Foreign companies rendering electronic services and content are obliged to pay value-added tax

The amendments to the first and second parts of the Tax Code of the Russian Federation were introduced by the Federal law as of 03.07.2016 №244-FL “On introduction of amendments to the first and second parts of the Tax Code of the Russian Federation”. According to them, starting from January 1st, 2017 foreign companies rendering electronic services and content are obliged to pay value-added tax (VAT).

The law classifies electronic services as granting of rights through Internet to use computer programs. Such programs include games, databases, advertising services and announcements, electronic resources support, electronic books, music and video content etc.

Foreign companies rendering such services are obliged to pay value-added tax on their own account no later than the 25th day of the month next to the reporting period. For this purpose they should cooperate with tax authorities in electronic format. There is an opportunity to register on the web-site of the Federal Tax Service by use of the special service. It is possible to file VAT declarations, exchange documents and letters in the online account.

According to the Federal Tax Service as of February 21^st , 2017, 59 foreign companies have already been registered in the tax authorities including such major companies as Apple, Google, Microsoft, Netflix, Samsung, Bloomberg, Amazon, eBay, Nintendo, Booking, Alibaba and many more. About 40 companies have filed corresponding applications.

According to experts, these amendments, considering the global experience, make the working conditions of the Russian and foreign Internet-companies equal and may promote the annual replenishment of the country’s budget amounting to about 10 billion RUB.