Doing Business in Russia
Value Added Tax
Value Added Tax (VAT) is an indirect tax
- the burden of which is carried by the
end-customer- that must be calculated
and paid to the Russian federal budget
by the supplier.
Taxable Supplies
Generally, VAT should be charged
by taxpayers (companies, individual
entrepreneurs, importers) on the
following transactions:
-
The sale of goods, work, and
services, provided that the sales take
place on the territory of the Russian
Federation, including the free-of-
charge supply of goods and the
transferal of property rights;
The transfer of goods, work, and
services for the taxpayer's own
needs if the expenses incurred are
non-deductible when it comes to
profits tax (including depreciation
charges);
Construction and assembly work
carried out by the taxpayer for its own
purposes;
The import of goods into Russia and
to other territories under Russian
jurisdiction.
Place of Supply Rules
The Russian Tax Code stipulates
specific 'place of supply' rules that
determine whether goods, work or
services are supplied in Russia and thus
whether they are subject to Russian
VAT.
Goods are deemed to be supplied on
Russian territory for VAT purposes if:
the goods at the beginning of
their shipment or transportation
are located in Russia or on other
territories under Russian jurisdiction;
-
the goods at the moment of their
sale are located in Russia or on
other territories under Russian
jurisdiction, and are not transported/
shipped. Notably, the shipment or
sale of hydrocarbons or hydrocarbon
products from the territory of
the Russian continental shelf is
considered as supply on Russian
territory.
Generally, work is / services are
deemed to be supplied in Russia if the
supplier of the work / services has a
place of business in Russia (the default
'place of supply' rule). However, there is
a closed list of exceptions to the default
'place of supply' rule in the Russian Tax
Code relating to certain types of work/
services, in particular:
services directly connected with
movable/immovable property
located in Russia are considered as
rendered in Russia;
certain services are considered to
be rendered in Russia if the service
recipient's place of business is
Russia. This exception relates, in
particular, to consulting, marketing,
and engineering services; the
transfer, provision of patents,
licences, trademarks, copyrights
or other similar rights; services
regarding the development
of software and databases;
transportation and freight forwarding
services (under certain conditions);
etc;
some services are deemed to be
rendered in Russia if they are actually
rendered on Russian territory. This
exception relates in particular to
education (training) services.
Tax Agent Mechanism
If foreign companies that are not
registered with the Russian tax
authorities supply goods, work or
services in Russia, and these supplies
are deemed to have taken place in
Russia in accordance with the 'place of
supply' rule, the buyer (tax-registered
in Russia) is required to calculate the
amount of Russian VAT, withhold this
VAT from the amount of fee payable to
the foreign supplier, and remit that VAT
to the Russian federal budget on behalf
of the foreign company (the "tax agent"
mechanism).
Having withheld and paid the VAT to the
state budget, the buyer may claim this
VAT for recovery against its output VAT
under the general conditions covering
the recovery of input VAT.
Doing Business in Russia 25
Saint Petersburg
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