Indirect taxes include VAT and excise tax. Over the last decade, VAT has been a major tax in Russia in terms of the contribution it makes to state revenue. Taxpayers have also traditionally viewed the law surrounding VAT to be considerably complicated, and VAT as being one of the most difficult taxes to administer. Although from an economic point of view VAT is borne by consumers, each taxpayer involved in the supply chain must report and pay VAT to the budget.
Historically, the Russian tax authorities have paid significant attention to VAT issues during audits.
For most taxpayers, key VAT considerations include:
Excise tax represents a major cost for companies involved in activities subject to this tax (alcohol, tobacco, oil products, etc.) The administrative regulation of the turnover of excisable goods also has a major impact on taxpayers’ operations.
We provide assistance in obtaining VAT refunds. This includes developing an approach on the timing of claiming refunds and undertaking other steps prescribed by the VAT refund procedure, assessing the quality of documentary support related to the refunded amount, and preparing for and assisting during tax audits. PwC also assists with the compliance terms for the formal VAT refund procedure, including submitting applications for VAT refunds and subsequent follow up.
Certain services provided to foreign clients are not subject to VAT.
We analyse the nature of the provided services in order to assess whether there is a basis not to apply VAT. At the next stage, we assist in drawing up the documents between the parties which will enable the non-VATable treatment to be applied.
The law establishes a number of VAT exemptions (warranty repairs, banking services, the sale of residential real-estate, etc). We provide advice and other assistance related to the application of such exemptions, including an analysis of the applicable requirements, documentary support, etc.
We analyse the classification of goods, provide recommendations aimed at taking advantage of the reduced VAT rate upon the sale of qualifying goods, and assist with any related implementation issues.
If a taxpayer is involved in activities that are not subject to VAT, generally input VAT on the respective costs should be expensed.
We provide recommendations on compliance with input VAT related regulations, analyse the impact of input VAT on the company’s costs, and, where appropriate, assist
in structuring VAT exempt activities in a cost efficient way.
Similarly, we analyse the cash flow implications of the VAT application on the company’s activities and provide recommendations on improvements.
We provide advice on excise tax law. This is usually related to compliance with applicable law requirements, issues surrounding the classification of products, and administrative procedures related to the turnover of excisable goods.
With the involvement of PwC network member firms in other countries, we can assist Russian companies that have activities outside Russia to deal with non-Russian VAT issues. These often relate to VAT refunds, registration, etc.