"Tax on Google"

Russia

At the beginning of July, 2016 the Russian President Vladimir Putin signed the Federal law "About Making Changes in Parts the First and Second Tax Code of the Russian Federation" which in society called "a tax on Google". Since January 1, 2017 the document became effective. Foreign supplier companies of electronic services are obliged to pay a value added tax. The tax extends to such types of electronic services as sales of computer programs, games, e-books, databases, images, music, providing access to search systems on the Internet, registration of domains, etc. The foreign organizations rendering to natural persons in the Russian Federation services electronically are obliged to be registered in the Russian tax authorities. Previously they submit the application with the corresponding document package within 30 days from the moment of the beginning of rendering similar services. Since January 1, 2019 also the companies rendering electronic services to the companies and individual entrepreneurs (B2B) should be registered in tax. "The first statements from these companies began to arrive in December, 2018.

Except services of search systems such services as fall under the taxation object on 244-FZ:

• providing the rights to use the computer programs (including computer games), databases through the Internet, including by providing remote access to them, including updates to them and additional functionality;
• rendering promotion services on the Internet, including using the computer programs and databases functioning in the Internet and also providing the advertizing space (space) on the Internet;
• rendering services in placement of offers on acquisition (implementation) of goods (works, services), property rights on the Internet;
• rendering through the Internet of services in providing the technical, organizational, information and other capabilities performed using information technologies and systems for establishment of contacts and the conclusion of transactions between sellers and buyers;
• rendering services in search and (or) representation to the customer of information on potential buyers;
• providing domain names, rendering services of a hosting;
• etc.

At the same time the tax law defines also the list of transactions which do not belong to services electronically.

• sales of goods (works, services) if at the order via the Internet delivery of goods (execution of works, rendering services) is performed without use of a global network;
• implementation (assignment of rights on use) programs for electronic computers (including computer games), databases on material carriers;
• rendering consulting services in e-mail;
• rendering services in providing Internet access.

What rate?
The law sets a duty from all cash amounts received by the foreign companies from rendering electronic services to individuals in the territory of Russia to pay 15.25% in the form of the VAT.

Who pays?
The tax will be paid to that by the organization which directly renders service to the buyer. It can be both the foreign company, and the Russian organizations or individual entrepreneurs who act as intermediaries. For payment of "a tax on Google" the foreign companies will have to be registered in tax administration. The Federal Tax Service developed "VAT Office of the Internet Company" service using which the foreign IT companies will be able to pay "a tax on Google".

Check whether it is necessary to pay you "a tax on Google" and to submit the reporting

What to prepare for Russian companies which buy foreign electronic services or mediate?

• Since January 1, 2017 they will become tax agents
• Load of the divisions which are responsible for tax statements will increase
  • it will Be necessary to train employees for the correct identification of electronic services, calculation of a taxable basis for this transaction type, selection of the physical persons buyers who are residents by new rules
  • development of the system of interaction of divisions and document flow, allowing to process new information flows Is required

Privilege on the VAT at sale of the rights to software: what are risks?

• The VAT are not assessed: the non-exclusive rights to the computer programs and databases on the basis of the license agreement.
• There is no answer to a question how to define those electronic services from the list in the text of the law on "a tax on Google" which sale is exempted from the VAT. Neither FTS, nor the Ministry of Finance explain by what criteria to distinguish them.

Digital tax in Russia

Main article: A digital tax in Russia

2019

The foreign companies met difficulties with payment of "a tax on Google"

Some foreign companies selling electronic content in the territory of Russia met difficulties with payment of a so-called tax on Google, RBC reports in December.

The Russian legislation obliges the foreign companies to pay "a tax on Google" directly, however the Russian banks deny tax payments from foreign accounts due to the lack of complete details in payment orders, representatives of the foreign companies told the edition. At the same time, interlocutors of the edition emphasize, payment forms were filled according to the instruction.

As the experts polled by the edition explained, the foreign companies pay a tax on the accounts in foreign banks, and in standard forms of payment orders via the SWIFT system such number of digits, as is not provided in correspondent accounts in Russia and codes of budget classification. The companies, according to them, just lack the place in a payment form to specify all necessary details.

FTS and Treasury reported to RBC that the matter is not within their competence. Sberbank recommended to the foreign companies to address for operational consultation if payments for any reasons are denied.

to the Russian companies will simplify a VAT deduction from purchase of foreign cloud services

On November 18, 2019 it became known that to the Russian companies will simplify VAT refund from purchase of cloud and other digital services from foreign suppliers. The relevant bill was approved by the working group on normative regulation of ANO Tsifrovaya ekonomika (ANO TsE; integrates representatives of business for work on tasks of the national project of the same name).

According to Kommersant, the document suggests to assign to the Russian companies which buy electronic services, for example cloud services or the rights to use software, at foreign, is right to pay independently the VAT from them and to show it to the deduction provided by the Tax Code.

It became known that to the Russian companies will simplify VAT refund from purchase of cloud and other digital services from foreign suppliers

To the bill follows from the explanatory note that since 2019 the foreign IT companies are obliged to be registered in tax authorities and to pay the VAT in Russia. However by November it was made by only 1800 companies.

Assessment of the Ministry of Finance of the Russian Federation according to which increase in budget revenues in 2017 due to inclusion of the foreign companies in number of payers of the VAT was 9.34 billion rubles is given though the indicator should be at the level of 52.6 billion rubles.

According to the special adviser for tax questions of PEN & Paper Bar of Andrey Lokis, the bill is expected not only the IT companies, but also any business, buying electronic services from foreign suppliers.

It can be the right to use software, services in armoring of tickets or hotels, the software product on enterprise management and so on — the edition cites the expert's words.

The CEO of Marvel Distribution Alexey Melnikov reported to the newspaper that this initiative is extremely important for IT distributors.

The source of Kommersant in the Federal Tax Service considers that amendments in the law will lead to return of inequality in taxation: both the foreign companies, and buyers of their electronic services will actually cease to pay a tax.^[1]

2018: VAT for the amount of 12 billion rubles

For 2018 foreign sellers of electronic content paid the VAT for the amount of 12 billion rubles on "a tax on Google". It is 2.6 billion rubles more, than in 2017. Such data are provided by the Federal Tax Service (FTS) of the Russian Federation. In total in the Russian tax authorities 280 foreign companies rendering services electronically to individuals (B2C) are registered. Since January 1, 2019 in tax also the companies rendering services to a B2B-segment are obliged to be registered. According to analysts, the price of content for end users did not grow including in the light of increase in a tax rate on the VAT.

2017

The global Internet companies paid 9.4 billion rubles of taxes in Russia

The volume of the taxes paid by the foreign Internet companies in Russia in 2017 was 9.4 billion rubles. Such data were read by the head of FTS Mikhail Mishustin, Interfax reports in February, 2018.

Since January 1, 2017 the foreign Internet companies which provide services in Russia obliged to pay the VAT at the rate of 18% from online transactions. Within a so-called tax on Google of the organization are obliged to be registered in tax administration and to regularly provide tax declarations of FTS.

According to Mishustin, on tax accounting already independently there were 143 global companies. Among them - Facebook, Google, Apple, Netflix, Amazon, Sony, Bloomberg and others.

Can permit to pay the foreign companies "a tax on Google" for legal persons and SP

On July 19, 2017 there was information that in To the Federal Tax Service (FTS) the Russian Federation discuss an opportunity to grant the right to foreign suppliers of electronic services to pay "a tax on Google" for legal entities and individual entrepreneurs. Now such companies after registration in FTS can pay a tax only for natural persons.^[2]

As you know, the law on introduction of the VAT for electronic services (a so-called "tax on Google") was signed by the Russian President Vladimir Putin in the summer of 2016. According to the law, foreign services from the means received from rendering electronic services to individuals in the territory of Russia should pay the VAT in the amount of 15.25%. The Russian companies and the SP purchasing services of such services should pay a tax independently. Now the foreign companies can have an opportunity to pay independently for all the Russian clients.

"It would be convenient both for market participants, and for the state. For example, SP and the organizations which apply the special tax modes should not pay the VAT. But now they are forced to perform function of the tax agent, so — to hand over declarations, to pay a tax, etc." — provide Izvestia the comment of representatives of FTS.

FTS: in 1 quarter 2017 "the tax on Google" brought two billion rubles in the budget

The Federal Tax Service published in May, 2017 the first data on application in Russia of a so-called tax on Google^[3].

The foreign companies selling electronic content in the territory of Russia in the first quarter paid 2017 a value added tax (VAT) for total amount about two billion rubles, says FTS.

On tax accounting, according to fiscal department, as of the beginning of May there were 111 foreign supplier companies of electronic services.

FTS will send to the companies obliged to pay "a tax on Google" which did not submit the declaration yet notifications on need to provide the relevant information.

Netflix and Google were registered for payment of the VAT in Russia

The large foreign companies, among which Apple Distribution International, Google Commerce Ltd. and Netflix International B.V., were registered in To the Federal Tax Service (FTS) for payment of the VAT at sale of virtual goods of century Russia.

According to Vedomosti, in the list of 13 companies. They should make the first payments, since April 25, 2016. The companies will have to pay the VAT quarterly. The foreign organizations should be registered in FTS till January 31^[4].

Amazon increases the cost of services in Russia

Since January 1, 2017 in Russia the cost of services of Amazon will increase. Users who are not SP or legal persons will pay for use of a cloud platform of Amazon Web Services (AWS) still the VAT in the amount of 18%. You look in more detail - Amazon Web Services (AWS).

Some companies, including Apple, did not begin to raise the prices, but included in them the VAT that follows from receipts on payment. However Google, for example, obliged users to pay the VAT in the amount of 18%.

Belarus

In Belarus since January 1, 2017 the value added tax will be levied on the software products placed on foreign platforms of digital distribution. Increase in prices for the import licensed software and mobile applications on average for 20% can become result of introduction of the VAT.

In October, 2016 both chambers of parliament adopt amendments to the Tax Code according to which the VAT from turnovers on implementation of the electronic services rendered in the territory of Republic of Belarus by the foreign companies is entered, "The Belarusian guerrilla" reported^[5]. Council of the Republic adopted amendments on October 6. The VAT will be assessed practically all services rendered in the Internet: sale of e-books, listening of music, sale of information, IP telephony, sale of games, etc.

The Ministry of Taxes and Tax Collection of Belarus announced that the tax on digital software products will be imposed in July, 2016.

"The Ministry of Taxes and Tax Collection of Belarus studies an opportunity to levy a tax on implementation of mobile applications, games, movies" — the chief of head department of methodology of taxation of the Ministry of Taxes and Tax Collection organizations Igor Skrinnikov told.

"The first that we will do, it we recognize the place of implementation of such services the territory of Belarus. It will mean that the foreign companies rendering them will have to fulfill tax liabilities in the form of calculation of payment of a value added tax at us. At the same time it is going to apply a standard VAT rate in 20%. These offers will be systematized and sent to the Ministry of Finance for the subsequent discussion with all interested bodies in the nearest future. We hope that this offer will be supported and will find reflection in the Tax Code since January 1, 2017" — he noted.

Kyrgyzstan

The deputy of parliament of Kyrgyzstan Ruslan Kazakbayev suggested to tax large Internet resources, such as Facebook, Instagram, Twitter, Google and so forth. The Kyrgyzstan Sputnik edition^[6] reports about it^[7].

According to Kazakbayev, Internet giant take from the commercial organizations thousands of dollars for advertizing, however not in all countries where this advertizing extends, they are forced to pay taxes.

"According to experts, we lose from $500 million to $1 billion because Internet resources do not pay taxes. Practically all business companies give them money for advertizing, but they pay taxes only in the countries", - the deputy noted.

Kazakbayev gave experience of Russia in which since 2012 Internet resources pay the state fees as an example. According to the parliamentarian, the Internet companies paid about 2 billion rubles of taxes only for the first quarter of the current year.

The member of parliament urged to draft the relevant bill for this initiative. At the same time these changes should not affect users in any way.

Europe

"Double Irish" scheme of optimization of taxation (Double Irish)

Decades the American IT giant preferred to use in Europe one of versions "Double Irish" schemes (Double Irish — similar to the name of the Irish cocktail). Simply it looks as follows. Americans establish in any offshore and directly in Ireland couple of legal persons, and then connect offshore to the next national representative office of transnational giant. The local office on fabulous quotations "licenses" "intellectual property" at the, in fact, parent offshore company. And then pays according to the license agreement.

As a result multi-billion national revenue is spent for "runtime royalty fees" to parent offshore which it regularly lists to head "mother" in Ireland. In continental Europe according to accounting documents there is no profit left and Americans practically do not pay the local taxes on profit. It irritates France long ago.

It is curious that thanks to offshore "laying" and features of the legislation of Ireland, even in the last country where head offices of Americans on the continent are opened, taxes are paid uskolzayushche low, their business is done by "offshore"^[8].

2020

Closing of Facebook Ireland because of charges of non-payment of taxes for $9 billion

At the end of December, 2020 Facebook closed all the Irish holding companies which used for storage of intellectual property to avoid payment of taxes in the USA, Great Britain and hundreds of other countries. Several months earlier American tax accused Facebook of what the company thanks to Ireland underpaid taxes on $9 billion, and now Facebook returns this money home.

The companies entering into Facebook paid for use of intellectual property to Irish structure worldwide. It allowed Facebook to transfer a considerable share of the global income out of borders of the USA. Ireland is as a rule considered one of the best countries for creation of the holding company because of its flexible policy for tax benefits. So, the main Irish subsidiary company of Facebook company paid $101 million in a type of tax, at the same time having locked in profits in the amount of more than $15 billion.

Main article: Facebook Ireland

2019

Europe thought up as it will force to pay taxes in the place of income generation

On October 15, 2019 it became known that large multinational companies, such as Google, Apple, Facebook and Amazon, can soon begin to pay taxes in those countries where they really gain income, but not in jurisdictions convenient to them. To it they will be obliged by the rules developed by the Organization for Economic Cooperation and Development (OECD). The relevant proposal is already published by the secretariat of the organization.

The OECD notes that the existing rules for apportionment of taxes were accepted in the 1920th, and do not consider feature of the progressing globalization and digitalization of economy. For October, 2019 the large companies, first of all technology corporations and digital services, can gain income in those countries where they have no divisions — and it and occurs, especially in developing countries.

As the companies have an opportunity to freely move income worldwide, they register office in jurisdiction with low taxation and pay taxes there as it does Apple which European office is in Ireland.

With respect thereto the OECD suggests to introduce two rules. First, it is necessary to deprive of the company of an opportunity "throw" profit from the country to the country that will force them to pay taxes in the place of receiving this profit provided that the company in this country has a significant business. Secondly, it is necessary to enter the fixed profit margin from local activity in those countries where the companies have offices.

Will benefit from these rules first of all the large countries, including the USA, China, Great Britain, Germany, France and Italy and also the developing economies. In territories of these countries technology giants perform large sales, and taxes on these sales will depart to the countries. "Tax havens" and the countries with low taxation, like Ireland will suffer generally.

OECD made necessary observations during the summer, and now believes that its offer will be supported by the leading global economies. The organization intends to discuss regulations at the level of "Group of Twenty" already by the end of January, 2020. The OECD hopes that such system will save the countries from need to take the tax measures against technology giants at the level of national legislations as France and Great Britain as it only increases strength in trade relations try to make it. In particular, these regulations will allow France to receive sales taxes of advertizing of Google to the French advertisers.

France conducts four years concerning Google investigation because the corporation evades paying taxes from income which it gains in the territory of the country. The most part of the European revenues of Google registers as the profit of the Irish office of the company in this connection France loses billions of euros. In September, 2019 Google agreed to pay to France 965 million euros to settle a dispute.

The Amazon company already stated that it welcomes such rules and considers them an important step forward. The company believes that the international consensus in this question is necessary to limit risk of double taxation and one-sided measures from the different states.

Representatives of the French Ministry of Finance said that they consider the proposal of OECD promising base for further work and that France will touch upon this subject at a meeting of "Group of Twenty" in Washington. The ministry considers that the agreement on the international taxation can be reached in 2020^[9].

Paris announced introduction of a tax on "Big Four" led by Google

By the end of February, 2019 the bill of taxation of the multi-national technology companies, first of all that which enter into "Big Four" — Google, Amazon, Facebook and Apple will be submitted for consideration of the French government, the Minister of Economy and Finance of France Bruno Le Mer said in January in an interview to Le Journal du Dimanche. For these four companies the special abbreviation consisting of the first letters of their names is thought up — GAFA^[10].

According to him, the tax "will affect all companies which are offering digital services and having turnover more than €750 million worldwide and €25 million in France". The minister called taxation of the international companies "a call of the 21st century" and "a question of justice". The government intends to send the bill to parliament as soon as possible. It is expected that thanks to a new tax the budget of France annually will be able to receive in addition about €500 million a year.

Besides, Le Mer promised to combat tax avoidance, initiating review of the international tax rules. According to him, legislators should "follow money which for the purpose of tax avoidance goes there where they should not be".

2018: The EU does not refuse plans for creation of "the fair system of taxation"

The European Union does not refuse plans for creation of "the fair system of taxation". The Reuters agency with reference to the Ministry of Finance of Germany reported about it, thereby having denied information of opposite contents distributed by the Bild newspaper on Thursday August 30, 2018^[11].

Introduction of a so-called digital tax with which will impose the large technology companies with global annual revenues from 750 million euros and from 50 million euros – within the EU should become an important step to creation of "the fair system of taxation" as envisioned by the EU. At primary discussion the European Commission was going to set a tax rate within 3%.

It is quite probable that this measure is directed first of all against the American technology companies which, according to the authorities of some states of the EU, are underpaid taxes in treasury, manipulating the legislation and using schemes of tax avoidance.

This version is spoken well also by the recent article of the Minister of Foreign Affairs of Germany Heiko Maas published in the Hadelsblatt edition. In it the official brought up the subject of fair taxation, having pointed to excess profits of European "subsidiaries" of Internet giant like Apple, Facebook, Google which "departure" across the ocean year after year – in the USA.

According to the estimates of the European officials, the tax burden will be incurred by over two hundred companies. Introduction of a tax will allow to fill up budgets of EU countries for the total amount of 5 billion euros.

BDI (Bundesverband der Deutschen Industrie is "Federal Consolidation of the German Industry"), the authoritative organization representing consolidation more than 100 thousand German companies in 40 fields of the industry called Olaf Scholz, the Minister of Finance of Germany, to refuse support of this idea. According to representatives of the German industrialists, "introduction of a new tax – a one-sided and unreasoned step from the EU". He is capable "lead to double taxation of the companies and do harm to the German industry which is in a phase of digital transformation of the business models now".

2017: Penalty of Google of 2.4 billion euros

At the end of June, 2017 the European Commission within antimonopoly case fined Google €2.4 billion for abuse of a dominant position in the market of search systems^[12].

Also in the commission came to a conclusion that Google violated rules of the European Union, having provided advantage to the service of purchases Google Shopping by search of goods through Google search engine. According to European Commission, Google significantly underestimated the ratings of the competing services, and their offers were output not to the first page of search, and to the fourth further.

2016

In 2016 the authorities of Great Britain forced Google to pay in addition in treasury of £130 million as compensation for the saved taxes. The British tax authorities considered that thanks to company registration in Ireland Google performed "aggressive" avoidance of taxes. The authorities accused corporation of immoral behavior as in 2013, for example, Google paid only £20.5 million taxes, despite income gained in Great Britain over $5.6 billion^[13].

Australia

Google threatened to turn off Internet search in Australia

Google in January, 2021 threatened to turn off the Internet search in Australia which authorities are going to adopt the law which is not arranging the company, the Sydney Morning Herald newspaper writes.

In Australia the legislation according to which technology giants will be obliged to discuss with local publishers and broadcasters of payment for content is drafted. In case of lack of the arrangement the price will be determined by the arbitrator appointed by the state.

{{quote | "After studying of the legislation we should conclude that we do not see a method at which we could in this case continue to provide the services in Australia" — said on listenings in the Australian senate Silva, the area director of Google — the world's largest Internet search engine.} Swept }

In turn, the prime minister of the country Scott Morrison said that the government will not react to threats.

The representative of Facebook also declared a possibility of blocking in Australia of the news section of social network.

Tax on the Internet

Main article: Digital tax