Russia digital VAT makes its debut

The new Russian digital tax a value-added tax (VAT) on the supply of cross-border digital services to consumers based in Russia was introduced on January 1, 2017.

Jan 2, 2017

On January 1, 2017, Russia became the latest country to change laws aimed at taxing the digital economy.

Russia digital vat

The specific change in Russia is that 18% value added tax (VAT) is now applied to the sale of a digital service based on the location of the end consumer in Russia, rather than the supplier’s location. Russia, mirroring the EU taxation approach, requires two pieces of evidence to be collected during the transaction and there is no threshold for compliance. No threshold means one sale to a Russia-based consumer will trigger compliance. This taxation tweak dramatically alters the market landscape in Russia for digital service suppliers.

Russia’s online market transformation

It is, however, a market ripe for picking. The Russian eCommerce market currently represents a potential customer base of 30 million online shoppers, or just over 20% of the 144 million population. This is despite the fact that 102.5 million, or 71% of the population, have internet access: a level that has risen from just 37% in 2010. Online cross-border shopping is accelerating among Russian consumers as they simply cannot find what they need on native websites. As a result over half (54%) of online shoppers look to foreign websites to fill the void.

The mix of a young population (46% aged between 25 and 54) allied to increased smartphone and tablet usage means mobile commerce is expected to explode from 2017 onwards. On the back of this market transformation revenues from digital media sold in Russia (e.g. video-on-demand, online gaming, and digital music) are estimated to increase by 52% between 2016 and 2021.

Lightning-fast legislative introductions, such as Russia’s (signed into law in July 2016, introduced in January 2017), have serious implications for digital businesses as they face up to additional compliance barriers when selling to existing, and new, markets.

This is a fundamental business shift as one global digital market quickly morphs into multiple, fractured local markets. This market fragmentation leads to a host of tax application, reporting and remittance problems for businesses to deal with.

Partner with Taxamo

By partnering with Taxamo you get full access to this flourishing Russian digital sales market. So, let Taxamo assume the VAT liabilities for all of your sales in Russia.

Here at Taxamo we know every business is different, we use this knowledge to create bespoke solutions for each partner.

The information contained in this publication (“Information”) has been provided to you for general information purposes only and we recommend that you obtain professional advice before acting or refraining from action as a result of the Information. Taxamo accepts no liability for any loss occasioned to any person acting or refraining from action as a result of the Information.