Russia: New VAT rules for e-services, effective 2019 | KPMG | GLOBAL
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Russia: New VAT rules for e-services, effective 2019

Russia: New VAT rules for e-services, effective 2019

New value added tax (VAT) rules with respect to business-to-business (B2B) supplies of e-services provided to Russian customers will be effective under new legislation beginning 1 January 2019.

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Under the new VAT rules, there will be new registration and reporting requirements.

  • VAT registration with the Russian tax authorities will be required of foreign B2B e-service providers. There is no VAT registration threshold. Foreign suppliers, therefore, will need to register if they make sales of e-services or charge Russian customers with an e-services fee irrespective of the volume of such sales.
  • There will also be VAT reporting and remittance requirements as well as a requirement to maintain an e-services sales ledger.
  • The amount of VAT as well as tax identification number and registration “reasoning code” issued upon VAT registration will need to be indicated separately on the invoice.
  • Legal entities, individual entrepreneurs, branches or offices of foreign companies registered in Russia that acquire e-services will be affected by the new VAT rules. In particular, they will not be responsible for withholding VAT from the payment for e-services, but they will need to receive properly drafted invoices from the suppliers to be able to recover VAT on e-services.
  • State registration of the company, branch or office is the main criterion to identify location of the customer for VAT purposes (although other criteria, such as place of effective management, could also apply).

The supplier of e-services or foreign intermediary companies (including the electronic platforms) will be solely liable for the VAT, and the corresponding VAT returns will have to be filed quarterly.  

There are exemptions from the VAT liability for e-services. For instance, the provision of rights to use software (including electronic games) and databases based on a licensing agreement will be exempt from VAT under this new measure.

For more information, contact a tax professional with the KPMG member firm in Russia:

Anton Kuzminykh | akuzminykh@kpmg.ru

Anton Grebenchuk | agrebenchuk@kpmg.ru

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