As of 1 January 2018 new rules in connection with the VAT on digital services will come into force in Belarus. Under the new rules foreign companies supplying digital services to individuals and individual entrepreneurs will be obliged to register for VAT purposes and and to pay VAT in Belarus. The VAT registration is possible as of 2 January 2018. Given that these rules will come into force soon, I would like to draw your attention to main compliance aspects regarding VAT on digital services.
The information below is based on the Tax Code provisions effective from January 1, 2018, and the anticipated changes by the Draft Law on amendments to the Tax Code (latest version available as of the newsflash date (Draft Law).
What are e-services?
The e-services falling within the scope of e-services VAT cover:
- licencing of software (incl. computer games), databases (incl. updates, additional functions provided), electronic books, information materials, graphic images, music, audiovisual works via Internet, as well as providing remote access for reviewing and/or listening via Internet;
- advertising services via Internet;
- placing sales offers via Internet;
- automated data search, selection, sorting and provision to users (incl. stock exchange reports) via Internet;
- search services and information on potential customers;
- provision of technical, organisational, information and other capacities with the use of information technologies and systems for establishing contacts and making deals between sellers and buyers (incl. provision of trading platforms in real-time mode);
- maintenance and support of Internet presence for personal goals or for business activity, support of users’ electronic resources (Internet sites, pages) and access to these with modification options, as well as information system administration services;
- information storage and processing if the information provider can access it via Internet;
- providing computing power in real-time mode for placing information in an information system;
- providing domain names and hosting services;
- providing access to search engines on the Internet;
- gathering statistics on Internet sites.
Currently, the Tax Code separately addresses services that should not be regarded as e-services:
- sale of goods if ordered via Internet;
- sale of computer programs, data bases on tangible media;
- consulting services via e-mail;
- internet access services.
The individual purchases e-services in the territory of Belarus when either of the below criteria is met:
- individual is in fact present in the territory of Belarus (it is still not clear how the factual presence of the individual can be determined practically; most probably a registration address would be a criterion);
- individual’s bank account / e-wallet used for e-services payment is opened in a bank located in Belarus / powered by an e-money operator located in Belarus;
- IP address used for purchase of e-services is registered in Belarus;
- international dialing code of the phone number used for purchase of e-services is assigned to Belarus.
Who is an e-services VAT payer?
A foreign company should be subject to payment of e-services VAT in Belarus when it fits with either of the below characteristics:
- the foreign company provides e-services to Belarusian individuals (including individual entrepreneurs) directly;
- the foreign company carries out intermediary activity encompassing participation in payment transactions by Belarusian individuals for e-services purchased from foreign companies. Such activity is carried out under some agency agreement or an agreement of similar nature concluded between an e-services provider and a payment intermediary. Mere processing of payments should not trigger obligation to pay e-services VAT.
Is there any e-services VAT registration?
E-services VAT is a special tax that is paid by e-services VAT registered foreign companies directly to the Belarusian tax authorities. E-services VAT registration starts on January 2, 2018. Foreign companies shall be registered for e-services VAT before the quarter when they started to provide e-services to Belarusian individuals ends.
The e-services VAT registration authority is the Minsk City tax inspectorate (Registration Authority). The registration is expected to be carried out via e-portal powered by the Ministry of Taxes and Duties of the Republic of Belarus using digital signature assigned to the foreign company representative. Paper registration encompassing face-to-face visit of the Registration Authority by the foreign company’s representative should be also available.
How is e-services VAT calculated and paid?
E-services VAT amount due in Belarus is calculated as e-services VAT base multiplied by e-services VAT rate. E-services VAT tax base is the amount of funds received by a foreign company from providing e-services to Belarusian individuals. E-services VAT rate is 20%.
Submission of e-services VAT returns/e-services VAT information forms, as well as e-services VAT payment shall be carried out quarterly. E-services VAT information form is a simplified form resembling main sections of the e-services VAT return and should be submitted only if there are e-portal malfunctions and e-services VAT return cannot be submitted. E-services VAT returns can be submitted via the e-portal using the digital signature assigned to the foreign company’s representative at e-services VAT registration. E-services VAT information form can be also submitted via the e-portal, in particular when the option of digital signature signing is technically unavailable.
Are there any special reporting standards for e-services VAT?
Foreign companies providing e-services to Belarusian individuals shall maintain per every individual that receives e-services separate reporting records of:
data used for determining VAT amount payable, in particular:
- date of services provision;
- payment amount received (including any prepayment);
- payment currency;
- information on any changes in payment amount (e.g. if there was a money refund to the individual).
data used for determining location of the individual purchasing e-services, in particular:
- name and surname (if the individual provided it);
- IP address, domain name;
- international dialing code;
- postal index of home address (i.e. individual’s registered address can determine the individual’s factual location for the purposes of VAT on e-services);
- bank identification code.
However, the tax authorities would accept that a foreign company sticks to a particular criterion in determination of customer’s location, since that choice would be largely dictated by the technological specifics of foreign company business.
Foreign companies can maintain reporting records in any form.
PwC Belarus is ready to assist with determining e-services VAT regulations applicability to your business, and if necessary, provide complex on-site support for e-services VAT compliance, including e-services VAT registration and e-services VAT reporting in Belarus.
For obtaining a piece of professional advice tailored to your case, please contact our experts:
Head of Tax and Legal Services at PwC Belarus
+375 17 3354000
Senior Associate, Tax and Legal Services at PwC Belarus
+375 17 3354000
Bildquelle: Isabella Pechlivanis / pixelio.de