Deloitte in the News

Russia Considering VAT for Foreign Online Shops

Russian authorities disclosed plans to make foreign web-based retailers liable for the country’s value-added tax.

According to Anatoly Golomolzin, deputy head of the Federal Anti-Monopoly Service (FAS), a bill has been drafted that requires foreign online shops to pay Russian VAT.

Deputy Prime Minister Arkady Dvorkovich said the current system doesn’t ensure equality of Russian and foreign producers.

Commenting on the draft law, announced March 14, Deloitte CIS partner Oleg Berezin said it “is in line with the actions listed” in the Russian Finance Ministry’s Basic Principles of the Tax Policy for 2017 -19.

The draft suggests that goods sold by foreign internet shops to Russia would be subject to VAT from 2018-2019—“foreign entities selling goods to Russian private customers would be required to obtain Russian tax registration and pay VAT themselves,” he said in a March 15 email to Bloomberg BNA.

“This initiative is in line with BEPS Action 1, ‘Addressing the Tax Challenges of the Digital Economy’ and the [European Union] developments in the area of internet trade,” Berezin said.

The planned measure could be similar to the one already introduced in Russia from Jan. 1, 2017, he said.

Online Transactions

Russian authorities amended the country’s legislative provisions in July 2016 to make cross-border online sales of goods and services subject to VAT. The Federal Law No. 244-FZ amended Article 174.2 of the Tax Code and set forth provisions on taxation of cross-border online transactions.

Transactions subject to Russia’s 18 percent VAT include sales of content, ads, software and games by overseas entities as well as online services such as database access, streaming music, films, gaming services, domain names, hosting, website and webpage support.

However, goods--works and services--ordered online but supplied offline are not subject to requirements of this law.

Currently, foreign businesses conducting online sales to Russian customers are required to register with the Russian tax authorities.


It remains to be seen how the new draft law would regulate enforcement and whether websites of non-compliant businesses would be blocked, Berezin noted.

“Small foreign businesses selling directly to Russian private customers would unlikely want to register and would have to stop selling to Russia,” he warned.

Therefore, Russia may be shifting from earlier non-taxation of the majority of business-to-customer sales made by overseas suppliers “to over-protectionist and discriminatory practices applied to foreign businesses,” Berezin said.

To contact the reporter on this story: Sergei Blagov in Moscow at

To contact the editor responsible for this story: Penny Sukhraj at

For More Information

The agency's March 14 announcement, in Russian, is at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.



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