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%).
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.