On Monday, March 25, 2019, the Federal Tax Service (FTS) of the Russian Federation has issued the explanatory lettar that clarifies a number of issues, arized after amendments to the Tax Code of the Russian Federation (TC RF) in connection with the so-called "A Google tax" entered into force.
We remind, that from the beginning of this year (2019), all foreign legal entities (those that are not tax residents of the Russian Federation) providing electronic services to tax residents of Russia are required to register with the Federal Tax Service, and pay value-added tax (VAT) at a rate of 16.67%. (More can be found here).
Let's take a closer look at the clarifications that have been given by Federal Tax Service in the letter regarding several issues.
1. The publicly disclosed informational message of the FTS notes that if the delivery of electronic services by foreign organizations (and place of provision of services is Russia), then all VAT liabilities are imposed on such foreign organizations (supplier of services) or on foreign/Russian intermediary organizations, regardless of who is the final purcaser of services - a natural or legal person.
Moreover, the final purchaser of the specified electronic services is released from the obligation to calculate and pay VAT.
2. Also the text of the clarification letter emphasizes that a foreign organization or foreign intermediary organization that provides not only electronic services, but also other accompanying services (and place of provision of services is Russia, for example, consulting or accounting services), shall calculate and pay VAT to the budget of the Russian Federation themselves.
3. A very important point in this report is that if under the terms of the contract for the provision of a range of services, including both electronic services (as main services) and other services (as accompanying services), the total vlaue of all such services to be provided is deemed to be a tax base. If the main services to be provided are electronic services, then:
4. The FTS of Russia also notes that the following categories of persons may use the right to deduct the amount of VAT paid:
5. If an foreign organizations provide services (and place of provision of services is Russia) via Russian intermetiaries on the basis of agency or other similar agreements concluded with such Russian intermediaries, then these Russian intermediaries are deemed to be tax agents for the purpose of VAT calculation and payment.
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