Changes in VAT in Russia

From 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 enter into force 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 of 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 the decision of 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 tax control additional measures, an act will be compulsorily 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, the third reading will be held on July 18. We expect the law to enter into force before the end of 2018. Since January 1, 2019, all foreign organizations that provide electronic services to counterparties are required to register for taxation and pay VAT independently.

Currently this requirement applies only to foreign organizations that provide electronic services to individuals residing in the Russian Federation. From 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 to the tax authority an application for registration no later than 30 calendar days from the date of the beginning of the provision of these services or until February 1, 2019 for those who already render 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 on the Internet, as well as provision of advertising place (space) in this network,
  • provision of domain names,
  • provision of hosting and other services.

The application for registration 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 other consultations.

Our expert

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

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