During August, the Russian government made amendments to the Russian tax code with the key change being an increase in the VAT rates. The amendments take effect on January 1, 2019.

The main updates in the new tax code

  • The standard VAT rate will increase from 18 to 20 %.
  • The reduced rate of 10 % for certain food products, medical appliances, pharmaceuticals, educational, cultural and scientific materials and children’s products will be spared from the VAT tax hike.
  • However, enterprise sales and foreign service providers of e-services will now have a VAT rate of 16.67 % raised from the previous 15.25 %.

What taxpayers should ask their local tax professional

  1. For guidance on issues arising in connection with the VAT rate increase.
  2. How the change in the tax rate will affect existing contracts; if this will eat into profit margins due to the addition of additional inputs.
  3. How to offset the temporary increase in cash outflow.
  4. How to modify the company’s internal systems to ensure that all transactions under the new rate are adjusted accordingly.

Practical issues accompanying changes to the VAT rate

  • How will the VAT be calculated in relation to goods, work and services supplied after 1 January 2019 when advance payments have been made before that date?
  • For goods returned after 1 January but purchased before, how will the seller reclaim the VAT based on an invoice presented by the purchaser with the new VAT rate applied?

Want to find out more?

Please do not hesitate to get in touch to know more about how Pagero can help you achieve and maintain compliance with local VAT/tax regulations.