Recent significant changes in tax legislation
These significant changes to the Russian tax law apply from 1 January 2019:
- Movable property is not subject to property tax. Russian corporate taxpayers still wait for clear rules of classification (movable/immovable).
- The standard value-added tax (VAT) rate increased from 18% to 20%.
- Domestic transactions are not subject to transfer pricing control anymore (with some exceptions). Transactions with foreign related counterparties may be controlled only if the turnover exceeds 60 million Russian rubles (RUB).
- Foreign companies providing electronic services to Russian customers must obtain VAT registration in Russia and pay VAT on their own. In this case, corporate customers are entitled to recover VAT charged by foreign providers.
As of 1 July 2019, input VAT related to export of many types of services, including software development, consulting, legal, and marketing services (with some exceptions) may be recovered.
Russia ratified the Multilateral Instrument (MLI) in May 2019. However, some formal steps have not been made, and the Russian Ministry of Finance issued a clarification in December 2019 where it pointed out that the MLI would apply to withholding taxes (WHTs) not earlier than 1 January 2021. Starting from that date, tax agents should consider both double tax treaties (DTTs) and MLI provisions when paying passive income abroad (in most cases the Principle Purpose Test should be passed). In practice, the Russian tax authorities have already started to test business purposes of significant cross-border transactions.