Russia – Latest Update

Russia increased VAT rate from January 2019 

Russia has approved the law increasing the standard VAT rate from 18% to 20% from 1 January 2019.

However, the reduced rate of 10 %, and the 0 % remain unchanged. The rate of 10 % is applied to basic foodstuffs, medicines, child’s products etc, the rate of 0 %   - for exports of goods, international transportation.

Russia introduced VAT on B²B digital sales

New tax rules effective from January 1, 2019

Foreign companies providing electronically supplied services to Russian companies or individual entrepreneurs will be liable for calculating and payment of Russian VAT. The earlier VAT was due only for digital B²C sales.

According to new rule foreign companies have to:

  • Register for VAT with the Russian tax authority
  • Submit VAT returns quarterly not late than the 25th day of the month following the reporting period.

Threshold

There is no VAT registration threshold. Foreign suppliers, therefore, will need to register if they make even a single e-supply irrespective of the volume of such sale

Invoicing

There are no obligations to issue a standard VAT invoice, they can issue simplified VAT invoices – VAT number and Sum of VAT must be stated there.

If a foreign company is already VAT-registered (providing e-commerce services to individuals) there’s no need to apply for additional registration.

Penalties

In case of failure to be registered with the Russian tax authority, a penalty tax will be up to 40 % of the company’s income from Russian sources. 

Deadline

Foreign companies are expected to file tax returns and pay VAT on a quarterly basis The tax rate on B²B and B²C (from 1 January 2019) electronically supplied services will be 16, 67 %.

Practical issues associated with the new VAT rules

Russian customers acquiring e-services will no longer use reverse-charge mechanism. Foreign companies have to ensure that their Russian clients are aware of new tax rules. Otherwise, double taxation can happen.

Russian customers; in order to deduct VAT should be provided by foreign e-service suppliers with their VAT registration information, such as their Taxpayer Identification Number (INN) and Taxpayer Registration Reason Code (KPP). Only invoices from the suppliers will ensure the possibility to credit VAT paid on e-services.

 

The above information was kindly provided by Olga Maksimova from Mark Prior, Russia. If you need any further information you can directly contact Olga at maximova@markprior.ru.

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Disclaimer:  The information contained in the present page is general and does not constitute legal advice. Before taking any decision or action on the above information you should take the appropriate professional advice.