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Russia proposes 3% sales tax 2015

  • Jul 31, 2014 | Richard Asquith

Russia proposes 3% sales tax 2015

Russian consumers are facing a new Sales Tax of up to 3% as the country faces the prospect of declining revenues from the latest US and European sanctions.

The Ministry of Finance has said this week that it plans to grant the 12 Russian Economic Regions and 85 Federal Regions the power to implement a new sales tax of up to 3%. This will on top of the existing 18% Russian VAT, but there will be no right to deduct or reclaim the new sales tax.  In addition to including VAT in the new Sales Tax base, any excise duty should be included too.

Differences across the Russian regions.

The tax will apply to all goods and services provided to non-taxable individuals (consumers).  Whilst the Federal regions will create the local compliance regime, returns will be on a monthly basis everywhere and the place of supply is the orgin of the provider of the goods or services.  Any goods which are VAT exempt, or at the reduced VAT rates, will be exempt from the new tax.  This includes basic foodstuffs, education and most public services.  Financial services will be exempt, too.

Russia had previously applied a Turnover Tax until the end of 2003.

Russian sales tax triggers GDP reduction and inflation rise

Sberbank, Russia’s largest bank, estimates that the new sales tax will cut up to 1% off Russia's GDP. Russia’s economy is currently at near flat growth rate. The immediate impact of the new tax will be an increase in the inflation rate. It is estimated that this will be between 1% and 2.1% per annum depending on retailers’ ability to pass on the rise to shoppers.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara