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Question: The organization purchases electronic services from an individual entrepreneur registered in a foreign country.

Whether the organization is obliged when paying for electronic services to an individual entrepreneur registered in a foreign country, to perform the functions of a tax agent for VAT in accordance with art. 161 of the Tax Code of the Russian Federation, that is, to calculate and pay VAT, or the individual registered in a foreign country, must register with the tax authorities in the Russian Federation in accordance with paragraph 4.6 of Art. 83 of the Tax Code and calculate and pay it himself (herself)?

Answer:

In connection with the letter on the application of value added tax (hereinafter referred to as VAT) when providing services in electronic form by a foreign individual entrepreneur to the Russian organization, the Tax and Customs Policy Department reports the following.

Services in electronic form, the place of sale of which in accordance with sub-clause 4 of clause 1 of Article 148 of the Tax Code of the Russian Federation (hereinafter - the Code) is the territory of the Russian Federation, are the services referred to in clause 1 of Article 174.2 of the Code.

On the basis of clause 4.6 of Article 83 of the Code, a foreign organization providing services in electronic form specified in clause 1 of Article 174.2 of the Code, the place of sale of which is recognized as the territory of the Russian Federation (with the exception of a foreign organization providing these services through a separate division located in the territory of the Russian Federation), and carrying out payments directly with buyers of these services, is subject to registration with the tax authority. At the same time, registration of foreign individual entrepreneurs providing services in electronic form specified by Article 83 of the Code is not provided.

Article 161 of the Code establishes that when a foreign person, who is not registered with the Russian tax authorities, sells services whose place of implementation is the territory of the Russian Federation, the value added tax is calculated and paid to the budget system of the Russian Federation by the tax agent who purchases these services from a foreign persons. In this regard, a Russian organization that purchases electronic services provided by a foreign individual entrepreneur, the place of sale of which is recognized as the territory of the Russian Federation, is recognized as a tax agent obliged to calculate and pay the value added tax on such operations to the budget of the Russian Federation.

This letter does not contain any legal rules or general rules specifying regulatory requirements and is not a regulatory legal act. In accordance with the letter of the Ministry of Finance of Russia dated August 7, 2007 N 03-02-07/2-138, this letter has an informational and explanatory character on the application of the legislation of the Russian Federation on taxes and fees, and does not prevent anybody from being guided by the rules of legislation on taxes and fees in understanding that is different from the interpretation given in this letter.

05/24/2019