Payment of the “Google tax” by Russian companies

LEGAL DIGEST, NEWS \ 18.07.2022

The President of the Russian Federation has signed a Law that establishes the obligation for Russian companies to perform the function of a tax agent and pay tax on electronic services for a foreign supplier.

Starting from October 1, 2022, Russian organizations registered with tax authorities and purchasing services in the Russian Federation in electronic form from foreign organizations are required to calculate and pay VAT on such services as a tax agent.

At the same time, the obligation to pay VAT by a tax agent arises if a foreign legal entity providing electronic services:

• are not registered with the tax authorities or
• are registered with the tax authorities only in connection with the presence of immovable property and (or) vehicles belonging to them in the Russian Federation, or in connection with the opening of a bank account.

Please be reminded that, starting from 2019, Russian companies have been relieved of the duties of tax agents when purchasing services in electronic form. Starting from this period, foreign companies have to independently calculate and pay VAT on the sale of electronic services. To do this, they needed:

• to register with the Federal Tax Service through the online service “VAT office of Internet companies”;
• to obtain a taxpayer ID number;
• to pay VAT quarterly and submit reporting.

However, owing to the current difficulties in transferring funds from foreign bank accounts to the accounts of the Federal Treasury for the purpose of paying VAT, amendments were made to the Tax Code, which again impose the obligation to pay tax on Russian companies – tax agents. Please note that the services in electronic form include:

• granting rights to use programs (online / via remote access);
• online advertising;
• services of technical, organizational, informational or commercial platforms;
• information systems administration and websites’ support services;
• storing and processing information online;
• provision of computation powers for information placement;
• providing domain names, provision of hosting services;
• provision of automated services for data searching, their selection and sorting on requests;
• granting rights to use electronic books, graphic pictures, and musical compositions;
• services for searching for or providing the customer with information about potential buyers;
• providing access to search systems;
• maintaining statistics on websites.

Acsour recommends checking whether a foreign company providing electronic services to you is registered with the tax authorities and, if necessary, pay VAT on such services for it.