Value Added Tax (VAT)-Publication

1.       Will the new 20% VAT rate apply without any exception?

Starting from 1 January 2019, the key VAT rate will amount to 20 percent, however, some specific rates remain, such as 0% for export and 0% for food products and goods for babies and children.

The new TAX rate will apply to the goods (works, services) shipped after 1 January 2019.

Legal Basis and Details:

Federal Law No. 303-FZ, dated 03 August 2018, “On the Amendment to Certain Legal Acts of the Russian Federation on Taxes and Charges”


2.       How shall the VAT be calculated for the agreements providing for a step-by-step performance? How shall the VAT be accrued to a prepayment received in 2018 for the goods to be delivered in 2019? What to do, if an agreement is entered into in 2018, and goods will be shipped / services will be rendered in 2019?

·         It is recommended to act as follows when determining the VAT rate for the agreements providing for a step-by-step performance: the 18% VAT rate applies if documents for a stage are dated 2018, i.e. the works are performed, or the services are rendered, or the goods are delivered in 2018. The 20% VAT rate applies if the documents are dated 2019.

  • According to the standard procedure, the VAT accrued on a prepayment received in 2018 for a shipment of goods to be made in 2019 shall be deducted on the shipment date and within the limits of the tax amount previously accrued on the prepayment.
  • Whether or not an agreement was entered into prior to or after 01 January 2019 does not have any impact on determining the VAT rate. What is important:

    - the date of shipping goods (rendering services, performing work) — in general;
    - the date of shipping and paying income to a counterparty — to pay VAT as an agent when procuring services or jobs from a foreign company that is not a tax resident of the Russian Federation, as well as renting public property.

Legal Basis and Details:

Federal Law No. 303-FZ, dated 03 August 2018, “On the Amendment to Certain Legal Acts of the Russian Federation on Taxes and Charges”

 

3.       Will the procedure for confirmation of a zero VAT rate change?

Yes, a simplified procedure may be available for this purpose: starting from 2019, the zero VAT rate may be confirmed by registers of the customs declarations, transportation, consignment, forwarding and any other documents instead of copies thereof. It is available, if:

  • the goods provided for by Art. 164, Clause 1, Item 1, Para. 4 and 5 of the Tax Code are subject to reexport customs procedure;
  • goods are transported by global post servicespassenger and luggage transportation by a long-distance public railway (except for the services set out in Art. 164, Clause 1, Item 4); 
  • global transportation.

Please note that registers shall be filed in an electronic form.

Legal Basis and Details:

Federal Law No. 350-FZ, dated 27 November 2017


4.       Will the list of companies exempted from VAT change in 2019?

Yes, new companies will be added to the list starting from 2019: companies carrying passengers and luggage by road transport and city overland electric transport at regulated tariffs under governmental agreements shall be exempted from the VAT starting from 1 January 2019.

Moreover, organizations acknowledged to be participants of a scientific and technological centre in accordance with the Federal Law No. 216-FZ, dated 29 July 2017 shall be entitled for an exemption of taxpayer obligations associated with VAT assessment and payment in the manner set out in Art. 145.1 of the Russian Tax Code (up to ten years, inclusively, from acknowledgement as such).

Legal Basis and Details:

Federal Law No. 392-FZ, dated 30 October 2018, and Federal Law No. 373-FZ, dated 30 October 2018

 

5.       How will the manner of payment of the VAT accrued on the cost of electronic services rendered by a foreign company change in 2019?

Starting from 2019, all foreign organizations rendering electronic services shall be obliged to pay the VAT accrued on such services. Whereby it will not matter, whether they provide such services to individuals, individual proprietors, or legal entities. Foreign organizations providing electronic services to legal entities shall register with the Russian tax authorities within 30 calendar days from the commencement of such services (no later than on 15 February 2019 if the services are provided as of 1 January 2019).

Russian organizations and entrepreneurs purchasing electronic services from foreign organizations shall no more be acknowledged as the tax agents of such companies.

There is an exemption therefrom: if services are provided through an intermediary that settles payments with buyers (customers) under a engagement agreements, commission agreements, agency agreements, or any other similar agreements, such intermediary shall be deemed a tax agent.

Legal Basis and Details:

Federal Law No. 335-FZ, dated 27 November 2017

“On the Amendment to Part 1 and 2 of the Tax Code of the Russian Federation and Certain Legal Acts of the Russian Federation”


6.       How will the place of rendering electronic services be confirmed?

Starting from 2019, the place of rendering electronic services shall be confirmed by way of special-purpose transaction registers. The form thereof is approved by Order of the Federal Tax Service No. MMV-7-15/693, dated 29 August 2017.

Legal Basis and Details:

Federal Law No. 335-FZ, dated 27 November, 2017, “On the Amendment to Part 1 and 2 of the Tax Code of the Russian Federation and Certain Legal Acts of the Russian Federation”


7.       What documents shall be used in 2019 to confirm deduction of the VAT accrued to electronic services rendered by foreign companies?

To confirm VAT deduction, a Russian company shall provide an agreement and (or) a payment document (in which the tax amount, INN (Taxpayer Id. No.), and KPP (Code Registration Code) of a foreign company shall be specified - we described the manner of registration of foreign companies with the Russian tax authorities above), as well as any documents confirming money transfer within the framework of payment for the services.

Please note that a foreign provider of electronic services is not required to provide VAT invoices to a buyer to let the latter claim a tax deduction. However, other provisions of Art. 171-172 of the Tax Code of the Russian Federation remain relevant.

Legal Basis and Details:

Federal Law No. 335-FZ, dated 27 November 2017



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