On Friday the state Duma adopted in the first reading the draft law on the introduction of value added tax for foreign companies selling through Internet e-content in Russia. In particular, we are talking about paying tax when buying a mobile apps in the App Store and Google Play. The document was approved by majority vote. The bill will be revised for the second reading.
The bill affects virtually all aspects of services on the IT market. In the current version of the document listed 12 types of electronic services, which, according to the authors of the project should be subject to VAT. Including sales of digital content and software in digital form, hosting, domain registration, voice services over the Internet, storing and processing of information, broadcasting of television and radio services for remote system administration and remote software support, system search, advertising and other services to establish contacts and (or) transactions between sellers and buyers.
“At the present time in the Russian market a situation in which Russian consumers is more profitable to buy content from foreign companies, because the cost of the content does not include the value added tax. For this reason, the services of Russian companies become less attractive, as a result, foreign suppliers put in a more advantageous position in comparison with Russian companies,” – said one of the authors of the bill Vladimir Parakhin.
According to the document, the foreign company will have to pay in Russia, the VAT for supply to local customers, photos, ebooks, music, movies, games, hosting services and advertising on the Internet. The same requirement applies to Russian companies that sell their services on behalf of foreign companies.
In June last year it was reported that the Ministry of Finance decided not to tax telecommunications services, which foreign IT-giants have in Russia. This means that when you buy applications, video and audio content in the virtual shops of the Russian users, VAT on these services are not paid to the Russian budget.
Then the initiators of the idea to the staff of the presidential administration, working with the assistant to the President Igor Shegolev, representatives of Roskomnadzor and the state Duma decided that Apple and Google are definitely underpaid taxes to the Russian budget. As an example, consider the situation when the Russian users buy in online stores iTunes App Store and Google Play apps, music and movies to their mobile devices, these payments are not subject to taxes in Russia have been making purchases directly from foreign companies.
The introduction of a tax can increase the cost of the games and apps in the App Store, Google Play, Steam and other online stores in Russia.