VAT Invoice Rules for Intermediary Transactions Made Clearer.

23.04.2010

Legal Update No.138.

Goltsblat BLP advises that the Federal Tax Service of Russia has issued  Letter  No. ШС-22-3/85@, dated 04 February 2010, clarifying VAT invoice rules applicable to sale or acquisition of goods (work or services) through intermediaries.

As in its previous clarifications, Russia’s Federal Tax Service requires the principal selling goods (work or services) through an intermediary to issue VAT invoices to the intermediary containing the same details as those included in the VAT invoices issued by the intermediary to consumers. In turn, the intermediary is required to issue the principal a VAT invoice for the amount of its commission (agency) fee.

2009 saw significant amendments to Russian Government Resolution No. 914, dated 02 December 2000, “On Approval of the Rules for Keeping Journals of In-coming and Out-going VAT Invoices, Purchase Ledgers and Sales Ledgers for VAT Payment Purposes”. These amendments were prompted by adoption of Federal Law No. 224-FZ, dated 26 November 2008, entitling the taxpayer to deduct input VAT on advance payments.

In this context, the Letter of  Russia’s Federal Tax Service:

  • Details the rules for completion of VAT invoices  by an intermediary upon receipt of a pre-payment against forthcoming deliveries of goods (work or services) under intermediary operations.
    Upon acquisition of goods by the principal through an intermediary, the latter is to issue, on its own behalf, a VAT invoice to the principal containing the same details as those included in the VAT invoice received by the intermediary from the seller. In addition, the intermediary is to issue the principal a VAT invoice for the amount of its commission (agency) fee.
  • Clarifies the procedure for validating the input VAT deduction right of a principal that transfers a pre-payment to a seller through an intermediary for forthcoming deliveries.

In this case, alongside the documents listed in clause 9, art. 172 of the Russian Tax Code, the principal must hold the VAT invoice received by the intermediary from the seller upon the prepayment for the forthcoming deliveries transferred to the seller. The principal must also have the document confirming the prepayment actually transferred to the seller by the intermediary.

The Letter also requires intermediaries that do not incur VAT liabilities to issue VAT invoices when they sell the principal’s goods.

For additional information, please contact:

Andrey Shpak, Partner,
Tax Practice,
Goltsblat BLP,
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

Sergey Kalinin, Senior Associate,
Tax Practice,
Goltsblat BLP,
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

 

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