Tax & Accounting Blog

Russia Advances Draft Law to Introduce VAT on E-Services

BEPS, Blog, Checkpoint, ONESOURCE, Transfer Pricing June 27, 2016

On June 17, 2016, the Russian Federal Taxation Service (FTS) published a press release on Draft Law No. 962487-6, which will require foreign companies to pay value added tax (VAT) on transactions for the sale of electronic services / content to Russian consumers. See BEPS Action 1 recommendations. This law was passed by the State Duma on June 15, 2016 during a third reading, and is currently under review by the Federation Council. The legislation, once enacted, would be effective beginning on January 1, 2017.

The draft law, which will amend Parts 1 and 2 of the Russian Tax Code, aims to create equal conditions for Russian and foreign companies doing business in the Russian Federation. Under the law, the place of supply of e­-services is the customer's location.

Foreign organizations must register with the Russian tax authorities and are required to submit a tax return, and include VAT. To register, these entities must complete an online form, providing company information and including the services it provides or plans to provide to Russian consumers. They will then be assigned a VAT number.

Under the draft law, electronic services are defined as the following (list is not exhaustive):

  • Transfer of non-exclusive rights to use software for computers and databases, including access rights.
  • Provision of advertising services via the Internet.
  • Storage and processing of information through the Internet.
  • Provision of domain names.
  • Provision of services for remote system administration and remote software support of information systems and websites.
  • Provision of services involving posting of offers to buy (sell) goods (work and services) and property rights on the Internet.

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