Practice reading the following words and collocations. a) ambiguity; authority; issue; legislation; license; nature; register; requirements; scheme; threshold; through;

a) ambiguity; authority; issue; legislation; license; nature; register; requirements; scheme; threshold; through;

b) ambiguous provisions; circulation of commodities; combustive-lubricating materials; construction and installation; customs procedure; digital products; exempt transactions; foreign representative offices; in compliance with; legal entities; railway vehicles/containers and freight-forwarding services; Supreme Arbitration Court; value added tax; VAT registers;

c) analyze; be amended; be exempt from; be obligated; be subject to; clarify; issue. 

 

At present, the value added tax is one of the most important federal taxes. The basis of its collection is the value added of all stages of production and circulation of commodities.

Since 2013 the VAT legislation has been amended several times. One of the changes was aiming at resolving the ambiguity surrounding the VAT treatment of bonuses payable by suppliers of goods (works, services) to customers for the fulfilment of certain conditions (e.g. volume of purchases). In summer 2014, the Supreme Arbitration Court adopted a resolution where they provided their interpretation of some ambiguous provisions of VAT legislation (for instance, they clarified that if the contract does not contain reference to the VAT amount, such VAT is deemed to be included to the agreed contract price, that it is possible to claim a VAT recovery within 3 years since the period when the right for such a recovery arose, etc.). Since 2014, VAT payers are obligated to submit VAT returns in electronic form. There were some other minor amendments to the VAT legislation that introduced certain changes to VAT documentation requirements (for instance, it is no longer necessary to issue VAT invoices in respect of VAT exempt transactions, for taxpayers to maintain VAT registers, except in certain special cases, etc.), extended the list of VAT exempt services for financial organizations, and clarified the methodology for input VAT allocation by such financial organizations.

There are discussions regarding increase in VAT rate from 18% to 20% and introduction of a sales tax at the maximum rate of 3% to the Russian tax legislation. Also, there is an intention of the Russian Government to commence a discussion with the business community regarding the necessity to introduce changes to the place of supply rules on telecommunications services. The intention is to bring Russian tax legislation in compliance with the international tax practice.

Generally, VAT-able operations include:

-The sale of goods (works, services) in Russia and transfer of property rights;

- The transfer of goods (works, services) in Russia for the taxpayer’s own use if the expenses incurred are non-deductible for corporate profit tax purposes;

- construction and installation works for the taxpayer’s own use;

- the import of goods into Russia and other territories under its jurisdiction.

Note that free-of-charge supplies are also subject to Russian VAT.

The standard rate of VAT is 18 percent. There are also 10 percent and 0 percent rates, for example:

10% - sales of specifically listed foodstuffs; sales of specifically listed goods for children; sales of periodical printed publications, except for those of advertising or erotic nature; sales of specifically listed medical goods manufactured both in and outside of Russia;

0 % - export sales; international transportation services; the processing of goods placed under the customs procedure; services related to provision of railway vehicles/containers and freight-forwarding services related to international carriage or international transportation of goods (subject to certain conditions); work (services) directly related to the carriage or transportation of goods placed under the customs procedure of customs transit; supplies exported from Russia (fuel and combustive-lubricating materials necessary for the functioning of aircraft and sea ships).

There is a list of certain types of activities that under certain conditions are exempt from VAT, for example: the leasing of premises to foreign individuals and foreign representative offices accredited in Russia; the sale of specifically listed medical goods and services; funeral services; warranty repair services; educational services rendered by nonprofit educational institutions on the basis of license; services rendered by organizations carrying out activities in the area of culture and art; banking and insurance services; the provision of rights to use software and know-how and some other IP rights under the license agreement; R&D works financed out of federal or local budgets and special funds (for instance, Russian Foundation for Basic Research or Russian Foundation for Technological Development Funds Supporting Research, etc.).

Generally, VAT is calculated based on the total amount of consideration for the supply of goods, works services or property rights. In the case of free-of-charge transfers of goods/works/services the VAT is based on the market value of such goods/works/services. Import VAT is calculated based on the customs value of the imported goods.