The Ministry of Finance explained the procedure for paying VAT when transferring programs over the Internet

One of the Russian distributors of foreign software turned to the Ministry of Finance with a request for the procedure for applying the amendments under the Google tax law in case of acquiring rights to the software on the basis of a license agreement, which provides for its transmission via the Internet.

Earlier, we wrote on Habré that the VAT exemption for sales under software licensing agreements will remain subject to the actual transfer of licensed copies of software to the user.

The Ministry of Finance confirmed this conclusion, explaining that when obtaining rights to software under a license agreement, regardless of the method of transferring such software, the right to release license remuneration from VAT remains on the basis of paragraph 26 of clause 2 of Article 149 of the RF Tax Code (see Letter of 12.01 .2017 N 03-07-08 / 555 ).
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Therefore, the trend to receive VAT benefits under license agreements should be preserved.

This is good news not only for Russian distributors of foreign software, but in general for any rightholders who sell licenses in Russia via the Internet, since the principles for taxing such operations are the same.

Interestingly, given the position of the Ministry of Finance, Google’s decision to withhold VAT from the cost of applications provided to Russian users under licensing agreements seems unfounded. Perhaps developers should ask this Google question?

Let's try to understand this issue in more detail.

Recall that from January 1, 2017, amendments to the Tax Code of the Russian Federation under the so-called law “On Google Tax” (Federal Law of 03.07.2016 N 244-FZ) were introduced, which relate to certain conditions of taxation of “electronic services”.

These services include, among other things, the granting of rights to use programs for electronic computers (including computer games), databases via the Internet, including by providing remote access to them, including updates to them and additional functionality (see paragraph 2 of paragraph 1 of Article 174.2 of the Tax Code).

At the same time, a reservation was made that for the purposes of Chapter 21 of the Tax Code of the Russian Federation, the implementation in electronic form does not include the implementation (transfer of rights to use) of programs for electronic computers (including computer games), databases on tangible media (paragraph 18 p. 74.2 of the TC RF).

Thus, the new law formally divides the granting of a license for software on tangible media and the granting of rights to software transmitted via the Internet. In this case, the latter operation qualifies in accordance with Clause 1, Article 174.2 of the RF Tax Code as a service in electronic form.

In this regard, many lawyers expressed concern that when licensing software with the provision via the Internet, VAT arises, and when transferring such software on tangible media, there is a VAT exemption.

The following argument was given. VAT does not arise only when selling rights to software transferred on a tangible medium. In this case, an exception is applied in accordance with p. 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, according to which the realization of exclusive rights to programs for electronic computers on the basis of a licensing agreement is not subject to taxation.

At the same time, when selling software rights with the transfer of programs or databases via the Internet, VAT arises, since in this case we are talking about the provision of services in electronic form. Such services are an independent object of realization and are not specified in Article 149 of the Tax Code of the Russian Federation among operations exempted from VAT.

In this regard, the distributor of foreign software has sent a request to the Ministry of Finance with a request to clarify the procedure for applying the changes introduced by the law on Google tax.

According to the position expressed in the Letter of January 12, 2017, N 03-07-08 / 555, the Ministry of Finance truly refers to the provision of rights to software via the Internet to services in electronic form. However, in this case, it does not exclude the application of paragraphs.26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation on exempting the implementation of software rights from VAT in the event that such rights are granted under a license agreement.

Thus, the Ministry of Finance in this situation does not oppose services in electronic form to transferring rights to programs under a license agreement. Apparently, the Ministry of Finance believes that the service in electronic form may include licensing.

In the opinion of specialists, such a mixture of different objects of implementation looks at least strange. Perhaps later we will see a number of clarifying letters on this issue.

In particular, it should be noted that the question of licensing remote access to software using the SaaS model has remained outside the scope of the explanation of the Ministry of Finance.

However, at the moment there is every reason to believe that VAT will not be charged to the downloadable software, regardless of whether it is transferred on a tangible medium or via the Internet.