Digital services in Russia: new VAT rules

From this year, foreign digital service providers engaged in online sales of electronic content to Russian consumers to pay VAT
Digital services in Russia: new VAT rules
03 January 14:30 2017 Print This Article

From now on, foreign companies not registered for tax purposes in Russia are required to pay Russian VAT on digital services rendered to Russian individuals. The legislation widely known as the “Google tax” has officially come into force on Jan. 1, 2017.

The new law basically envisages that digital services shall be regarded as supplied at the place of the buyer’s location and, therefore, if rendered by foreign service providers to Russian customers, Russian 18% VAT shall be payed. In this case the law will require foreign service providers to register themselves on the Russian tax service’s special electronic index and pay taxes. The VAT shall be paid at the latest on 25th of the month “following the expired fiscal period.”

The VAT will now be applied on granting a right to use software and databases, including access to online games and loading computer games into electronic devices. It also covers “granting rights to use electronic books and other electronic materials, graphic images, music and audiovisual products via Internet, including enabling remote access to them for viewing or listening,” cites TASS the text of the document.

What’s more, the new VAT covers provision of services in electronic form, advertising services on the Internet, goods and property rights sale and purchase placement services, providing a trading floor on the Internet, support and website administration.

Trading of physical goods via the Internet is not covered by the legislation. The new law will not apply to the sales of programs and databases on material media. Consulting services via email and Internet access provision services are also exempt from the VAT.

Russian companies selling applications or games via Apple iTunes, AppStore, Google Play, or Steam marketplaces will also have to pay the “Google Tax”.

The law was signed by Russian President Vladimir Putin on July 3, 2016, and was intended to set “equal conditions” for Russian and foreign Internet companies, aiming primarily foreign companies that sell software in online stores without paying VAT in Russia.


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