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22 July 2016
On June 15 2016 the State Duma of the Federal Assembly adopted in its third reading the Federal Law on the Amendment of Part One and Part Two of the Tax Code of the Russian Federation. The law's new requirements have informally been named 'Google tax' as they introduce significant changes to the Russian tax regime for foreign companies that:
The main change introduced by the law is the obligation for foreign companies providing services in electronic form and selling content online to Russian consumers to register with the Russian tax authorities. Such registration will not depend on the foreign company having a representative office or any other place of business in the Russian territory and – in itself – will not require the creation of such a representative office.
Foreign companies providing services in electronic form in the Russian territory must register with the Russian tax authorities:
Services in electronic form will be deemed to have been provided in the Russian territory if:
The cost of the services provided in electronic form in the Russian territory will be subject to value added tax (VAT) at the computed rate of 15.25%, which should be calculated and paid by the taxpayer (ie, the foreign company).
If a foreign company providing services in electronic form in the Russian territory fails to submit an appropriate tax declaration and pay the corresponding VAT, the Russian tax authorities should be entitled to audit the company and charge VAT based on available data pertaining to the similar operations of other taxpayers.
Overpaid VAT is able to be returned to foreign companies; however, they will not be entitled to a VAT deduction.
The law introduces revolutionary amendments associated with the taxation of software and internet services sold in the Russian territory and may affect all foreign companies operating in the Russian market, as well as Russian companies with foreign sales offices.
Companies are advised to assess the tax risks associated with the so-called 'Google tax' and the obligation to register with the Russian tax authorities from January 1 2017.
For further information on this topic please contact Evgeny Alexandrov or Valery Narezhniy at Gorodissky & Partners by telephone (+7 495 937 6116) or email (firstname.lastname@example.org or email@example.com). The Gorodissky & Partners website can be accessed at www.gorodissky.com.
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