The State Duma approved amendments to the Russian Tax Code (RTC) introducing the right for input VAT recovery in relation of export of many types of services. This is generally in line with the VAT principles in many other countries. The right to recover input VAT in relation to export of services

Under the legislation till June 30,  export of certain services was out of scope of Russian VAT but related input was non-recoverable (such input VAT increases costs of the Russian taxpayer).

The new law envisages the right for recovery of input VAT related to export of services (i.e. when the place of supply of services is out of Russia). Such amendments allow reducing the tax burden for Russian taxpayers rendering services to foreign customers, in particular, for the providers of the following services:

• development of software and databases, their adaptation and modification;
• engineering services;
• digital services;
• consulting, legal, accounting, audit, data processing services;
• advertising and marketing services;
• rent of certain types of moveable property;
• some other services.

Please be aware that the procedure for documentary evidence of non-VATable treatment of the above services remains unchanged (i.e. contracts and primary documents are still required).

Exceptions to the new rules

The new rules are not applicable to export of those services that are mentioned in Article 149 of the RTC (i.e. the VAT exempt services).

• transfer of exclusive rights to inventions, utility models, industrial prototypes, computer software, databases, layout designs of integrated circuit and know-how, as well as provision of rights to use the above intellectual property under licensing agreements;
• certain types of R&D services related to the development of new products and technologies, or to the improvement of products and technologies that are currently produced;
• R&D performed by educational and scientific organizations.

Taxpayers engaged in the above operations under the contracts with foreign customers are not be eligible for input VAT recovery and input VAT will still be a cost for them.

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