Russia Announces ‘Google Tax Law’

Foreign companies selling e-content via the Internet in Russia are now required to register private offices in Russia, submit information on their sales in the country, and pay an 18% value added tax (VAT). 

The new rule, the Kremlin hopes, will claw back some much needed revenue from the sector, according to East-West Digital News.

The tax applies to the following types of content or services,  including selling and giving access to e-books, audio and visual content, images and music, computer programs and games, online advertising and other types of information on service or product offerings, domain name registration and hosting services.

This VAT will be levied based on the customers identified as Russian residents by their credit card number or IP addresses.

These rules, nicknamed ‘Google tax law,’ were introduced this past summer via amendments to the Russian tax code. They apply, in particular, to Apple, Google and Microsoft, which generate revenues through their application stores in Russia, as well as to such service providers as Gett and Uber.

Aiming to balance the scales between domestic and foreign Internet companies operating in Russia, the law may bring in to state coffers some ten billion rubles (approximately $160 million), according to its advocates.

 However, foreign companies have no obligation to create a legal entity in Russia, and may pay the tax via their local partners.

This is the case of Uber, under the condition that its Russian drivers be registered as legal entities or individual entrepreneurs, and that the responsibility for the settlement of the VAT be specified in their contract with Uber N.V., which is registered in the Netherlands.

The 18% VAT applies only to the commission fee paid by the drivers to Uber — in exchange for what is regarded as an “electronic service,” — not to the total fare settled by the client.