In general, revenue originating from the supply of goods, works and services in the territory of the Russian Federation and from the import of goods is subject to VAT unless specifically exempted by the Tax Code. Russia applies the destination principle, i.e.:
The taxpayer may be exempted from VAT upon application, provided that the turnover for the preceding 3 months did not exceed RUR 1 million.
The amount of VAT payable is the difference between the VAT due on the supply of goods, works or services and the amount of input tax incurred. The deductible input VAT is the VAT payable to other taxpayers according to invoices for goods, works or services actually received and related to the taxable transactions of the taxpayer, including transactions liable to VAT at the zero rate. The amount of the deduction also covers VAT paid on imported goods and on capital assets at the date on which the assets are capitalized. Input VAT offset or refund rules are complex and in most cases require thorough financial planning and contract structuring.
A VAT deduction is not available for transactions exempted from VAT and for transactions performed by a VAT non-taxable person. In these cases, the VAT paid is classed as a business expense.
If the amount of deductible input tax exceeds the amount of VAT payable on outputs, the excess may be used to offset other tax liabilities of a taxpayer in a consecutive period of 3 months. On the expiry of this period, the excess may be refunded at the request of the taxpayer. The application must be processed within 2 weeks of submitting the necessary documents. The same time limit applies to the subsequent refund payment.
The taxable amount for imports is determined in the same manner as for customs duties and must be increased by any excise taxes payable and customs fees. In the absence of a customs border, the tax base is defined as the sum of the purchase price of the goods plus any excise taxes due.
The export of goods and certain services from the customs territory of Russia is zero-rated by virtue of the destination principle, regardless of the state of destination. The same principle applies to re-exported goods and the goods exported following the completion of services pursuant to a contract under which the previously imported goods have been improved, processed or converted.
The zero-rating of exports is subject to certain documentation requirements, i.e. a taxpayer must submit the relevant documents to the tax authorities. VAT is paid and reported monthly.