Development of the controversial Google tax law

On 25 April, 2019, the Federal Tax Service of the Russian Federation issued a Letter “On the Procedure for the Application of VAT in the Provision of Services by Foreign Organizations in Electronic Form from January 1, 2019” No. SD-4-3/7937@.

This letter was issued as a result of a long dialogue between the Federal Tax Service of the Russian Federation and representatives of foreign businesses in Russia regarding the Federal Law of the Russian Federation of November 27, 2017 N 335-FZ, which came into force on January 1, 2019. The adopted law requires foreign organizations providing electronic services to legal entities in Russia to register with the Federal Tax Service of the Russian Federation and pay VAT on the services provided. Previously, such regulations applied only to the provision of electronic services to individuals.

This letter caused a lot of confusion and led to different interpretations by representatives of business, consulting, and media. SCHNEIDER GROUP experts actively participated in the discussion of the law and would like to comment on this letter, and explain whether it brings any relief to foreign businesses.

Can VAT be paid by a Russian tax agent?

Position of the law of November 11, 2017 N 335-FZ

A Russian company is not recognized as a tax agent for electronic services and VAT cannot be deducted by a Russian company in this situation, even if it was paid and actually received by the budget.

Position of the letter from the Federal Tax Service

The Federal Tax Service once again confirmed that registration of foreign companies providing electronic services in Russia is mandatory. The Federal Tax Service gave a certain relaxation for business in the situation where a foreign organization has not been registered and VAT has been paid by a Russian organization as a tax agent. Now, according to the explanations of the Federal Tax Service, a Russian organization may accept this VAT deduction if it has withheld and paid VAT to the budget.


We would like to point out that this position does not stem directly from the law, and also contradicts the clarifications previously provided by the Federal Tax Service and the Ministry of Finance. As before, SCHNEIDER GROUP adheres to the position that registration of foreign companies providing electronic services is mandatory. We also believe that a Russian organization that is a tax agent has the right to deduct VAT only if it has been paid to a foreign organization, which is registered for VAT purposes on the basis of an account indicating the TIN and checkpoint of the foreign company.

Does a foreign company now have to pay VAT on non-electronic services?

Position of the law of November 27, 2017 N 335-FZ

The law does not directly require the payment of VAT on non-electronic services by a foreign organization that has registered for tax purposes. However, it requires these organizations to register with the Russian tax authorities.

Position of the letter from the Federal Tax Service

The Federal Tax Service, as the Ministry of Finance did before, explained that when a foreign organization has been ordered to account for VAT on its electronic services, it is also obliged to declare and independently pay VAT not only on electronic services, but also on other services, such as consulting services that it renders in Russia to Russian companies. At an earlier meeting of representatives of the Federal Tax Service, the Association of European Businesses, and the Russian-German Chamber of Commerce, an agreement was reached where a foreign organization must pay VAT only on electronic services, and VAT on other types of services could still be paid by a Russian counterpart. However, the Letter from April 25, 2019 issued by the Ministry of Finance takes a different position: a foreign organization registered with the tax authorities as an organization providing electronic services should independently calculate and pay VAT on all transactions subject to VAT performed in the territory of the Russian Federation.


Considering the above, the safest position is that a foreign company registered for tax purposes should reflect in its tax return and pay VAT on both electronic services and other services where the Russian Federation is the place of sale. At the same time, a foreign organization, when invoicing non-electronic services, should allocate VAT and indicate its TIN and checkpoints. The Russian company is not recognized as a tax agent for such non-electronic services.

Please note that a different position, where a foreign company should report only on electronic services and should reflect in the VAT declaration only the amount of VAT on electronic services, carries a high degree of tax risk. In addition, the organization will have to prove the legitimacy of its position, most likely in court.


Our further newsletters will keep you informed of developments in this situation. In addition, SCHNEIDER GROUP provides services for registration of foreign organizations regarding the provision of electronic services in Russia and the submission of reports to the tax authorities on these operations. Also, if you have any doubts about whether your organization is subject to registration, please contact our experts.

Google tax law
Our experts
Alex Stolarsky
Partner, Rechtsanwalt, Legal & Compliance, Moscow
+7 / 495 / 956 55 57
Ekaterina Lakatosh
Tax Team Leader
+7 / 495 / 956 55 57
Olga Lux
Senior Tax Expert
+7 / 812 / 458 58 00