The Russian Federation imposed the obligation to Value Added Tax register on non-resident providers of digital or electronic services from 1 January 2017. This includes sales of services to consumers and, unusually, businesses customers, too.
There is no VAT registration threshold – providers must register immediately. The current Russian VAT rate is 20%, however, the VAT rate for digital services is 16.67%.
There are no VAT deemed supplier obligations for marketplaces operating in Russia.
What Russian digital services subject to VAT
Russia has imposed VAT on income from the following electronic/digital services
- Download or streaming video, films and music
- Digital newspapers and journals
- E-books and publications and graphical images
- Broadcast television and radio
- Telcom’s services – data and texting
- Automated online translations
- Online gambling and games of chance (‘computer programmes)
- SaaS or cloud-based software, support and data storage
- Subscriptions to news and other content sites
- Web hosting services or online databases
- the advertising services on the Internet, including the use of computer programmes and databases, operating on the Internet and the placement of commercials;
- Automated advertising services on the Internet, including the use of computer programmes and databases, operating on the Internet and the placement of commercials;
- Access to internet search engines
The following services are excluded: supply of goods ordered via the internet; transfer of rights to use computer programmes, including games; and internet access.
Note: from 1 July 2021, non-resident with more than 500,000 Russian users or customers may face Russian foreign digital VAT obligations, including the need to establish a local entity.
Determining if Russian VAT due – place of supply
In order to determine if the services are supplied in the Russian Federation, and therefore liable to VAT, one or more of the following pieces of evidence should be used to determine the location of the consumer:
- Billing address;
- IP address;
- Payment (bank or credit card) address; and
- Russian telephone country code.
B2B Russian digital services VAT rules
Until January 2019, sales by offshore providers of digital services to Russian VAT-registered businesses were zero-rated. The Russian customer took charge of reporting the VAT via their return under the reverse charge rules. The foreign customer must now VAT register (although does not necessarily have to charge VAT, see below). Russia is almost unique in not applying the reverse charge in this use case.
Both sides may enter into an agreement for the Russian customer to act as a tax collecting agent. The provider must still complete quarterly VAT returns to report the nil-rated transaction. However, it is possible to avoid this if the foreign provider instead appoints an intermediary.
B2B sales by a non-resident do not require a VAT invoice.
Russian VAT registration and compliance
For reporting the VAT charged on B2C transactions (and B2B invoice details), non-residents are required to register with the Federal Tax Service. They must use a local authorised agent for this process.
B2C sales by a non-resident do not require a VAT invoice.
Simplified VAT returns are filed quarterly. There is no scope for a non-resident to deduct any Russian input VAT suffered. They are due by the 25th of the month following the quarter end. Any VAT due should be paid at the same time.
Check our global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
Europe VAT on digital services
|Country (click for details)||Rate||Date||Threshold||Comments|
|EU 27 member states||17% to 27%||Jan 2015||€10k EU residents; Nil for non-EU|
|Bosnia Herzegovina||17%||Jan 2023||BAM 50.000|
|Iceland||24%||Nov 2011||ISK 2 million|
|Norway||25%||Jul 2011||NOK 50,000|
|Russia||16.67%||Jan 2017||Nil||B2C & B2B|
|Switzerland||7.7%||Jan 2010||CHF 100,000 on global income|
|Ukraine||20%||Jan 2022||UAH 1m|