Changes concerning VAT payment on e-services
Federal Law No. 323-FZ of 14 July 2022 amended the Russian Tax Code to restore the procedure under which Russian customers purchasing electronic services from foreign suppliers should pay VAT to the Russian budget as tax agents. Thus, companies are effectively returning to the payment procedure that existed before 2019.
In addition, Russian customers of e-services will be required to claim a VAT deduction for VAT paid on e-services in the manner prescribed for tax agents, i.e. after payment for the services and their acceptance in records. The changes did not affect non-electronic services.
These changes will come into force on 1 October 2022. However, the Federal Tax Service recommends that Russian customers to now already pay VAT on electronic and non-electronic services ("Services") (see Letter No. SD-4-3/3807@ of the FTS of 30 March 2022).
If your company purchases Services from foreign suppliers and the place of their sales is the Russian Federation, in our opinion, you should pay attention to the following questions:
- How do these changes affect the commercial terms of the Services provided by the foreign supplier to the Russian customers?
- What further plans does the foreign supplier have regarding the provision of the Services to the Russian customer and how may these changes affect them?
- Does the foreign supplier need to apply for deregistration with the tax authorities in case of discontinuation of e-services and what is the process of deregistration?
- If VAT on the Services is now paid by Russian customers, what responsibilities will the foreign supplier have?
- Does the foreign supplier adjust the scope of the Services provided, which have been prepaid by the Russian customers?
- How do to pay the existing VAT debt in relation to the Services of a foreign supplier to the tax authorities if payment from a bank account abroad is not possible?
- What should the foreign supplier do if it has an overpayment of VAT in respect of the Services?