Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

May 30, 2019
2019-5688

Russia: Taxpayers to deduct VAT on export services as of 1 July 2019

The Russian Government, on 15 April 2019, published a Federal Law1 that allows taxpayers to deduct value-added tax (VAT) on goods (work, services) used in providing services outside Russia (i.e., when “exporting” services2).

VAT charged to or paid by a taxpayer when goods are imported into the Russian Federation and other territories under its jurisdiction, in cases where Russia is not regarded as the place of supply under Article 148 of the Russian Tax Code, is generally nondeductible and must be included in the cost of such goods (work, services).

An exception will now be made for VAT paid on goods (work, services) used in exporting services that are VAT-exempt under Article 149 of the Russian Tax Code. The changes will also affect separate accounting for VAT and the calculation of proportions for input VAT deductions, since taxpayers will have to treat export services as VAT-able transactions for these purposes.

Next steps

Taxpayers providing export services should work with their local tax professionals to address:

  • Analysis of company services that contain elements of the services listed in Article 149 of the Russian Tax Code and whose place of supply is regarded as the seller’s place of business
  • Recommendations on the new separate accounting procedure for VAT and a review of compliance with other criteria for the deduction of input VAT
  • Preparation of amendments to the company’s accounting policy for tax purposes to minimize associated VAT risks
  • Review of the potential for restructuring intra-group relations if VAT cannot be deducted by a tax agent
  • Analysis of profits tax consequences if legislative changes prevent the taxpayer from treating input VAT in connection with exported services as expenses
  • Support in modifying the ERP system and adjusting tax registers so that transactions are recorded in compliance with the new requirements

Endnotes

1. Federal Law No. 63-FZ of 15 April 2019 “On Amendments to Part Two of the Tax Code of the Russian Federation and Article 9 of the Federal Law ‘On Amendments to Parts One and Two of the Tax Code of the Russian Federation and to Certain Legislative Acts of the Russian Federation Concerning Taxes and Levies.’”

2. More detailed information is provided in EY Global Tax Alert, Russian State Duma approves new right to recover input VAT on exported services, dated 11 April 2019.

For additional information with respect to this Alert, please contact the following:

EY Moscow, Indirect Tax
  • Vadim Ilyin | vadim.ilyin@ru.ey.com
  • Olga Odintsova | olga.odintsova@ru.ey.com
  • Yulia Antipova | yulia.antipova@ru.ey.com
  • Yulia Kolesnikova | yulia.kolesnikova@ru.ey.com

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more