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When e-services of a foreign company are not subject to VAT

The Ministry of Finance clarified when a foreign company should not pay VAT when providing electronic services in Russia.

In a letter dated June 19, 2019 No. 03-07-08 / 44653, the Ministry notes that Article 149 of the Tax Code contains a list of transactions exempted from VAT. Thus, in particular, subparagraph 26 of paragraph 2 of this article exempts from VAT transactions on the transfer of exclusive rights to:

  • inventions, utility models, industrial designs;
  • programs for electronic computers, databases, topologies of integrated circuits, production secrets (know-how);
  • use of the listed results of intellectual activity on the basis of a license agreement.

At the same time, Article 174.2 of the Tax Code of the Russian Federation refers to electronic services subject to VAT in Russia, provision of rights to use programs for electronic computers (including computer games), databases via the Internet, including by providing remote access to them, including updates to them and additional functionality.

Thus, if the services provided by a foreign organization in electronic form are indicated in subparagraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, then such services are exempt from VAT. Accordingly, the obligation to pay VAT from a foreign organization in the provision of such services does not arise.