Significant amendments to chapter 21 of the Russian Tax Code

Pepeliaev Group advises that on 6 July 2011 the Russian State Duma adopted in the third reading the law On amending part one and two of the Russian Tax Code and certain items of Russian legislation on taxes and levies.
The following main amendments were made to chapter 21 of the Tax Code Value added tax.

1. The law has introduced adjusted VAT invoices that will be issued by the seller of goods (work, services) to the buyer if the value or number (amount) of goods shipped (work performed, services provided) changes.

2. The bank statement on the crediting of revenues to the account has been excluded fr om the list of documents needed to confirm the right to use the 0% rate.

3. The following services have been added to the list of services subject to 0% VAT rate:

a. transportation (including provision of railway vehicles, containers or forwarding services) fr om the place wh ere the goods arrive in Russia to the place of their destination within Russia;

b. carrying and transportation within the Customs Union and certain related work (services).

4. The law has changed the procedure for deducting VAT on goods (work, services) acquired for operations subject to 0% rate.

5. VAT will have to be restored:

a. with regard to construction and assembly work, as well as goods (work, services), if real estate is modernised (reconstructed) according to the procedure for restoring VAT on real estate assets;

b. if subsidies are received from the budget to pay for the goods (work, services) acquired and to reimburse expenses on VAT when goods are imported into Russia.

6. The law clarifies the definition of the place of supply of work (services) in article 148 of the Tax Code:

a. The Russian Federation will be treated as the place of supply of work (services) on the Russian continental shelf for geological exploration, survey and extraction of carbohydrates;

b. The place of the buyer’s location will be treated as the place wh ere emission quotas (according to the Kyoto Protocol under the UN Framework Convention on Climate Change) are used.

7. Differences in amount are not subject to VAT. The tax base on the sale of goods (work, services) or proprietary rights under agreements under which the payments are stipulated in roubles in an amount equivalent to a specific amount in foreign currency or conventional units, is calculated using the Russian Central Bank’s rate as of the shipment (supply) date.

The law with regard to the above amendments enters into force not earlier than one month after it is officially published and not earlier than the first day of the following VAT period.

Pepeliaev Group’s experts will be happy to provide additional information on the amendments that have been adopted, as well as to analyse potential risks and identify additional opportunities for your company in connection with the new regulations.

For further information, please contact:

in Moscow – Sergey Savseris, Partner, at: (495) 967-0007 or by s.savseris@pgplaw.ru; Ivan Tregubov, Associate, at: (495) 967-0007 or by i.tregubov@pgplaw.ru

in St Petersburg - Sergey Sosnovsky, Head of Tax Practice (St. Petersburg), at (812) 640-60-10 or by e-mail