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Russia limits VAT exemption on software licences

Russia is limiting VAT exemptions on software licences. Foreign companies that licence software or databases to customers in Russia will now have to pay Russian VAT.

The software licence VAT exemption will now be limited to certain domestic software companies that are included in the official national register of software companies.

Advertising software is also no longer eligible for VAT exemption.

Background: 2008 VAT exemption

Russian place of supply regulations deem software licenses as realised in Russia. They are therefore theoretically subject to domestic VAT. However, Russian regulations implemented in 2008 exempt software licences from VAT. 

Authorities have now considerably revised those regulations. 

Don’t leave Russian VAT compliance to chance

In most cases, nonresident companies providing e-services to Russia are already required to register for Russian VAT.

Companies must register for VAT in the case of both B2C and B2B sales.

Russia’s Electronically Supplied Services protocol can be notoriously complex.  Therefore, any businesses with an e-services VAT obligation in Russia is likely to benefit from expert compliance advice.  

Russian digital services tax on the horizon?

Russian Deputy Finance Minister Alexei Sazanov says that the country is considering a digital services tax.

Digital services companies that sell to customers in Russia need to carefully monitor the situation and assess their potential tax obligations accordingly. 

In other technology tax related news, Russian Prime Minister Mikhail Mishustin, who previously worked as the director of Russia’s  Federal Taxation Service, has suggested imposing a tax on cryptocurrency.

If Russia adopts the measure, it will set an interesting precedent for other nations evaluating their options for taxing Bitcoin and other cryptocurrencies. 

A global e-services solution

The regulations governing e-services VAT are complex, and vary from country to country. For firms that supply digital services to multiple markets, compliance with evolving VAT laws is extremely time-consuming and difficult. 

Vatglobal’s elegant technology-driven solution makes compliance simple and easy.  We will also keep you updated as regulations change. Get in touch for a simple solution to the complex problem of global VAT compliance. 


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