In brief
Russian B2B purchasers should self-assess and pay to the Russian budget VAT on electronically supplied services (ESS) purchased from foreign vendors. This is an official recommendation of the Federal Tax Service of Russia (FTS).1
In detail
Under the current Russian VAT regime on B2B ESS, foreign ESS vendors must collect and directly pay VAT to the Russian budget. The FTS recommendations appear to allow facilitating the VAT payment in cases when making a payment from a foreign bank account to the Russian treasury becomes difficult or impossible, including due to applicable sanctions.
If the Russian purchaser self-assesses and pays VAT, the Russian tax authorities must not require the foreign vendor to pay this tax and must not challenge the VAT recovery by the purchaser.
Comments
Earlier in 2019, the FTS has already referred to such mechanism as acceptable2 (see our Legal Alert dated 26 April 2019). It has also been tested in practice. In light of the latest recommendation of the FTS, foreign ESS vendors now can consider several VAT payment options to comply with the Russian tax legislation.
We will be glad to provide necessary assistance with selecting the most appropriate VAT payment route, subject to your facts and applicable sanctions.
This LEGAL ALERT is issued to inform Baker McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.
[1] FTS Letter dated March 30, 2022 No. СД-4-3/3807@ “On value-added tax”.
[2] FTS Letter dated 24 April 2019 No. СД-4-3/7937@ “On application of VAT in connection with supplies of electronic services by foreign companies as of 1 January 2019”.
