The legislation on value-added tax in Russia has faced a number of changes, affecting the taxation of services and goods in 2021. The amendments revolve around new VAT exemptions, the electronic checks for VAT refund, additional items on the list of goods and services to which new conditions apply, the incorrect submission of tax returns and new VAT return forms. Our tax experts from Russia summarized these changes for you in our latest article.
New exemptions from VAT in Russia
The list of transactions not subject to taxation (exempt from taxation) in the territory of the Russian Federation has been updated. It now includes the exclusive rights to computer programs and databases included in the unified register of Russian computer programs, exclusive rights to inventions, utility models, industrial designs, integrated circuit topologies, trade secrets (know-how), etc. (subclause 26 Clause 2 of Article 149 of the Tax Code of the Russian Federation as amended by Federal Law No. 265-FZ of 31.07.2020, as well as a new subclause 26.1 of Clause 2 of Article 149, introduced by Federal Law No. 265-FZ of 31.07.2020).
In view of this, starting from January 1, 2021, the transfer of rights to use Russian and foreign software that is not included in the unified register of Russian computer programs and databases is subject to VAT in the manner prescribed by the Tax Code of the Russian Federation.
There are no exceptions to services for the transfer of rights to use software rendered under contracts concluded before the entry into force of Federal Law No. 265-FZ of 31.07.2020, and which are of a continuing nature, extending to 2021 and subsequent years. This means that services for the transfer of rights to use computer programs provided from January 1, 2021, are subject to VAT at a rate of 20%, regardless of the date and conditions for concluding agreements for the provision of such services (Letter of the Ministry of Finance of Russia No. 03 -07-08 / 101332 of November 20, 2020).
Electronic VAT refund checks in Russia
From January 1, 2021, retail trade entities, when selling goods to foreign citizens, can issue VAT refund checks in electronic form (clause 6 of article 169.1 of the Tax Code of the Russian Federation as amended by Federal Law No. 220-FZ of 20.07.2020). The format of the document (check) has already been approved (Order of the Federal Tax Service of Russia No. 977 / ED-7-15 / 809 @ dated 11.11.2020).
The exchange of information (electronic and paper checks data) between stores, persons providing services for VAT compensation to foreigners, the Federal Customs Service and the Federal Tax Service is also carried out in electronic form. The draft format and the communication procedure have already been developed.
New items on the list of goods and services under the Russian Decree No. 468
Starting from January 1, 2021, the list of goods, works, services the cycle of production, execution, provision of which exceeds 6 months has been extended (under section 2 of the Decree of the Government of the Russian Federation of July 28, 2006 No. 468 as amended by the Resolution of the Government of the Russian Federation No. 1031 of July 11, 2020). The list in section 2 of the Decree of the Government of the Russian Federation No. 468 of July 28, 2006 has now been supplemented with such items as:
- construction of buildings
- construction of engineering structures
- dismantling and demolition of buildings
- construction site clearing
- drainage works on agricultural land, forest land, as well as on construction sites
- electrical, sanitation and other construction and installation works
- building finishing works
- other specialized construction works
- activities in the areas of architecture, engineering surveys and technical consulting in these areas
This amendment is important for VAT payers, since in accordance with tax legislation a manufacturer of goods, works, services, with a production cycle exceeding 6 months, upon receipt of an advance payment, including partial payment, has the right to calculate the tax base as of the date of shipment (transfer), and not as of the payment date (clause 13 of article 167 of the Tax Code of the Russian Federation).
Incorrect filing of tax return considered as not submitted in Russia
From July 1, 2021, Art. 174 of the Tax Code of the Russian Federation is supplemented with clauses 5.3 and 5.4 (Federal Law No. 374-FZ of 23.11.2020). The new clause 5.3 of Art. 174 stipulates that, in the event the inspectors find out that the indicators in the submitted tax return do not correspond to the control ratios, indicating failure to observe the correct procedure for filling out the report, such a tax return is considered not submitted. In this case, the Tax Inspectorate must notify the taxpayer about the breach no later than the day following the day of receipt of the tax return. The taxpayer is only given 5 days to eliminate the identified inconsistencies (clause 5.4 of article 174 of the Tax Code of the Russian Federation).
New VAT return form in Russia
Please note that the Federal Tax Service of Russia has enacted a new VAT return form (Order of the Federal Tax Service of Russia No. ED-7-3 / 591 @ dated 19.08.2020). The amendments were designed to bring the reporting in line with the changes that came into force pursuant to the Federal Law No. 69-FZ of 01.04.2020 “On the Protection and Promotion of Capital Investments in the Russian Federation”, as well as in connection with updates of VAT relief and some types of operations codes.
The updated form must be used starting with the returns for the Q4 of 2020 (clause 2 of the Order of the Federal Tax Service of Russia No. ED-7-3 / 591 @ dated 19.08.2020).
Please also note that starting from November 23, 2020 there is a new recommended form, format and the procedure for filling out the register of documents submitted by the taxpayer at the request of the State Tax Service pursuant to Art. 93 of the Tax Code of the Russian Federation (whenever it is necessary to confirm the validity of an application for a tax allowance). The total number of documents to be submitted for review, is set for each operation code according to a specific algorithm. At least 50% of the total number of requested documents must be in confirmation of the transactions involving the largest amounts for which tax allowances were used. In the event the taxpayer failed to submit the register of documents or to send the printed forms to the inspectors, the documents are requested in full (Letter of the Federal Tax Service of Russia No. ЕА-4-15 / 18589 of 12.11.2020).