Russian VAT on e-services
Since January 2017 (Federal Law # 244-FZ of 3 July 2016), non-resident providers of electronic services to Russian customers have been required to register for, and charge VAT. This mirrors similar regimes in the European Union and other countries around the world.
Income from services included within the definition of e-services includes: streaming video, music or gaming; e-books, hosting websites; broadcast TV or radio; online telephony and data.
Definition of Russian e-services
Fees from electronic services subject to Russian VAT include:
- Online gaming
- Online software and automated support
- Subscriptions to news and other content sites
- Broadcast TV and radio
- Online telephony and data services
- Webhosting or online databases
- Automated, online advertising services
- Cloud or similar online data storage and memory
- Automated domain name-related services
- Excluded: internet access; consulting/advice services provided via email
Identifying residency of Russian customers
The provider will have to be able to identify that the services were consumed in Russia to apply Russian VAT.
This can be done through:
- Address of the customer
- IP address of the device used to access the content
- International dialling code
- Credit card or other payment method address
Russian VAT registration and returns
Eligible providers can register with the tax authorities via a tax agent or directly through the tax office’s online registration portal.
The VAT registered provider is then required to maintain records of transactions with supporting evidence for identifying the place of taxation as Russia. The VAT calculation should be recorded on a per-transaction basis.
VAT registered providers are required to submit quarterly returns, due by the 25th of the following month. The simplified electronic services VAT returns do not allow for input VAT credits or deductions.
VAT payments must be settled in Russian rubles. This can present problems with regard to foreign bank accounts which may not be able to properly identify the payment to the Russian tax authorities. This means tax payers may wish to appoint a local representative with a treasury function, or open their own Russian bank account.
B2B sales of electronic services in Russia
Until 1 January 2019, B2B transactions for digital services are zero rated (reverse charge) when provided by a non-resident seller.
Foreign providers of e-services to Russian resident VAT registered businesses will have to register for Russian VAT following changes applied from 1 January 2019.
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