On June 15 2016 the State Duma of the Federal Assembly adopted
in its third reading the Federal Law on the Amendment of Part One
and Part Two of the Tax Code of the Russian Federation. The
law's new requirements have informally been named 'Google
tax' as they introduce significant changes to the Russian tax
regime for foreign companies that:
sell services associated with the
provision of remote access to computer software and databases;
sell hosting services;
transfer software, computer game,
audiovisual and literary rights; and
provide advertising services on the
Internet and other activities classified in the law as
'services in electronic form'.
Obligation to register with Russian tax authorities
The main change introduced by the law is the obligation for
foreign companies providing services in electronic form and selling
content online to Russian consumers to register with the Russian
tax authorities. Such registration will not depend on the foreign
company having a representative office or any other place of
business in the Russian territory and – in itself –
will not require the creation of such a representative office.
Foreign companies providing services in electronic form in the
Russian territory must register with the Russian tax
no later than 30 days from the date
on which they begin providing such services; or
if the provision of such services has
already started, within 30 days from the date on which the law
takes effect (January 1 2017).
Services in electronic form will be deemed to have been provided
in the Russian territory if:
the customer resides in the Russian
the bank or operator through which
the electronic payment of services was organised is located in the
the customer's internet protocol
address (used to purchase the services) is located in the Russian
the international country code of the
telephone number used to acquire payment of the services is
assigned to the Russian territory.
The cost of the services provided in electronic form in the
Russian territory will be subject to value added tax (VAT) at the
computed rate of 15.25%, which should be calculated and paid by the
taxpayer (ie, the foreign company).
If a foreign company providing services in electronic form in
the Russian territory fails to submit an appropriate tax
declaration and pay the corresponding VAT, the Russian tax
authorities should be entitled to audit the company and charge VAT
based on available data pertaining to the similar operations of
Overpaid VAT is able to be returned to foreign companies;
however, they will not be entitled to a VAT deduction.
The law introduces revolutionary amendments associated with the
taxation of software and internet services sold in the Russian
territory and may affect all foreign companies operating in the
Russian market, as well as Russian companies with foreign sales
Companies are advised to assess the tax risks associated with
the so-called 'Google tax' and the obligation to register
with the Russian tax authorities from January 1 2017.
Jonathan Sheehan gives an Irish perspective in the October 2016 edition of The American Lawyer on the European Commission's decision that Ireland granted undue tax benefits of up to EUR13 billion, plus interest, to Apple.
Three of my favourite topics feature in this issue of the Denton Briefing – tax, Bond and beer. But not necessarily in that order and not necessarily for the right reasons.
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