The Federal Tax Service of Russia has confirmed that payments for e-services to a tax-registered foreign intermediary qualify for input VAT recovery. 1 Earlier VAT recovery in such cases was questionable.
Foreign companies are required to register for tax purposes in Russia if they provide e-services to Russian customers and collect payments directly from such customers. If the supply chain includes a foreign intermediary (e.g., an agent or a commissionaire) that collects payments from Russian customers, only this intermediary is required to tax register in Russia.
The Russian Tax Code allows input VAT recovery on e-services if they are acquired from a foreign vendor tax registered in Russia. 2 If this requirement is interpreted literally, payments for e-services to a foreign intermediary do not qualify for input VAT recovery when the foreign vendor has no Russian tax registration.
The Federal Tax Service resolved this technical issue in its clarifications. Thus, foreign companies now have greater flexibility in structuring the supply of e-services to Russia.
- Analyze your current or intended structure for supplying e-services to Russian customers.
- Consider integrating an intermediary into the supply chain to relieve the actual vendor from the Russian tax registration requirement.
1 The relevant clarifications are provided in Letter No. СД-4-3/8916@ dated May 14, 2019 (officially released on the website of the Federal Tax Service on May 31, 2019).
2 See clause 2.1 of Article 171 of the Russian Tax Code.