FTS clarification on how to pay Russian VAT on e-services during sanctions

KPMG Review

KPMG Review

Since 1 January 2019 foreign suppliers providing B2B services in an electronic form listed in Article 174.2 of the Russian Tax Code to Russian business customers and making settlements directly with such customers have had to register for VAT in Russia and pay Russian VAT on such services themselves. Once a foreign entity is registered for VAT in Russia as an e-service supplier, the foreign entity should also pay Russian VAT on other supplies that are subject to VAT in Russia (e.g. supplies of non-electronic services).

Following the introduction of sanctions against Russia by certain countries, including sanctions on transactions with the Central Bank of Russia, the aforesaid foreign companies face issues vis-à-vis VAT payments made from foreign bank accounts to Russian Federal Treasury accounts.

The KPMG Review below observes the current state of play, FTS clarifications and their impact on the business as well as recommendations from KPMG experts.