How to draw up an international contract for software import
In this article, we decided to share the experience of localizing foreign contracts for software distribution. Surely you know the term "localization" in relation to the withdrawal of software on the Russian or foreign market. It is also necessary to deal with any international contract if you do not want to get tax problems.
For example, in negotiations with a foreign vendor, you agreed on a good margin, but did not take into account the need to withhold the VAT or source tax from the fee. As a result, you can not only earn money on sales of imported software, but also get a loss. Or you just do not want to get involved in customs clearance, payment of duties and taxes when importing software to Russia.
Want to make an informed choice? Under the cut, we described a number of problems and ways to solve them.
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In practice, we often have to deal with various distribution agreements of foreign vendors. Some of them are based on the delivery contract scheme without transferring any rights to use the programs to the distributor, the other provides for transferring rights to use the programs to the end user along the chain from the vendor through the distributor on the basis of a license agreement .
In both cases, the role of the distributor in the contract is reduced to the issues of finding end users of software products, taking orders from them, collecting fees and transferring them to the vendor. The distributor may also be charged with technical support services for the acquired software, but this does not affect the choice of contract design with the vendor.
What are the fundamental differences between a software supply contract and a license agreement?
In accordance with the provisions of the Russian legislation under the supply contract, the supplier-seller engaged in entrepreneurial activity undertakes to transfer, within the stipulated time or terms, the goods produced or purchased by him to the buyer for use in entrepreneurial activity or for other purposes not related to personal, family, home and other goods. similar use (Article.506 of the Civil Code).
In general, other provisions on the contract of sale, which do not contradict the special rules on the contract of delivery, also apply to the contract of supply.
Similarly, the provisions on the contract of sale apply to the sale of property rights, unless it follows otherwise from the content or nature of these rights (clause 4 of article 464 of the Civil Code of the Russian Federation.
The subject of the supply contract is the obligation to transfer the goods to the property of the buyer (paragraph 1 of article 464 of the Civil Code of the Russian Federation). In this case, a commodity is a certain thing (clause 1 of article 465 of the Civil Code of the Russian Federation). In this regard, the seller is responsible for the quality of such a thing, its consumer characteristics, as well as its return in case of non-compliance with the specified parameters. In addition, the seller is responsible for the delivery of such goods by the carrier or the transfer at the place of its location.
Thus, these provisions relate exclusively to the distribution of tangible media containing software.
However, in most cases, modern distribution contracts do not provide for the transfer of software on separate tangible media. On the contrary, the transfer of software is carried out by providing access to it (via the Internet).
In this case, a copy of the software is provided by transferring data to the user's device, which does not allow to consider it as a certain thing.
In addition, the software is the result of intellectual activity (intellectual property), acting as a separate object of civil rights (Article.128 of the Civil Code of the Russian Federation).
As a result, the right to use software products is granted on the basis of articles 1235 and 1286 of the Civil Code of the Russian Federation in accordance with the license agreement.
In the license agreement, in addition to the software itself, the territory, term, and permitted methods of its use are indicated. The transfer of a copy of the program to the user is not the main subject of the contract, but the obligation arising from it. This is how it differs from the supply contract in the content part.
In connection with the above features, distributors often have difficulty with the question of the need for customs clearance of software acquired under an agreement.
Here it is interesting to note the clarifications given in due time by the Federal Customs Service in a Letter dated March 17, 2006 No. 15-14 / 8524 “On Customs Clearance of Information Transmitted via the Internet”.
In it, the Federal Customs Service stated that the legislation “does not include the transfer of information products via electronic communications to the international information exchange, and under the import (export) of information products determines the movement of information (documents) on a tangible medium ...
The Commodity Nomenclature for Foreign Economic Activity of the Russian Federation and the Customs Tariff of the Russian Federation do not contain, respectively, neither classification codes, nor customs duty rates for software or any other information products.
In view of the above, the current customs legislation of the Russian Federation does not provide for customs clearance of information products transported across the customs border of the Russian Federation via electronic communications.
Thus, it is not information (computer software, mobile content) that is transported to the International Internet using fiber-optic communication or satellite communication channels, but goods transported through the customs border of the Russian Federation containing the specified information, i.e. material carrier (laser disk, diskette, cassette, etc.). "
The regulations specified in this letter have ceased to exist, however, the logic of modern legislation and law enforcement has been preserved.
So at the present time in the Customs Code of the Russian Federation, a commodity is directly understood as movable property moving across the customs border, including information carriers (paragraph 35 of paragraph 4 of Article 4 of the Labor Code of the Russian Federation).
Accordingly, customs clearance is not performed for software downloaded via the network. At the same time, when delivering software on tangible media, it is necessary to comply with all necessary customs procedures.
From the point of view of tax law, the implementation of the right to use programs under a license agreement is exempted from paying VAT on the basis of paragraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, in contrast to selling software as a product under a supply agreement, for which the value of goods is charged 18% VAT .
For imported goods, VAT is also paid in full. However, it is necessary to take into account that the collection of VAT is made depending on the chosen customs procedure simultaneously with the payment of customs duties. In the absence of customs clearance of imported software, VAT is not actually withheld.
However, in connection with the use of the design of the supply contract, which by definition refers to operations with goods subject to customs clearance when imported into the Russian Federation, there is a significant risk of charging arrears in VAT, penalties and fines as a result of a distributor’s tax audit.
Distribution agreements for the delivery of programs using the Internet do not correspond to the actual relations of the parties and the requirements of Russian civil law.
Specifying the obligation to deliver software as the subject of a distribution contract is a significant misconception and makes it impossible to legally exempt from the Russian VAT the remuneration paid, since such an agreement cannot be qualified as a license.
In addition, such a distribution agreement does not grant the distributor the right to use the supplied software and its sublicensing. In this regard, the distributor is deprived of the opportunity to enter into licensing agreements with end users, under which VAT exemption is granted.
In addition, the recognition of a distribution contract as a supply contract creates difficulties in applying the provisions of the agreement on avoidance of double taxation in terms of copyright income (royalties), since here the income comes from the sale of property, and not rights.
In addition to the supply contract, other tax and accounting requirements are applied. For the posting of goods and write-offs, it is necessary to have primary documentation different from the documentation for the provision of a license.
As a result, to confirm the grounds for conducting currency settlements under the contract, the bank servicing the distributor may request that documents normally applied under an international supply contract (commodity and waybills), as well as confirmation of customs clearance be submitted.
In this regard, we recommend localizing distribution agreements for the supply of programs in accordance with the requirements of Russian legislation, depending on the actual distribution scheme of such software.
Registration of a distribution agreement in the form of a license agreement will allow to exclude the above civil and tax risks in full, as well as significantly simplify the subsequent conclusion of contracts with end users, since it will reduce the retail price by the amount of Russian VAT.
For example, in negotiations with a foreign vendor, you agreed on a good margin, but did not take into account the need to withhold the VAT or source tax from the fee. As a result, you can not only earn money on sales of imported software, but also get a loss. Or you just do not want to get involved in customs clearance, payment of duties and taxes when importing software to Russia.
Want to make an informed choice? Under the cut, we described a number of problems and ways to solve them.
')
Select the subject of the contract
In practice, we often have to deal with various distribution agreements of foreign vendors. Some of them are based on the delivery contract scheme without transferring any rights to use the programs to the distributor, the other provides for transferring rights to use the programs to the end user along the chain from the vendor through the distributor on the basis of a license agreement .
In both cases, the role of the distributor in the contract is reduced to the issues of finding end users of software products, taking orders from them, collecting fees and transferring them to the vendor. The distributor may also be charged with technical support services for the acquired software, but this does not affect the choice of contract design with the vendor.
What are the fundamental differences between a software supply contract and a license agreement?
In accordance with the provisions of the Russian legislation under the supply contract, the supplier-seller engaged in entrepreneurial activity undertakes to transfer, within the stipulated time or terms, the goods produced or purchased by him to the buyer for use in entrepreneurial activity or for other purposes not related to personal, family, home and other goods. similar use (Article.506 of the Civil Code).
In general, other provisions on the contract of sale, which do not contradict the special rules on the contract of delivery, also apply to the contract of supply.
Similarly, the provisions on the contract of sale apply to the sale of property rights, unless it follows otherwise from the content or nature of these rights (clause 4 of article 464 of the Civil Code of the Russian Federation.
The subject of the supply contract is the obligation to transfer the goods to the property of the buyer (paragraph 1 of article 464 of the Civil Code of the Russian Federation). In this case, a commodity is a certain thing (clause 1 of article 465 of the Civil Code of the Russian Federation). In this regard, the seller is responsible for the quality of such a thing, its consumer characteristics, as well as its return in case of non-compliance with the specified parameters. In addition, the seller is responsible for the delivery of such goods by the carrier or the transfer at the place of its location.
Thus, these provisions relate exclusively to the distribution of tangible media containing software.
However, in most cases, modern distribution contracts do not provide for the transfer of software on separate tangible media. On the contrary, the transfer of software is carried out by providing access to it (via the Internet).
In this case, a copy of the software is provided by transferring data to the user's device, which does not allow to consider it as a certain thing.
In addition, the software is the result of intellectual activity (intellectual property), acting as a separate object of civil rights (Article.128 of the Civil Code of the Russian Federation).
As a result, the right to use software products is granted on the basis of articles 1235 and 1286 of the Civil Code of the Russian Federation in accordance with the license agreement.
In the license agreement, in addition to the software itself, the territory, term, and permitted methods of its use are indicated. The transfer of a copy of the program to the user is not the main subject of the contract, but the obligation arising from it. This is how it differs from the supply contract in the content part.
Customs clearance software
In connection with the above features, distributors often have difficulty with the question of the need for customs clearance of software acquired under an agreement.
Here it is interesting to note the clarifications given in due time by the Federal Customs Service in a Letter dated March 17, 2006 No. 15-14 / 8524 “On Customs Clearance of Information Transmitted via the Internet”.
In it, the Federal Customs Service stated that the legislation “does not include the transfer of information products via electronic communications to the international information exchange, and under the import (export) of information products determines the movement of information (documents) on a tangible medium ...
The Commodity Nomenclature for Foreign Economic Activity of the Russian Federation and the Customs Tariff of the Russian Federation do not contain, respectively, neither classification codes, nor customs duty rates for software or any other information products.
In view of the above, the current customs legislation of the Russian Federation does not provide for customs clearance of information products transported across the customs border of the Russian Federation via electronic communications.
Thus, it is not information (computer software, mobile content) that is transported to the International Internet using fiber-optic communication or satellite communication channels, but goods transported through the customs border of the Russian Federation containing the specified information, i.e. material carrier (laser disk, diskette, cassette, etc.). "
The regulations specified in this letter have ceased to exist, however, the logic of modern legislation and law enforcement has been preserved.
So at the present time in the Customs Code of the Russian Federation, a commodity is directly understood as movable property moving across the customs border, including information carriers (paragraph 35 of paragraph 4 of Article 4 of the Labor Code of the Russian Federation).
Accordingly, customs clearance is not performed for software downloaded via the network. At the same time, when delivering software on tangible media, it is necessary to comply with all necessary customs procedures.
Tax risks when importing software
From the point of view of tax law, the implementation of the right to use programs under a license agreement is exempted from paying VAT on the basis of paragraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, in contrast to selling software as a product under a supply agreement, for which the value of goods is charged 18% VAT .
For imported goods, VAT is also paid in full. However, it is necessary to take into account that the collection of VAT is made depending on the chosen customs procedure simultaneously with the payment of customs duties. In the absence of customs clearance of imported software, VAT is not actually withheld.
However, in connection with the use of the design of the supply contract, which by definition refers to operations with goods subject to customs clearance when imported into the Russian Federation, there is a significant risk of charging arrears in VAT, penalties and fines as a result of a distributor’s tax audit.
Conclusions and recommendations on contractual registration of software imports
Distribution agreements for the delivery of programs using the Internet do not correspond to the actual relations of the parties and the requirements of Russian civil law.
Specifying the obligation to deliver software as the subject of a distribution contract is a significant misconception and makes it impossible to legally exempt from the Russian VAT the remuneration paid, since such an agreement cannot be qualified as a license.
In addition, such a distribution agreement does not grant the distributor the right to use the supplied software and its sublicensing. In this regard, the distributor is deprived of the opportunity to enter into licensing agreements with end users, under which VAT exemption is granted.
In addition, the recognition of a distribution contract as a supply contract creates difficulties in applying the provisions of the agreement on avoidance of double taxation in terms of copyright income (royalties), since here the income comes from the sale of property, and not rights.
In addition to the supply contract, other tax and accounting requirements are applied. For the posting of goods and write-offs, it is necessary to have primary documentation different from the documentation for the provision of a license.
As a result, to confirm the grounds for conducting currency settlements under the contract, the bank servicing the distributor may request that documents normally applied under an international supply contract (commodity and waybills), as well as confirmation of customs clearance be submitted.
In this regard, we recommend localizing distribution agreements for the supply of programs in accordance with the requirements of Russian legislation, depending on the actual distribution scheme of such software.
Registration of a distribution agreement in the form of a license agreement will allow to exclude the above civil and tax risks in full, as well as significantly simplify the subsequent conclusion of contracts with end users, since it will reduce the retail price by the amount of Russian VAT.
Source: https://habr.com/ru/post/290038/
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