We would like to inform you that the foreign providers of electronic services (e-services) via the internet who offer services to Russian consumers (B2B and B2C) will be required to register for VAT purposes and pay VAT on electronically supplied services in Russia. Furthermore, these rules also apply to the performance of intragroup IT services in international holdings.
Services subject to VAT registration
Subject to the regulations are digital products and e-services which are sold via the internet. It concerns:
- Sales of software, e-books, photos, music, movies, etc.
- Web hosting, server capacity, and storage
- Information and data processing provided electronically
- Database access
- Web design
- Online administration and remote maintenance of IT systems and programs
- Online games
- Digital marketing services, internet advertising
- Online trading platforms
- Social media services
- Search and directory services.
There are some exemptions. The following services are not regarded as digital products and e-services, so general VAT rules apply:
- Distribution of goods and services via the internet if the goods / services are delivered outside of the internet (for example, distribution of goods via internet shops)
- Sale of software via the internet if the delivery of the software is done on a data medium (e.g. CD-rom)
- Consulting services via email
- Provision of internet access
Foreign providers are obliged to register for VAT purposes on the website of the Russian Federal Tax Service and to get access to the online personal account on platform “VAT office for online service providers”.
The deadline for tax registration is 30 working days after submission of an application etc. to a tax authority.
Filing VAT return
Registered companies must submit their VAT returns on a quarterly basis via special login area on the VAT office on the website of the Russian Tax Services and pay the declared VAT to the Russian tax authorities.
The deadlines for submission of VAT returns are following:
- 1st quarter 2019 no later than April 25
- 2nd quarter 2019 no later than July 25
- 3rd quarter 2019 no later than October 25
- 4th quarter 2019 no later than January 25
In contrast to the regular Russian VAT rate of 20%, a special rate of 16.67% will be applied to the gross amount of e-services rendered by foreign providers to Russian consumers. However, foreign providers are not authorized to make input VAT deductions.
VAT shall be paid in rubles. VAT payment details can be found in the VAT office.
If the foreign provider does not have the ability to pay in rubles, a third party may act as a financial agent and pay VAT to the tax authority.
At the moment it is still possible for Russian companies (buyers of e-services) to pay VAT as a tax agent (Reverse Charge mechanism). This VAT payment method for e-services in B2B relationships was valid until January 1, 2019.
Please note that the deadline for VAT payment is the same as the filing deadline for VAT returns. In case the tax payment is not on time, fines are charged for each day of non-payment.
The legislation regarding VAT on e-services is still in development and will be finalized with the business community. We will keep you informed about tax legislation on e-services.
SCHNEIDER GROUP is happy to offer assistance with
- Analysis and adaptation of contracts for digital products and e-services
- VAT registration and filing of tax returns
- VAT payment to tax authorities
Dr. Mathias Weber