Moscow, Russia

New Rules on the Export of Services

By Valeria Khmelevskaya and Gleb Stepanov, KBK Accounting

Following the assignment of the Russian President to make the export of services equal to the tax regime of the export of goods, new rules on VAT were introduced starting from 01 July 2019.

The new rules allow Russian companies and permanent establishments of foreign entities in Russia to offset against their output VAT, the input VAT with regard to services whose place of supply is outside of Russia. Previously, such input VAT could not be offset but could be deducted from the profits tax base (profits tax is a Russian corporate income tax levied at the rate of 20%); hence, effectively, the previous rules allowed de facto “recovery” of only 20% of such input VAT amounts. Currently, this input VAT could be offset in full, if the relevant entity carries out VAT-able transactions.

These new rules may be interesting, in particular, to Russian companies providing consulting, legal, accounting, auditing, engineering, advertising, and marketing services to foreign customers. Also, provision of electronic services, lease of movable property, software development and modification, provision of trademark licenses, R&D, and data processing could be covered.

Notably, VAT-exempt transactions, e.g. warranty services, software, knowhow or database licensing, are clearly excluded from the list. With respect to such transactions, the offset is not possible, hence, input VAT related to such services may still be deducted as expenses from the profits tax base.

Notwithstanding the positive effect of the new rules, more scrutiny and even more detailed tax audits could be expected from the tax authorities due to the newly introduced possibility of VAT recovery. Considering this, companies should pay attention to the proper documentation of such transactions.


Valeria Khmelevskaya

Valeria Khmelevskaya

GGI member firm
KBK Accounting
Auditing & Accounting, Tax
Moscow, Russia
T: +7 495 662 33 30
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W: www.kbk-accounting.de

KBK Accounting is a reputable outsourcing firm and provider of a wide range of services, including tax accounting and bookkeeping, tax advisory, reporting and compliance, HR, and interim management.

Valeria Khmelevskaya is a Partner, lawyer and tax consultant admitted to practice in Russia. She has over 17 years experience of consulting in matters of Russian and international tax law. Ms Khmelevskaya is also the Deputy Chair of the Committee for Taxes, Reporting and Controlling of the German- Russian Chamber of Commerce (AHK) and recommended attorney of the Austrian Foreign Trade Centre Moscow (Österreichische Außenhandelsstelle Moskau).
Gleb Stepanov

Gleb Stepanov

GGI member firm
KBK Accounting
Auditing & Accounting, Tax
Moscow, Russia
T: +7 495 662 33 30
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W: www.kbk-accounting.de

Gleb Stepanov is a lawyer and a member of the tax and consulting team.


Published: Indirect Taxes Newsletter, No. 09 Autumn 2019 l Photo: moeimyazanyato - stock.adobe.com

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