New VAT rules for B2C supplies to Russian recipients

If your business, or your client’s business provide electronically supplied services to private consumers* in Russia new rules will require foreign (“non-established“) businesses to register and pay VAT on their supplies.

These rules will come into effect from 1 January 2017.

Supplies of such services will be subject to the Russian standard VAT rate of 15.25% of gross revenue.

For the purposes of this legislation electronically supplied services include (but are not limited to):

• e-books
• streaming of music and film
• online access to games and download of games to electronic devices
• services of social networking sites
• cloud computing
• hosting of websites
• access to search engines
• internet service providers
• broadcasting of TV or radio channels
• online advertising
• data storage,
• and other similar services

This definition broadly follows the definition for EU supplies.

Quarterly VAT returns will be required, however, there will be no right to recover input tax on these returns.

Place of belonging

As with any e-sales, it is important to have a procedure in place in order to establish the place of belonging of all customers as this will dictate what (if any) VAT is applicable, and to which authority payment should be made.  In broader terms, the rules for Distance selling must also be adhered to. Guide here 

* Russian definition of place of an individual customer – A “private consumer” is deemed to be in Russia if his/her living place is in Russia; or if he/she purchased the service by using a Russian bank (or a Russian electronic money operator), a network address registered in Russia, or a phone number with the Russia’s country code.

This follows an international trend as may be seen with similar developments here

If you are affected by this new VAT legislation, please contact us.  We have a worldwide network which can take the pain out of international VAT compliance and avoid a business inadvertently triggering swingeing penalties and interest overseas. Please see further details of this service here