VAT Refund in Russia
The Russian Value Added Tax can be considered as an all stages net revenue tax with the possibility of a tax return. All turnovers, which were generated through the sale of goods and services in Russia, are subject to the Russian VAT. Similar as in Germany, Austria, Switzerland or the UK, the destination principle gets applied in Russia as well.
The basic rate has been set to 20% starting from 01.01.2019, whereas the reduced VAT rate for specific goods, for example staple food, is at 10%. There are several goods and services that are not subject to the Russian VAT at all. International transport services, medical services as well as exports from Russia and the Eurasian Customs Union are free from the Russian VAT.
The VAT return has to be submitted to the tax authorities printed out and also electronically every quarter. It needs to be balanced until the 25th of the quarter of the following month.
If the input VAT paid through the purchase of goods and services exceeds the generated VAT through sales, there is a input tax surplus which has to be balanced by the Russian financial office.
Examples of how an input tax surplus occurs in the Russian business:
- A British Company establishes a subsidiary in Russia. In the beginning of the business operation bigger investments get settled. The VAT paid within these investments can only be balanced with future generated VAT through sales of goods and services. This way an input VAT surplus occurs.
- The Russian subsidiary of an American company has established a production facility in Russia. The biggest share of those manufactured products gets shipped to Asia. Because exporting goods are exempt from Russian VAT, this way an input VAT surplus is generated. Due to the fact that this company will not generate any VAT in the future as well, the paid input tax cannot be balanced. The refund of the input VAT is a very important subject for this company.
- Within the establishment of a production facility in Russia, machinery gets shipped from the UK to Russia. During the import to Russia, the Russian import VAT (20%) has to be paid. The tax has to be paid directly to the Russian customs while importing. This tax gets deductible as soon as the production facility starts working.
The refund of the VAT or the input VAT surplus therefore is of vital importance matter for international companies acting in Russia. Calculation, declaration and all supporting and advising actions during the process of tax refund are done by us in Moscow and in the all of Russia.
How does the process of VAT refund look like?
Here is an overview of the process of VAT refund in Russia.
- VAT Calculation together with the generation and the handing in of the electronic VAT Declaration. During this time, our Russian tax consultants and senior accountants collect and prepare all the relevant accounting documents like contracts, registers and VAT invoices and hand them in referring to the Russian tax guidelines. If there is a input VAT surplus, in other words a claim against the Russian financial office, it has to be decided whether this surplus should remain to balance it with upcoming tax payments or if the financial office should transfer the money to the company’s bank account. We advise our clients during this decision in detail. If there has been a motion brought forward to pay out the input VAT surplus, generally a tax audit lasting three months follows. The procedure of this audit is explained in the following.
- Before the refund of the Russian VAT can be allowed, the Russian tax authorities induce a tax audit of the relevant company, which generally takes three month and sometimes even more. Within this audit, the tax inspector requests detailed documents, visit the company at the legal address without announcement beforehand and cite representatives of the company for interviews. Partners of this company can be interviewed in this context as well. Our experienced tax consultants and senior accountants join our clients during this procedure.
- Based on this tax audit, the tax authorities decide whether to transfer back the input VAT surplus or not. This decision gets delivered within twelve days after the tax audit has been terminated. If the decision includes a refusal of paying out the input VAT surplus, the relevant company can either accept this decision or can try to claim for the transfer in front of a court.
- In case of a positive decision, namely the decision to transfer the surplus, the money has to be transferred from the tax authorities to the company’s bank account within seven days.
The guidelines regarding the refund of the Russian VAT are mostly regulated in the Tax Code of the Russian Federation, Chapter 21, Article 170.
We help our clients in line with the VAT Declaration with the following services:
- Detailed Tax Accountancy in Russia, especially regarding the Russian VAT and the refund procedure of an input VAT surplus;
- Calculation of the VAT, creation and delivery of the electronic VAT declaration;
- Preparation and supervision of all tax audits, especially regarding the refund of the input VAT surplus;
- Clearance of all doubts and questions between clients and the tax authorities;
- Visit of the Russian tax authorities representing our client;
- Advisory of the management of the company, training of the employees of our clients about how to act during a tax audit in Russia (Do’s and Dont’s);
- Law enforcement in front of Russian courts in close collaboration with our Russo German partner law firm;
- Provision and maintenance of a legal address and
- Tax registration of foreign companies in Russia (especially VAT registration of foreign companies, which sell electronic services (web services) to Russian users, referring to changes in the VAT regulations for electronic goods and services in force since the 1st of January 2017).
Our clients of Tax Accountancy in Russia often ask us to perform the following services as well:
10 Reasons to work with Rufil Russia Consulting
- Quality: Our tax consultants and all other employees maintain a client, service and quality oriented approach.
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“Your contact person will be a senior accounting specialist who successfully gained the qualification “IFRS expert”, with a good command of English, who regularly participates in professional training, is permanently employed at Rufil Russia Consulting and is based at our office in the very center of Moscow. Don’t settle for less!”
In our office in Moscow work highly qualified accountants, auditors, finance experts (IFRS, US-GAAP, HGB, Russian GAAP), tax consultants, experts and programmers for automation, accounting software and IT solutions as well as international management consultants. Our working languages are English, Russian and German.