Russia has changed the VAT legislation in 2001, when a new chapter was introduced in the Tax Code. Value added tax in Russia is applied to goods, works and services made or imported in Russia. Barter actions and transfer of proprietorship of goods are also subject to VAT as they enter in the category of services. All companies and individual undertakers are subject to VAT, except for those with taxable incomes that do not exceed 1 million RUR in the first three months.
The standard value added tax rate in Russia is 18%. A reduced rate of 10% applies to certain categories of foods and children’s products that are supported by the Russian government. Medical devices, pharmaceuticals and printed materials are also subject to the reduced rate of 10%. A zero rate applies to exported goods and certain services.
There are also products and services that are exempt for Russian VAT. Among these, we can find: medical devices and services listed by the government, public transportation, financial services (insurances, educational services provided by NGOs and real estate leasing to foreign companies or individual entrepreneurs if special requirements are met).
The zero rate applies to:
- exported goods, except for oil and gas to CIS states;
- international transportation facilities,
- products and services employed by foreign diplomatic delegates in Russia, if the same courtesy applies to Russian diplomats;
- the sale of precious metals to the Central Bank or other Russian banks.
In Russia, VAT must be registered with all the other taxes, as there is no separate office to register for VAT only.
Any company or individual undertaking a commercial, industrial or agricultural activity must register for VAT. Branch offices and subsidiaries of foreign companies must also register with the competent tax authorities within the first month of activity in Russia.
If a company does not register for VAT in Russia, it will be subject to a penalization of 10% of its incomes, within the sum of 40,000 RUR. If the registration does not occur in the first 90 days, as stipulated by law, a penalty of 10,000 RUR will be applied to the company.
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