Changes in Russian VAT rules

25 September 2023

Unicon inform about recent changes in Russian VAT rules applicable to foreign (non-Russian) providers of electronic services.

Starting from 1 October 2022, foreign companies are obliged to assess and pay Russian VAT only in cases where electronic services are supplied directly to individuals in Russia (that are not registered as sole proprietors).

If foreign companies provide services to legal entities and/or sole proprietors acting in Russia (i.e., b2b services), the latter are liable for VAT under the reverse charge mechanism (as tax agents). However, it was not clear whether such foreign suppliers have to stay registered with Russian tax authorities and continue filing nil tax returns.

In accordance with Federal law of 31 July 2023 No. 389-FZ, para 4.6 of article 83 of the Russian Tax Code establishing registration rules was amended. VAT registration is now required if a foreign company provides electronic services to Russian individuals and makes settlements with such individuals. This provision of the law will come into force on 1 April 2024.

Therefore, other foreign providers may apply for de-registration.

Below, we outline the consequences for different cases.

Type of customer in Russia

Implications/recommendations for service provider

Services are provided to individuals (or both to individuals and businesses)

To stay registered and to continue filing tax returns

Services are provided to businesses solely

After 1 April 2024, it is possible to apply for deregistration. Up to that moment, it is necessary to continue filing nil tax returns

Currently, services are not provided to customers in Russia; it is expected that provision of services to at least individuals will be resumed in future

It is possible to apply for de-registration. However, the de-registration process could take more than 6 months; hence, it might be reasonable to stay registered and to continue filing nil tax returns

Services are not provided to any customers in Russia, there is no intention to resume the activity

It is possible to apply for de-registration instantly.  The last tax return due will be that for the quarter of filing the application

Unicon VAT team will be happy to take care of the de-registration process.

Submit RFP