Since 2019, the obligation to calculate and pay VAT to the state budget has been imposed on foreign organisations rendering electronic services in the territory of Russia. These requirements apply both to the companies directly rendering electronic services and to those acting as intermediaries and participating in the settlements with Russian purchasers.
The list of the electronic services is established in the Tax Code of the RF (Russian Federation) and includes the following services, if they are rendered via the internet:
- Granting of the rights to use computer programmes (including computer games) and data bases by providing remote access to them.
- Rendering of advertising services.
- Rendering of services for placement of goods, works, services purchase/sale offers.
- Rendering of the services for providing technical, organisational, informational and other options for establishment of contacts and conclusion of transactions between sellers and purchasers.
- Providing or support of commercial or personal web presence.
- Support of websites/pages of users’ websites providing access to them and enabling of their modification.
- Storage and processing of the information, provided that the person who has submitted the information has access to it via the network.
- Submission in real time of the computation capacity for information placement in the information system.
- Providing domain names and rendering of hosting services.
- Rendering services in administering of information systems and websites.
- When a service purchaser enters the data, rendering of automated services for the data search, their selection and sorting by queries, submission of these data to the users via information and telecommunication networks.
- Granting of rights to use electronic books and other electronic publications, information materials, educational materials, graphic images, musical and audio-visual works.
- Rendering of services related to search and/or submission of the information on potential purchasers to the customer.
- Providing access to search systems.
- Maintaining of statistics
As this is the nature of the services to be rendered that defines the taxable presence of foreign organisations in Russia, one should pay attention to the wording in the concluded contracts which do not always specifically clarify whether the rendered services are “electronic” or not.
A foreign organisation rendering the listed services should:
- Register with the tax authorities, no later than 30 days after the effective day of the services rendering.
- Independently calculate and pay the VAT to the state budget of the RF.
- Submit the VAT returns on a quarterly basis.
The taxable base is determined as the services cost inclusive of the tax amount. Therefore, in order to decrease the number of disputes with counterparties and tax authorities, we recommended to mention in the contracts whether the tax is included in the service cost or not.
A foreign organisation is not obliged to draw-up VAT invoices for the services rendered and the main document allowing the tax calculation accuracy is the issued invoice. Therefore, one should pay special attention to the correctness of this document execution.
From 2021, the taxation relief in respect of the electronic services, granting the rights to use computer programs and data bases by providing remote access to them has partly been cancelled. Now the services for transferring the rights to use foreign software shall be subject to taxation.
No exceptions are provided for the services rendered by foreign organisations under the long-term contracts concluded before and extended to 2021 and the subsequent years. However, if the payment for the services was received in 2020, but they are rendered in 2021, no VAT shall be payable.
Exemption from VAT shall also survive in the situation when the services were rendered in 2020 by a foreign organisation registered with a tax authority of the RF, but the payment for them is received in 2021.
Registration with tax authorities has specific features and requires practical experience. Beside the procedure for determination of the taxable base for VAT calculation, filling-in the tax return and submission thereof to the tax authorities are often complicated tasks.