Russian standard VAT rate will be increased as of 1 January 2019

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Russian standard VAT rate will be increased as of 1 January 2019

On 3 August 2018, the President has signed the Federal Law stipulating an increase of the current standard VAT rate from 18% to 20%. The new VAT rate will be applied from 1 January 2019.

For B2C and B2B e-services, the VAT rate will be increased from 15.25% to 16.67% of the VAT inclusive value.

The reduced VAT rate of 10% (basic foodstuffs, medicines, children's products and books/newspapers) will not be amended.

Some practical implications

If a company cannot deduct VAT for some reason (banks, insurance companies, whose revenue is exempt from VAT, etc.), it is more profitable for them to bear 18% of input or import VAT before the end of the year, rather than 20% in 2019.

For exporters who keep separate accounting, a cash flow disadvantage exists due to a postponed deduction of input VAT (20% instead of 18%).

Practical consequences

The VAT rate increase has many relevant practical consequences VAT entrepreneurs may need to consider. Below are some examples:

  • Adjustments to ERP system
  • Price adjustments
  • Taking account of the rate increase in proposals for supplies to be rendered in 2019 or later.

 

Please feel welcome to contact us for more information.

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