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 21st , 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.

Import substitution

How efficiently is the government program of import substitution implemented, and should it be refused in case of the removal of sanctions

After almost three years since the adoption of the government program on import substitution experts have differed in assessments of its effectiveness and continuation.

The root of all evil. Increasingly in recent times it has been spoken about the possibility of removing the anti-Russian sanctions, and optimistic predictions, concerning the domestic economy, are heard in this regard. Together with the strengthening of the rouble exchange-value and the rise in oil prices it is supposed that the removal of sanctions will improve and restore the health of our falter economy. However, a deeper analysis shows that not the sanctions prevent its stable development. Belated reforms of the Government, imperfect legislation, as well as the volatility of the economic policy have led to prolonged stagnation of key domestic industries and markets. Thus, the sanctions have only showed us the weakness of the economy, first of all, of its financial sector, which has turned out to be unable to provide the real sector of long cheap money. It is becoming apparent that the importance of the government program on import substitution is not caused by active sanctions, but by the need to overcome the economic crisis.

Wanted the best. On the need for economic reforms it has been spoken much earlier than imposition of sanctions, and it confirms once again the importance of the government program on import substitution calculated up to 2020. However, recent reports of various ministries and agencies point to that in its present form it has practically ceased to deliver benefits, the implementation of its capacity is at a very low level. Only a few companies were able to take advantages provided by the program, in general the business continues to look for ways out of the crisis by itself. The strengthening of the rouble is cited as one of the reasons of poor implementation of the program: the growth of real incomes of population has caused the return of consumers to imported goods. The short-term advantage, which was received by a number of export-oriented sectors from the weakening rouble and the imposition of sanctions and counter sanctions, was not supported by reforms, which would become the basis of stable growth in the long-term period. However, it is wrong to write off the failure of the program only on the national currency. The legislative initiatives themselves aimed at import substitution have turned out to be deficient.

The course is new, purposes are old. The economic growth won’t follow just behind the removal of sanctions, because there are no conditions created for this within the country. The course of import substitution adopted by the Government needs to be continued, because its main aim is the formation of these conditions. However, this course needs to be adjusted, and the policy of import substitution should not be dictated by sanctions, but by the interests of economic development. The most important factors of the economic growth are labor and capital, which are at an extremely low level, and continue to go down, both in quantity and quality. The workforce does not meet the requirements of the modern economy; no investment in production, therefore, there is no infrastructure. In addition, the events of recent years have shown the imperfection of our tax laws. It should not be the same for all, because different sectors have different costs and profitability. It is necessary to remove the tax burden from the industries, whose development is a priority, to speculative types of activity, to financial in the first place. But perhaps the most important for the success of the program of import substitution will have the consistency, transparency and predictability of the work of the Government (previously we have already written about it – s. Article from 26.01.2017). Sudden and quick movements, volatility are unacceptable in the economic policy. This policy should be long-term, meant for many years. Each decision should be balanced, measured and thought through. Because only in such conditions business can plan its activity effectively and implement intended targets.