Starting from October 01, 2021 Russian companies and individual entrepreneurs are required to act as VAT tax agents in a larger number of cases when purchasing goods, works and services from foreign companies. Before Russia-based companies and individual entrepreneurs were liable to act as VAT tax agents only if (i) they acquired goods, works and services from foreign companies that had no tax registration in Russia at all; or (ii) they acted as intermediaries when selling goods (works, services, property rights) of foreign companies without tax registration in Russia.
According to new rules, VAT shall be withheld and remitted to the Russian budget by applying a reverse charge mechanism by Russian companies and individual entrepreneurs, even if the foreign company selling goods, works and services is tax registered in Russia for the following reasons: (i) bank account opened with a Russian bank; (ii) real estate or vehicles located in Russia; (iii) subdivision created in Russia, provided this subdivision does not participate in the sale.
NAZALI TAX & LEGAL