MOSCOW, January 1. /TASS/. Foreign organizations providing e-services in the b2b segment, are now required to register and to pay VAT in Russia. Appropriate changes to the Tax code came into force on 1 January 2019.
Prior to that, the obligation to pay VAT in the provision of electronic services (known as the “tax on Google”) were foreign companies only in transactions with individuals (b2c). Now the requirement to pay a foreign company for VAT in the provision of electronic services shall also apply to transactions with Russian organizations and individual entrepreneurs.
Innovation can complicate the lives of a large number of foreign companies in Russia, the partner of Baker McKenzie Arseny Seidov. According to him, the Russian legislation does not take into account the experience of foreign countries and practices of multinational corporations. “For example, in the field of e-commerce, it is common practice when services are provided by one company, and receives other remuneration (Treasury) company of the group. Russian b2b buyers may not receive a tax deduction under such circumstances, since under current law for registration of documents for deduction of the service provider and the beneficiary of the funds must be one and the same person,” he explains.
Even if that foreign Corporation has no such functional separation on companies, it may be tuhoamista. Seyidov said that the policy of many foreign corporations does not imply complete tax vendor registration e-services on the b2b market in each country where business is conducted. “A number of companies may find that the share of revenue attributable to Russia is not large enough for a decision on the tax registration in Russia. In this connection, can decide to leave the Russian market,” he says.
Partner Baker McKenzie also notes that under the new regime fall also most of the foreign groups, allochrusa part of the global costs (along with other costs headquarters) on the Russian “daughter”. “The business of such groups often has no relationship to the provision of electronic services. However, no Russian was a foreign supplier of the Russian parties will not be able to take a deduction of VAT on all intra-group turnover, which negatively impact on their financial model,” — said Seyidov.
Position of foreign companies
Large foreign corporations have already warned about the upcoming changes. “In connection with changes in Russian tax regulation, which imposes VAT for digital services rendered by foreign service providers to commercial customers in Russia, from 1 January 2019 Microsoft Ireland Operations Limited (MIOL) will include VAT in the account,” — said TASS in the press service of Microsoft.
At the same time, social network Facebook previously announced update regarding taxation in Russia. “Starting from January 2019 to purchase advertising Facebook in Russia subject to VAT at 20%. This update will apply to all ad accounts, for which Russia is listed as the country of the company,” has notified its users of the social network. At the same time in Facebook noted that the VAT on the purchase of advertising in social networks will be charged regardless of the purpose of purchase (commercial or personal).
In Google, in whose honor was named the law, did not respond to a request by TASS on the business plans of the company in terms of the changed legislation. The press service of Apple did not provide the Agency any comment on this issue.
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