Digital tax in Russia

• Taxes in Russia
• 244-FZ "Tax on Google"

2021

Ministry of Digital Affairs plan to introduce a tax of 15% for digital corporations

In September 2021, Deputy Head of the Ministry of Finance Maxim Parshin said that a digital tax could be introduced in Russia for foreign IT companies according to the model being worked out by the Organization for Economic Cooperation and Development (OECD), a detailed description of the model can be published in November.

The OECD model provides a minimum tax rate for global digital corporations of at least 15%; 130 countries have joined the new taxation plan.

PwC: Digital tax for foreign companies will bring Russia $100 million a year

According to PwC estimates, the introduction of a digital tax in Russia will bring the budget from $53 million to $103 million per year. The company reported this in a study that was commissioned by the Ministry of Digital Affairs of the Russian Federation and published at the end of August 2021.

According to Forbes interlocutors, the results of the PwC study on the benefits of introducing a digital tax will help develop additional support measures for the domestic IT market. Analysts compared the competitive conditions of IT giants in different jurisdictions.

For calculations on the Russian market, researchers used correction factors: they took into account the number of Internet users in France and Russia (almost twice as many in the Russian Federation), as well as the number of Russian IT companies.

PwC: Digital tax for foreign companies will bring Russia $100 million a year

Analysts also compared the effective tax rate for foreign and Russian IT companies. For Yandex, it is 30% (general and outside the United States), for Google's parent company Alphabet - 14% total, 10% - outside the United States, for Facebook - 16% total, 8% outside the United States, for Apple - 16% total, 14% - outside the United States.

The effective tax rate of Russian IT companies is often higher than that of global players, for example, due to the inability in different companies of the same group to reduce the total profit due to losses of some businesses and pay tax on it, says Forbes interlocutor in one of the IT companies.

In addition, in Russia it is impossible to attribute options issued to employees to expenses. At the same time, option programs are a common motivation tool for most IT companies, "he added.

According to the Ministry of Digital Affairs, a digital tax is necessary for those cases when foreign companies buy advertising from foreign social networks aimed at the Russian audience. By the end of August 2021, this money is not received in the Russian budget. The agency promised benefits to Russian Internet companies after the introduction of a digital tax.^[1]

Google imposes taxes on the income of Russian YouTube bloggers

In March 2021, Google announced the introduction of taxes on the income of YouTube bloggers, including Russian ones. More details here.

Discussion in the government of a proposal to introduce a digital tax

On March 4, 2021, it became known that a few days earlier, Russian Deputy Prime Minister Dmitry Chernyshenko held a meeting with representatives of the IT industry, during which a proposal to introduce the so-called digital tax in the country was discussed.

At the meeting with the Deputy Prime Minister were representatives of the Competence Center for import substitution in the field of ICT, 1C, the venture fund Almaz Capital Partners, Alfa Bank, Russian Railways, Mail.ru Group and Yandex.

As one of the participants in the meeting told Vedomosti, under this "digital tax" it is supposed to charge an additional fee to a company that uses the data of Russians, analyzes the behavior of users on the network and forms an advertising policy in Russia. The funds raised will be used to support the Russian IT industry, and the estimated deadline for making a decision on digital tax will be until mid-2021, the source said.

The government is discussing the introduction of a digital tax

The conversation about the redistribution of tax revenues and the introduction of a new tax came because benefits and support measures for Russian IT companies can no longer be expanded at the expense of budget funds - according to the participants in the meeting, Chernyshenko said such an introductory part. The high-tech industry already enjoys significant tax benefits, fraught with falling budget revenues.

According to the chief analyst of the Russian association electronic Kazaryan's kommunikatsiykarena, the VAT for electronic services brings in the budget about 50 billion rubles a year, it is less, than potential losses of the companies which do not have the right for a preferential tax rate. The analyst believes that it would be more effective to cross-subsidize some market players at the expense of others to return to a lightweight form of obtaining zero VAT for developers and eliminate double taxation for Russian IT companies offering their services through foreign platforms.^[2]

The Ministry of Finance is exploring the possibility of introducing a digital tax in Russia

On February 10, 2021, it became known that the Russian Ministry of Finance is exploring the possibility of introducing a new tax for foreign IT companies operating in the Russian Federation. About this deputy head of the department Alexei Sazanov said in an interview with the audit company KPMG.

Large foreign digital companies earn profits from the provision of services in Russia, which, in principle, is not now taxed in our country, because often they do not have representative offices here. Therefore, we will strive to change the situation and tax this profit, "Sazanov said.

According to him, by February 2021, the Ministry of Finance is studying a similar experience of other countries. So, it is planned to consider the results of the introduction of a digital tax in Britain. The ministry has not yet made a final decision, the deputy minister said, adding that it will be possible to talk about the feasibility of the initiative after studying such laws abroad.

Sazanov Alexey: The Ministry of Finance is studying the possibility of introducing a digital tax in the Russian Federation

This is a global trend, now there are discussions on the OECD platform about creating a supranational tax, which would then be distributed among various countries. But so far there is no tangible progress in this direction, so individual countries, such as Italy, Spain, England and France, independently introduce a digital tax in their territories, "said Alexei Sazanov.

This is not the first mention of the plans of the Ministry of Finance to introduce a digital tax in Russia. The corresponding provision appeared in the document "The main directions of the budget, tax and customs-tariff policy for 2020 and the planning period 2021 and 2022." The ministry then proposed changing Russian law so that digital companies declare income for taxation in those jurisdictions where their users are located. At the same time, the department clarified that the issue should be worked out in detail.^{[3] [4]}

2020

PwC: Russia will introduce a tax on artificial intelligence

In a study published on June 19, 2020, the consulting company PwC announced the possible introduction of a tax on artificial intelligence in Russia. This is expected to happen in 2030. More details here.

Federation Council proposes to introduce a digital tax

May 20, 2020 it became known about the proposal of the Federation Council to introduce a digital tax in Russia. A document with this initiative was sent to First Deputy Prime Minister Andrei Belousov.

Consider the introduction of a digital tax, which provides for taxation in the country where consumers of digital products are located. To work together with interested state authorities on the possibility of making appropriate changes to regulatory and regulatory legal acts, "the proposal of the working group of the Federation Council says (a fragment from this document cites TASS).

Federation Council sent Belousov a proposal to introduce a "digital tax"

A letter addressed to First Deputy Prime Minister  Andrei Belousov  was sent under the signature of the chairman of the working group of the Federation Council on improving legislation in the conditions of the COVID-19 coronavirus, the first vice- speaker Nikolai Fedorov. At the same time, the authors of the document do not explain for which digital products they want to levy taxes on the population.

The Center for Strategic Research (CSR), headed by presidential aide Maxim Oreshkin, believes that Russia needs a digital tax to help domestic IT companies and protect the Russian budget.

In 2019, the Ministry of Finance of the Russian Federation, in search of new sources of replenishment of the treasury, began to work out options for tightening the tax burden on global digital service providers. The agency wants to change approaches to taxation so that technology corporations, such as Google, Facebook and Apple, share revenues from the Russian audience with the Russian budget, and not pay income tax only at the place of registration of the head office. This situation appeared in the document  "The main  directions of  the budget, tax and customs-tariff policy for 2020 and the planning period 2021 and 2022."^[5]

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