Features of taxation of foreign companies providing services in electronic form were introduced in the tax code of Russian Federation on January 01, 2017. Initially, the «tax on Google» was directed to foreign companies without presence in Russia, selling services in electronic form to buyers – individuals.
The services in electronic form according to the art. 174.2 of the tax code include: granting the rights to use computer programs (including computer games), databases through the Internet; rendering advertising services in the Internet, providing the advertising space in the Internet; rendering services in placement of offers on acquisition of goods in the Internet; granting rights to use electronic books (publications) and other electronic publications through the Internet, including by providing remote access to them for viewing or listening through the Internet.
Such companies had to be tax registered in the Russian Federation, maintain a register of buyers of services, report on income and pay VAT.
At October 31st, 2018, only 174 foreign companies rendering services in electronic form were registered in tax authority as VAT payers.
Since January 01, 2019, the tax code will enter into force another set of amendments relating to work with foreign companies providing services in electronic form.
The essence of the changes:
Foreign companies providing services in the electronic form will include not only those companies that provide services to individuals in the territory of the Russian Federation, but also those that provide services to legal entities in the territory of the Russian Federation.
What a foreign company should do:
1. The providers of electronic services for legal entities having a direct contract and settlements with the buyer of services must be registered in the tax authority of the Russian Federation in the period up to 15.02.2019 (p.4.6. of article 83 of the tax code).
Exceptions: if there is an intermediary between the buyer and the seller of services who will act as a tax agent (can act on the basis of an Agency agreement/ order/ Commission, etc.) and transfer payments to the tax office for a foreign company (p. 10 of article 174.2 of the tax code).
Registration is possible by submitting an application on the website https://lkioreg.nalog.ru/ru. After submitting the application, the contact person will receive a login and password to access the account, as well as a certificate of registration.
2. To report and pay the VAT.
A foreign company must submit reports through its personal account on a quarterly basis, by the 25th day following the last month of the quarter. Payment of tax must be made within the same period.
The tax will be calculated based at the rate of 15.25%.
3. In addition to registration, it is recommended to open an account in a Russian Bank in order to pay the VAT and be sure that the tax service received it.