On January 1, 2017, Russia became the latest country to change laws aimed at taxing the digital economy.
The specific change in Russia is that 18% value added tax (VAT) is now applied to the sale of a digital service based on the location of the end consumer in Russia, rather than the supplier’s location. Russia, mirroring the EU taxation approach, requires two pieces of evidence to be collected during the transaction and there is no threshold for compliance.
Digital tax trends indicate a move to destination-based taxation. We like to keep those affected up-to-date so here’s a list of countries planning such changes.
The common thread in international digital tax trends is the move from a supplier-based taxation to one based on the consumer’s location, or destination-based taxation.
The Organisation for Economic Co-Operation and Development (OECD) has already approved the destination-based principle in Action 1 of the October 2015 release of their Base Erosion and Profit Shifting (BEPS) report.
Russia digital VAT looks set to become a reality by 2017.
But why is Russia making this move now?
First, some context. At the start of December 2015 it was revealed that Russia plans to introduce a new value-added tax (VAT) on digital services provided by foreign companies in January 2017.
This new 18% VAT (the standard rate) will mirror similar taxation intentions in the European Union (EU), and is aimed at non-Russian digital service companies supplying Russian consumers.