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Changes in Settlements with Foreign Companies: Currency Repatriation and E-Services VAT

Ms. Svetlana Pshenova
Assistant Auditor

We hereby inform you that Vladimir Putin, the President of the Russian Federation, has signed Decree No. 430 dated July 05, 2022 “On Repatriation of Foreign Exchange and Russian Federation Currency by Residents Involved in Foreign Trade Operations” (took effect on July 05, 2022).

In accordance with the Decree, the rate of mandatory crediting the residents’ accounts in the Russian banks with foreign currency proceeds is set out in the amount of their mandatory sale.

On June 10, the Government Commission on Monitoring Foreign Investment set to zero the mandatory sale rate (80% since the end of February, and 50% prior to that).

This means that the exporters are no longer required to return the foreign currency proceeds to the accounts held with the Russian banks.

The Government Commission is authorized to adjust the amount of foreign currency proceeds that are subject to mandatory sale, therefore, if such adjustments take place, the share of mandatory crediting the Russian accounts with foreign currency proceeds will change respectively.

Along with that, we would like to inform you on the other change in settlements with foreign parties that has not yet taken effect.

From the 4th quarter of 2022, an “old” regulation will take effect under which a Russian company that purchases electronic goods and services from foreign parties shall be recognized as a VAT tax agent. The specified amendments to the Tax Code of the Russian Federation were adopted by Federal Law No. 323-FZ dated July 14, 2022.

The new provisions of Article 174.2 of the RF Tax Code stipulate that when the foreign companies provide the Russian companies and individual entrepreneurs with electronic services that are recognized to be supplied on the territory of the Russian Federation, VAT is calculated and paid by the Russian entities and individual entrepreneurs as tax agents.

There are also exceptions when a foreign company selling e-services on the Russian Federation territory should independently pay the VAT: if the e-services have been provided to individuals or the services are provided by a standalone unit of the foreign company located on the territory of Russia.

Article 168 of the RF Tax Code stipulates that when calculating the tax amount, tax agents should issue VAT invoices within 5 calendar days of the month following the expired quarter in which payment or partial payment on account of the e-services provided by foreign companies is received.

Should you have any questions, please feel free to contact us via e-mail and our team will be glad to answer them.