Russian GAAR and debates on combating VAT-avoidance

By Valeria Khmelevskaya, KBK Accounting 

Russian general anti-avoidance rules (GAAR) are basically provided in Article 54.1 of the Russian Tax Code. Reduction of tax liability (e.g. deduction of expenses for profits tax purposes, VAT offsets, etc.) is allowed only when no distortion in the substance of the transaction has occurred, and when the principal purpose of the transaction has not been to minimise the tax burden. However, these provisions have proved to be insuffcient to safeguard customers when it comes to VAT offsets – in particular when working with counterparties in certain problem areas (e.g. cleaning services).

One of the options promoted by the Russian tax authorities since 2021 are the so-called tax clauses (caveats), aimed at contractually ensuring the service provider’s compliance with Russian tax laws (foreseeing the damage recovery option for customers). This solution is questioned by many taxpayers claiming interference in the private law sphere, the increase of administrative burdens on good-faith taxpayers, and eventual complications with damages recovery in practice due to insolvency or a lack of funds on the part of service providers. Companies tend to interpret these caveats as a way for tax authorities to effect the “actual transfer” of their tax audit function to taxpayers.

The business community is currently looking for ways to combat VATavoidance. One of the discussed options is payment of VAT and payroll taxes directly by the customer instead of the service provider. This option might be the most straightforward, as the Russian legislation already provides for it – Article 45 of the tax code allows payment of taxes for a third party, whereby the tax obligation remains on the service providers. The issue of additional clarifications by the Federal Tax Service might be necessary to put this idea into practice. There are also proposals to introduce a reverse-charge regulation, in the form known in the European Union, into the tax code for certain spheres such as construction, cleaning, etc. or, at least, for big customer entities which would effectively switch the tax obligation to the latter.


Valeria Khmelevskaya

Valeria Khmelevskaya

GGI member firm
KBK Accounting
Auditing & Accounting, Tax
Moscow, Russia
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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 Khmelevskayais a Partner, Lawyer, and Tax Consultant admitted to practice in Russia. She has over 20 years of experience of consulting in matters of Russian and international tax law. Ms. Khmelevskaya is also the Deputy Head of the Management Board and the Chair of the Committee for Taxes and Financial Reporting of the German-Russian Chamber of Commerce (AHK) and recommended attorney of the Austrian Foreign Trade Centre Moscow (Advantage Austria).


Published: Indirect Taxes Newsletter, No. 13 Spring 2022 l Photo: Pavel Losevsky - stock.adobe.com

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