VAT on electronic supplies to customers in Russia

At the start of December 2015 it was revealed that Russia plans to introduce a new value-added tax (VAT) on digital services provided by foreign companies in January 2017.

This new 18% VAT (the standard rate) will mirror similar taxation regimes in the European Union (EU), and is aimed at non-Russian digital service companies supplying Russian consumers. However, there will be Russian-specific issues for foreign companies such as registration and reporting.

A draft law proposing the new VAT was passed by the Russian State Duma at the start of December 2015. It seeks to change the place of supply rules govern digital services, i.e. types of consumer-oriented services downloaded via the internet. Examples of these digital services are digital downloads such as games, songs, and images; cloud computing and hosting; and downloading software such as anti-virus software.

This draft law also abolishes a VAT exemption for the licensing of software and databases. If this law passes the remaining legislative checks then it will come into effect on January 1, 2017.

If you have customers located in Russia and you are not sure whether your supplies will fall under the new rules feel free to contact us for further information.