Procedure for raising electronic VAT invoices approved

Pepeliaev Group advises that on 25 May 2011, the Russian Ministry of Justice registered the Ministry of Finance’s Order No. 50-n dated 25 April 2011. This Order approves the Procedure for raising and receiving VAT invoices electronically using telecommunications channels and applying digital electronic signatures (the “Procedure”). The Procedure came into force on 3 June 2011.

Main Provisions

The Procedure has been adopted in pursuance of article 169(9) of the Russian Tax Code. It describes the electronic document flow procedure, the requirements which are placed on the main parties involved and the actions to be taken by such parties. This includes the procedure for adjusting or amending VAT invoices.

Electronic document flow for VAT invoices is implemented through an operator, which is a specialist electronic document management company (an “Operator”), or through several Operators.

The following are the main conditions for VAT invoices to be raised electronically:

 1. the parties to a transaction must both agree. The Procedure does not stipulate a particular form for such agreement, but in all probability it should be stated in a contract or agreed in correspondence;

2. the seller and buyer must have compatible technology and be able to receive and process electronic VAT invoices;

3. a VAT invoice must be signed using the electronic digital signature (“EDS”) of a person authorised by the seller;

4. the VAT invoice must be transmitted via an Operator using telecommunications channels.

When VAT invoices are raised and received electronically using telecommunications channels, the seller and buyer will arrange for the electronic document flow to be implemented separately in respect of each VAT invoice.

The VAT invoice is signed by the EDS of the seller, which is issued with the key signature certificate of a special organisation forming part of the Federal Tax Service’s “accredited centres” network.

A VAT invoice is considered to have been raised electronically on the date on which the VAT invoice file reaches the Operator from the seller, as stated in the Operator’s confirmation.

A VAT invoice is considered to have been received on the date on which the seller’s VAT invoice file is sent by the Operator to the buyer, as stated in the Operator’s confirmation.

If a VAT invoice needs to be amended, the buyer sends to the seller via the Operator a notification concerning the adjustment of such VAT invoice. When sending the adjusted VAT invoice, the seller’s actions are the same as when it raises a VAT invoice.

The Procedure describes in detail the actions of each party involved in the electronic document flow process when a VAT invoice is raised, received and amended. It also describes the working regime of an Operator through which such document flow is implemented.

The Procedure came into force its official publication date (it was published in Rossiyskaya Gazeta, the government newspaper of record, on 3 June 2011).

PG Comments

The introduction of the Procedure is a significant step on the path towards creating an automated document flow process in Russia. Obviously, the Procedure will allow organisations which do business with a large number of other companies to optimise and speed up the process of raising and receiving VAT invoices.

Adjustment of the laws and regulations is required before the Procedure is actually operational in practice: the technical formats used in the electronic flow of documents have to be approved, and amendments also need to be made to the Russian Government’s Resolution No. 914 On registering VAT invoices and keeping sales and purchase ledgers dated 2 December 2000. Publicly available sources indicate that these amendments are currently being discussed internally within the Ministry of Finance.

Both from a technical and a legal standpoint, those who may be affected by electronic document management also need to prepare, among other things, to determine:

• the extent to which an Operator will be liable for VAT invoices being raised and received correctly and on a timely basis, bearing in mind that the Operator is the key link in the electronic document flow process;

• whether the Operator will be a party, and if so in what capacity, should there be a court dispute in terms of confirming that a VAT invoice has actually been raised and received.

For now, it is too early to talk about the new Procedure becoming universally accepted practice. It is the experience of the ‘pioneers’ that will reveal how viable and convenient for business the electronic exchange of documents will prove.

For further information, please contact:

in Moscow – Roustem Akhmetshin, Senior Partner, at: (495) 967-0007 or by e-mail; Julia Alexandrova, Lead associate, at: (495) 967-0007 or by e-mail

in St Petersburg - Sergey Sosnovsky, Head of Tax Practice (St. Petersburg), at (812) 333-07-17 or by e-mail