PRESS: AEB head says Russia’s Google tax new rules inconvenient

MOSCOW, Nov 9 (PRIME) -- The Association of European Businesses (AEB) believes new rules of charging the so-called Google tax could become an extra barrier to business, daily Vedomosti reported on Friday referring to a letter of AEB General Director Frank Schauff to Russian Finance Minister Anton Siluanov and the Federal Tax Service’s head Mikhail Mishustin.

Moscow will revise in 2019 the mechanism of charging the Google tax, a value-added tax that foreign companies pay from games, music, and books they sell in the Internet. In 2019, foreign companies will have to get registered with the local Federal Tax Service and pay the tax themselves for the services they render to Russian business. At present, customers pay the tax.

Schauff has offered in the letter to keep the existing procedure, because the requirement to register with the tax authority, file declarations, and pay the tax themselves contradict the international practice.

Transnational groups will have to do it even if they have a single deal of signing a contract with a unit on granting rights to use internal systems, Schauff said, adding that valued-added tax does not apply to license agreements, which will raise administrative load with no fiscal effect.

There is also a risk that Russian clients will not have a tax deduction if foreign companies are not registered.

Deputy Finance Minister Ilya Trunin said that the association’s proposals to set a special order for local enterprises affiliated with foreign ones violate principles of universality and equality of taxation. If a foreign company is not registered with the tax authority, it will be fined 10% of its income.

Foreign companies paid 7.9 billion rubles of value-added tax on electronic services in January–September. According to the tax authority, the Google tax was contributed by 162 companies as of October 1.

(66.2155 rubles – U.S. $1)

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