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Deduction of “input” VAT when exporting works and services

Deduction of “input” VAT when exporting works and services

LEGAL DIGEST \ 19.06.2019

From July 1, 2019, organizations will be eligible for the reimbursement from the state budget of amounts of VAT on purchased goods (works and services) used for subsequent sale to foreign customers.

The new rules affect companies that carry out works and provide services outside the Russian Federation. For example, VAT will be deducted from office rents, which often represent a significant proportion of a company’s expenses. In this case, the VAT receivables from those purchased goods, works and services are reimbursable which will be recorded no earlier than July 1, 2019.

It is worth noting that this new development is imperative: companies may not deduct the amount of “input” tax, but neither will they be able to write it off as an expense.

In order to have VAT reimbursed from the state budget, you must meet the following conditions:

– The purchased goods (works and services) should be used for the implementation of works and services outside the Russian Federation

– The purchased goods (works, services) must be recorded (entered in the books);

– A properly executed invoice or universal transfer document from the supplier must be present;

– No more than three years can have passed since the registration of the purchased goods.

It is worth noting that organizations do not need to keep separate records of “input” VAT on foreign transactions: now these will be equated to transactions subject to VAT. Please note that the changes have not affected the operations stated in Article 149 of the Tax Code, as they are exempt from VAT. The “input” VAT on such transactions is still recorded in the cost of the purchased goods (works, services) and is subsequently written off as an expense.

For questions concerning the application of tax legislation, you can always contact the experts of Acsour. Our experts will help you to understand the situation in detail, as well as help you correctly draw up all the necessary documents.