New VAT rules for goods sold via online trading platforms by foreign suppliers based in the EAEU

27 March 2024
Tax Messenger
On 26 March 2024 the State Duma of Russia passed in the first reading Draft Law No. 564179-8 (“the Draft Law”) setting out a number of amendments to the Tax Code of the Russian Federation (“the Tax Code”) regarding the introduction of new VAT rules for sales of goods by foreign suppliers that are residents of the Eurasian Economic Union (EAEU) via online trading platforms (“OTPs”).
New VAT rules for sales of goods via OTPs in the territory of the EAEU

The Draft Law proposes the following amendments:

  • Sales of goods by foreign suppliers resident in the EAEU via OTPs to Russian private individuals (“the customers”) will be subject to Russian VAT if the goods are located in Russia at the point when they are received by the customers.
  • Foreign suppliers selling goods to the customers via OTPs and foreign companies-owners of OTPs acting as intermediaries for the sale of goods through those OTPs under an agency contract (commission, commercial mandate and other similar contracts) – will be obliged to register with the Russian tax authorities (by submitting an application and other documents required for VAT registration to the Russian tax authorities in electronic form). The registration application must be submitted no later than 30 calendar days from the day on which goods begin to be sold.
  • Foreign suppliers registered for VAT purposes in Russia will be obliged to calculate and pay Russian VAT upon selling goods via OTPs to the customers in Russia (except in cases where it is the tax agent’s responsibility to do so) and submit VAT returns on a quarterly basis. VAT return should be filled in and submitted in electronic form via an online taxpayer account. During the period in which an online taxpayer account cannot be used, VAT returns must be submitted via telecommunications channels through an electronic document interchange operator not later than the 25th of the month following a tax period.
  • VAT registered foreign suppliers will not be required to issue VAT invoices or keep purchase/sales ledgers.
  • Foreign and Russian intermediaries will be required to calculate and pay Russian VAT as tax agents if, through OTPs belonging to them, foreign suppliers sell goods on the basis of agency contracts (commission, commercial mandate and other similar contracts) to the customers.
  • Sales of goods through OTPs to the customers will be VATable at the tax-inclusive rate of 16.67% or 9.09% (depending on the type of goods being sold) based on the gross value of goods.
  • Russian suppliers will have the right to claim for recovery the amount of VAT paid on purchases of goods which are subsequently sold via OTPs to the customers in other EAEU countries. At the same time, foreign suppliers based in the EAEU and foreign intermediaries will not be able to recover the Russian VAT, which is related to expenses incurred by them in carrying on VATable activities.
  • Russian suppliers, including Russian intermediaries, will have the right to recover VAT paid by them to the budgets of other EAEU countries during 2023 and the first half of 2024. The following conditions should be met in order to exercise that right:
1) the goods concerned were sold to the customers via the Internet;
2) VAT was actually paid out of the supplier’s own funds.
We should point out that the Draft Law does not propose amendments to the rules for the calculation and payment of VAT where goods are sold by EAEU suppliers to business customers in Russia.

If the Draft Law is passed, the amendments will take effect a month after the official publication of the decision to pass it, but no earlier than 1 July 2024.

What do these changes mean for businesses?

The proposed changes to the VAT regulations for sales of goods through OTPs will require businesses to rethink their current approach to paying VAT in Russia. Specifically, foreign suppliers located in the EAEU and foreign intermediaries acting as tax representatives will need to:

  • VAT register with the Russian tax authorities.
  • Adapt their ERP systems to comply with the new Russian VAT rules.
  • Review current contract terms with counterparts/customers.
  • Address various procedural issues associated with the new payment mechanism for VAT on goods sold through OTPs, including VAT recovery rules.
  • Make adjustments to commercial invoice templates and primary documents.
Arrangements for the transition to the new mechanism for the payment of Russian VAT would also have to be examined, as the Draft Law does not establish a transitional period. The new rules would therefore require EAEU-based foreign suppliers to discuss these matters with interested counterparties (including commercial aspects).
How can B1 help?

The B1 team is ready to provide professional advice on matters relating to the introduction of the new VAT rules for sales of goods to the customers via OTPs. Our services may include:

  • Analysing the need to register with the Russian tax authorities for foreign suppliers that are only at the stage of planning to sell goods to the customers in Russia via OTPs.
  • Assistance in tax registration process, comprehensive support with the filing of VAT returns through a foreign entity’s online tax account, and assistance in communication with the tax authorities.
  • Recommendations on a range of procedural issues, such as:
o the VAT tax point, especially under the intermediary model
o analysing the right to recover VAT and the period in which a VAT deduction may be claimed
o the procedure for calculating VAT in documents (in view of special tax rates set by tax law)
o the procedure for preparing and executing documents for tax and commercial purposes

  • Analysing and making appropriate adjustments to templates of invoices and primary documents.
  • Analysing transitional period issues and preparing a “roadmap” (taking account of invoices already issued and paid / not paid).
  • Analysing the provisions of contracts regarding the tax obligations of the parties and amending them as appropriate.
  • Communication with the Federal Tax Service and/or the Ministry of Finance of Russia to obtain clarifications regarding the new VAT rules for EAEU-based foreign suppliers and tax agents.

Authors:
  • Vadim Ilyin
    Partner
    Indirect Tax Group
  • Yulia Kolesnikova
    Senior Manager
    Indirect Tax Group
  • Alena Bodrova
    Manager
    Indirect Tax Group
  • Kristina Naumenko
    Senior
    Indirect Tax Group
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