Google tax: foreign companies that supply services must independently register with Russian tax authorities

LEGAL DIGEST \ 19.12.2018

Starting from 2019, Russian companies will no longer be obliged to act as tax agents when they purchase e-services from foreign service providers. Foreign companies will have to assess and pay VAT on Russian sales independently.

At present, the obligation to register with Russian tax authorities lies only with foreign companies that supply e-services to individuals in Russia. However, starting from New Year, this will also affect companies whose clients are legal entities.We remind you that e-services include the following:

• granting rights to use computer programs (online / through remote access);
• advertising in the Internet;
• services of technical, organizational, informational or trading platforms;
• services involving the administration of information systems and website support;
• storing and processing information online;
• providing computing capacities for information to be placed;
• providing domain names and supplying hosting services;
• supplying automated data search services, as well as selecting and sorting such data upon request;
• granting rights to use e-books, graphic images and musical compositions;
• services involving searches or the provision to a customer of information regarding potential buyers;
• granting access to search engines;
• maintaining statistics on websites.

For Russian companies this means that if e-services are purchased from foreign entities, it will be possible to deduct the VAT without drawing up VAT invoices. For them to do so, however, the foreign supplier must be registered at the website of the Federal Tax Service. Documents confirming that VAT has been paid, such as an agreement with the foreign entity and/or a settlement document, must be also available. These should single out the tax amount and indicate the foreign entity’s taxpayer identification number (abbreviated in Russian as INN) and code of reason for tax registration (abbreviated in Russian as KPP).
Foreign entities that supply such e-services to Russian legal entities will have to do the following:

• register with the Federal Tax Service through the ‘VAT office of Internet companies’ online service;
• obtain an individual taxpayer number;
• pay VAT and submit reports on a quarterly basis.

Please contact Acsour for an analysis of whether you need to register with tax authorities in Russia and to complete the procedures required to this end.