Russia foreign digital services VAT 2017

Thu 10th Dec 2015

A Bill has been introduced into the Russian Parliament to levy 18% VAT on the supplies of digital services to Russian consumers by non-resident providers from 1 January 2017.  The new tax will hit sales from providers such as Kindle for Amazon, Apple Store and Google Play.

The new proposed law would require foreign providers to register for Russian VAT, and charge the local tax at 18% for supplies to Russian individuals. The ‘place of supply’ will become the Russian Federation, and therefore subject to Russian VAT.

The range of electronic services that will fall within the new law include: software; e-books; streaming music and film; gaming; and online site subscription fees.  The draft law will also remove the VAT exemption on the supply of software and database licenses.

The law has been promoted by supporters of the Russian web giant, Yandex, which is in competition for foreign providers such as Google. It is believed that foreign providers have an unfair advantage in Russia since they are currently exempt from the local VAT.

The Bill mirrors the 2015 changes to VAT rate rules for EU providers, and follows similar laws in South Africa, South Korea and Japan. Countries like Australia and New Zealand will introduce foreign e-services VAT charges in 2017 and 2016 respectively.