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New VAT reform in Russia for all

If the company provides customers in Russia with electronic services, it should pay VAT regardless of its place of incorporation. So it can be actually Russian company, incorporated outside of Russian jurisdiction or it can be foreign company, in both cases VAT must be applied. According to RBC, draft law introduces VAT for licences for software for personal computers and databases regardless of person selling it – whether Russian company or foreign company sells such licence.

What kind of services will be imposed under proposed amendments in tax law? Such services as software in digital form, hosting, domain registration, IP telephony, storing and processing of information, TV and radio channels broadcasting, search systems, advertisement services, remote system administration, services for establishing new contacts and/or making deals between seller and buyer (looks like to impose VAT on social networks?). The main declared purposes of draft law is to impose foreign companies, but Russian companies also fall under new proposed rules. Their “life” and business will not get easier, as it is declared in public.

But there is one thing. In order to impose and collect tax from foreign company, Federal Taxation Service must keep records about all foreign companies trading in Russia. If they will not do it, does it mean that their trade in Russia will be prohibited? If not all companies, without taking into account major public companies like Google or Apple, will be registered in Russian Federal Tax Service does it mean that FTS will monitor internet or can make more easy – track all financial transactions made from Russia by natural persons? It means that all financial institutions will report who and how much has transferred money abroad?