, the investor calculates the tax amount, files a 3-NDFL declaration, and pays the tax on time. To confirm income, the investor must keep brokerage reports, transaction statements, and dividend certificates – especially if the funds pass through an offshore platform or holding company.
Important! Non-compliance with CFC rules leads to significant fines and tax charges. Keep founding documents, meeting protocols, financial reports, documents confirming the purchase of foreign shares, as well as dividend calculations and broker reports. This will help quickly respond to FNS inquiries, confirm transaction transparency, and avoid issues with regulatory authorities.
Foreign Trade Practice: Product Quality, Specifications, and FAQ on the Contract
In foreign trade contracts, everything matters – subject, price, delivery, terms, and dispute resolution procedures. The article “Product Quality in Foreign Trade Contracts” outlines basic standards (GOST, ISO), testing methods (SGS, Bureau Veritas), documents (invoices, certificates, bills of lading), and procedures for filing claims. For companies doing transactions through offshore structures, it’s especially important that all wording complies with foreign exchange legislation.
For banks, properly formatted document packages are the foundation of foreign exchange control: contracts, specifications, shipping documents, and registered foreign trade contracts.
An import contract is not just about prices and deadlines but also about the dispute resolution mechanism. In a foreign trade contract, the procedure for claims, storage, and inspection of goods should be specified to avoid disputes and payment delays.
Important! If the foreign trade contract lacks a clear quality and acceptance scheme, it will lead to payment delays. All conditions should be formalized before shipments begin.
Mistakes to Avoid
Many deals fall apart not because of malice but due to haste. Mistakes often stem from a lack of information or overestimation of one's knowledge.
Most Common Mistakes:
- Buying a company without legal assistance;
- Attempting to transfer money abroad without foreign exchange control;
- Trusting the seller's word without checking documents;
- Choosing a jurisdiction based on trends rather than common sense.
Each of these mistakes adds the human factor – the desire to save money or speed up the process. But in international deals, haste is unacceptable. You can avoid these mistakes by planning clearly in advance: who prepares the documents, how due diligence is conducted, through which bank payments are made, and where the confirmations will be stored. This approach reduces risks and makes the deal predictable.
Q&A: Frequently Asked Questions from Investors
- Can I buy a ready-made offshore company?
- Yes, if it's a structured solution and the jurisdiction meets the bank's requirements. Buying and selling ready-made offshore companies is common practice, provided there is transparency.
- What is a foreign trade contract and how to register it?
- It’s a contract regulating foreign economic activity. The bank registers it in its foreign exchange control system, and you provide a set of documents – invoices, specifications, and shipping papers.
- What risks exist when investing in foreign issuer shares?
- The main risks include market volatility, currency fluctuations, sanctions, tax regime changes, and corporate events.
- Who is the tax agent when trading foreign stocks?
- A Russian broker automatically withholds tax. If trading through a foreign broker, the investor is responsible for tax declaration.
- What does an import contract include?
- Delivery, price, deadlines, terms, arbitration, and dispute resolution. It is a specific type of foreign trade contract.
Conclusion: Foreign Companies Are Not Off-Limits
Buying a business abroad, setting up a foreign trade contract, and investing in foreign issuer shares is standard practice for Russian entrepreneurs. In the CIS, Asia, and the Middle East, it's easier to coordinate payments and open accounts. Purchasing an offshore company as a holding tool is permissible if you comply with bank and regulatory requirements.
The key is to follow the procedure, not act on intuition. Then, foreign assets will become a growth opportunity, not a risk. Legality, transparency, and professional support are three conditions under which the buying and selling of foreign companies work for you, not against you.