State Duma introduced 18% VAT for foreign Internet companies

A foreigner? Pay

After six months of discussions and approvals, the State Duma of the Russian Federation made the final decision to raise the tax for foreign IT companies that provide services in the Russian Federation via the Internet. Now, Western Internet companies (hosters, ad networks, search engines, vendors of software, games , messengers, etc.) should have a taxpayer office in the Russian tax inspectorate.

The bill number 962487-6 "On Amendments to the first and second parts of the Tax Code of the Russian Federation (in terms of taxation of certain transactions carried out through the Internet)" - the so-called "tax on Google" - adopted by the State Duma in the final reading.

Voting results with a surname list of voters
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The protectionist law that protects the Russian market from foreign competitors and significantly replenishes the treasury was supported by Russian players, including Yandex, Mail.ru Group, Rambler & Co, VKontakte, Group-IB, Russian Association of Electronic Companies (RAEC) other.

The fate of the bill is rather curious, somewhat reminiscent of a chess combination. It was introduced for consideration in December 2015, and initially it was planned to raise the VAT not only for Western, but also for Russian IT companies . After that, lawmakers agreed to remove Russian companies from the document, and they provided support for the bill.

According to the calculations of the Ministry of Finance, the increase in taxes for foreign IT companies will bring in the budget more than 10 billion rubles , and in the future the amount may increase significantly.

An Internet company must open a taxpayer’s office at the Russian tax inspectorate, use an electronic signature, and open its own account in a bank of the Russian Federation at least under one of the following conditions:

• the buyer lives in Russia;
• his phone number has the corresponding international code;
• the bank in which the account is opened for payment for services is located in Russia;
• The IP address of the buyer, used when purchasing services, is in Russia.

According to the Russian Association of Electronic Companies (RAEC), the adoption of VAT for foreign IT-companies will lead to an increase in prices in IT . Initially, RAEC reacted negatively to the initiative of the legislators, but then changed its position .

Among others, the new law will affect Google, which sells a considerable amount of advertising in the Russian market through the Google AdSense advertising network. The bill affects almost all services in the IT market, including hosting, selling digital content, granting rights to use software and games, registering domains, voice services over the Internet, storing and processing information, broadcasting TV and radio channels, remote system administration and remote software support, search engines, advertising services, etc.

Foreign IT companies will start paying VAT in Russia from January 1, 2017.