Russia confirms no VAT on foreign Intellectual Property sales

Tue 19th Aug 2014

It has been clarified by the Federal Tax Service that the sale for Intellectual Property (IP) by a foreign company to a Russian company for use outside of Russia falls outside of the scope of Russian Value Added Tax. Intellectual property includes the rights or license to use: copyrights; trademarks; and patents.

The Russian tax authorities confirmed that IP rights’ transactions come under the rules of place of supply of services. For Russian purposes, this means there is no Russian VAT due provided the foreign company has no permanent establishment within the Russian Federation, and the IP is not being exploited in Russia.

The rules are contained within Article 148 of the Russian Tax Code.  This follows the EU VAT Directive rules, which deems that IP exploitation is a provision of a service, and is taxable in the location of the customer.  If this is in another EU country, then the reverse charge may be applied to companies (but for consumers it is in the seller’s country).  If it is outside of the EU, then it is outside the scope of VAT (as with the above Russian guidance).