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Do foreign suppliers need to charge Value-Added Tax (VAT) on sales to Russia-based consumers?

Yes, the rules changed on January 1, 2017, and now foreign suppliers of digital services with sales to Russia-based consumers must now apply VAT on their sales there.

Is there a VAT registration threshold?

No, there is no registration threshold. This means that if you, as a digital service supplier, make even one sale to a Russian-based consumer then you must comply with these new rules.

How do suppliers prove their consumer’s location in Russia for VAT purposes?

Foreign digital service suppliers need to use available transaction evidence to identify their consumer in Russia. The acceptable pieces of evidence include:

  • The customer’s address: If the customer is the resident in the territory of the Russian Federation.
  • Credit card billing address: If the bank, or the operator of electronic money, through which payment of services has been organized, is located in the Russian Federation.
  • IP address: If the IP address of the customer used for the purchase of services is located in the Russian Federation.
  • Mobile phone number: If the international country code of the telephone number used for payment of the services is assigned to the Russian Federation.

Unlike other similar rules in operation across the globe, a supply is deemed to be taxable in Russia if one of the above pieces of evidence is captured during the transaction.

However, in the case of a conflict of evidence collected with another country that applies the destination-based place of supply rules (akin to the one that Russia introduced on January 1, 2017) then the merchant can choose which tax authority the tax will be remitted to.

What remote services are in scope for VAT in Russia?

Digital services supplied to private Russian individuals that come under the scope of the new Russian digital VAT law are defined as the following (note: this list is selective, other services may also come under scope of the rules):

  • Downloads of music, images, and/or games
  • Online gaming
  • Online software, remote administration and automated support services
  • Subscriptions to news and other content sites
  • Broadcast TV and internet radio
  • Online telephony and data services
  • Provision of advertising services via the internet
  • Data storage and data processing in the cloud
  • Web-hosting services
  • Internet auction sites

What is the Russian VAT rate?

The Russian VAT rate is 18%.

How do I register for VAT in Russia?

Foreign digital service suppliers must register within 30 days of their first supply to a consumer based in Russia. For example, if supplies start on the day of the introduction of the new tax (January 1, 2017) then the foreign digital service supplier must register with Russia’s Federal Tax Service (FTS) on, or before, January 30, 2017.

This registration can be done via the taxpayer’s individual online account with the FTS, more detail is available here.

Will registration create a Permanent Establishment in Russia?

VAT registration by a foreign company providing digital services will not create a Permanent Establishment in Russia.

How do I enable VAT for Russia in Taxamo?

Assuming your product/services qualify as digital goods/services in Russia, then complete the following steps:

  • Log into the Taxamo Merchant Portal and go to: My account > Tax regions (link here).
  • Enable in TEST mode or LIVE mode for the relevant dates.
  • Enter your Russia Tax ID number. Here you also have the option of proceeding without entering your Russia Tax ID number. You can add the number once you have finalised your registration with Russia’s tax authority.

NOTE: If you are using an integration other than the Taxamo API or the Taxamo checkout form, please confirm that your integration type has been upgraded to support Russia.

How often are VAT returns to be filed?

Once registered with Russia’s Federal Tax Service the foreign digital service supplier will have to remit the VAT collected no later than the 25th of the month following a quarter which has ended.

What are the invoicing requirements for companies registered with Russia’s VAT system?

Foreign companies do not have to issue VAT invoices regarding the provision of electronic services to Russia-based consumers.

How are sales in foreign currencies treated?

Russian VAT must be paid in rubles. The value of the provided services should be calculated in Russian rubles using the exchange rate of the Central Bank of the Russian Federation, website here.

The exchange rate of the last day of the tax period in which the digital services have been paid for is to be applied. There is no alternative source, you must use the Central Bank of the Russian Federation exchange rates.

What are the rounding rules for the VAT return?

According to paragraph 6 of Article 52 of Russian Federation Tax Code an approximation procedure is used when dealing with rounding issues.

If the amount of the tax due includes kopeks (the unit of currency worth 1% of a ruble) then there are two options:

  • Rounding to one full ruble (should the kopeks exceed 50).
  • Using a discount and decreasing the sum to the last full ruble (in the opposite case).

How are adjustments treated under the new VAT legislation?

According to Article 81 of Russian Federation Tax Code a taxpayer has the right to submit a revised tax return in the case of errors in a previously submitted return.

The revised return should be submitted before the deadline for the submission of tax returns for the relevant tax period. The tax return of the following tax period will not be affected.

This revised tax return should be prepared as a general tax return with a special mark which indicates that the tax return is revised.

How long should data be retained for audit purposes?

Foreign suppliers of digital services to Russia-based consumers must collect and keep records of the Russia-based consumers for four years. The information should be recorded electronically and the information can be requested by the Russian tax authorities in case of an audit after the submission of a tax return.

Source: Item 8 Article 23 of the Russian Tax Code.

How can I contact the Russian tax authority?

The website to use for foreign companies providing digital services to Russian consumers can be found here. The website is in the English language and there is a link at the bottom for registration for online service provider.