Changes in VAT in Russia

On January 1, 2019, the VAT rate will increase from 18% to 20%. The State Duma adopted the corresponding bill in the first reading. We expect that the law will come into effect before the end of 2018.

At the same time, the State Duma of the Russian Federation supported the draft of a set of compensation measures for VAT increasing:

  • The threshold on the declarative order for VAT refund is reduced from 7 billion to 2 billion rubles.
  • The term of on-site tax audit will be reduced to 2 months. This period can be extended to 3 months only by a decision from the tax authority head.
  • The appointment of a repeat on-site tax audit is possible only in case of an adjusted tax return submission to pay tax in a smaller amount.
  • As a result of additional tax control measures, an act will be prepared,and the results should be known to the taxpayer. Currently it is not so.

Who will it affect?

The corresponding amendments were approved in the second reading, and the third reading will be held on July 18, 2018. We expect the law to come into effect before the end of 2018. Since January 1, 2019, all foreign organizations that provide electronic services to counterparties are required to register for and pay VAT independently.

Currently this requirement applies only to foreign organizations that provide electronic services to individuals residing in the Russian Federation. After January 1, 2019 this requirement will also concern those organizations that provide electronic services to legal entities.

Foreign organizations that provide services in electronic form must submit and application for registration to the tax authority no later than 30 calendar days from the starting date of the provision of these services, or until February 1, 2019 for those who have already rendered these services in 2018.

The list of electronic services includes:

  • granting the rights to use computer programs (including computer games)
  • granting the rights to use databases via the Internet
  • provision of advertising services and space on the Internet
  • provision of domain names
  • provision of hosting and other services

The registration application may be submitted to the tax authority via a representative.

We will be happy to provide you with the VAT registration service, explain its consequences, and consult you on any other issues you may face.

Our expert

Sergey Leoshko
Head of Tax Department
+7 / 495 / 956 55 57

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