Google tax in Russia: who pays and how much

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In early 2017, a bill dubbed the "Google tax" came into force in Russia. Let's figure out what is good and not very dangerous for its introduction for global corporations and individual users, as experts commented on it, is it possible to avoid paying it.

Brief note on the draft law

"The tax on Google", which came into effect on January 1, 2017, was adopted by the State Duma of the Russian Federation more than six months earlier - on June 15, 2016. The bill obliged foreign companies selling their products or services via the Internet to pay from its activities VAT. Therefore, to the question: "What is the percentage" tax on "Google"?" you can easily answer - 18%.

The initial draft, proposed by deputies from Just Russia and the Liberal Democratic Party Vladimir Parakhin and Andrey Lugovoi, envisaged the introduction of this tax on the products of not only foreign IT companies, but also Russian ones. However, in this version, he was severely criticized. The real version of the draft was supported by 330 deputies out of 383.

Pros and cons of the bill

There are two undoubted advantages of the law on the “Google tax”. The first is additional revenues to the state treasury. that the law did not affect Russian developers - this will make their products more accessible and thus more attractive.

However, the drawback of the bill also concerns developers - those who promote their projects on the foreign Play Market, App Store, etc. Naturally, it is inappropriate for them to raise prices for games and applications that have already been released - the introduction of the law will affect the cost of new developments. Therefore, the second, very significant minus will affect end consumers: the amount of products will increase according to VAT, and the buyer will be forced to pay for it from his wallet.

Expert comments

Let's get acquainted with the comments on the "Google tax" of experts who were directly affected by the new project:

• Nikolay Nebyshenets, general manager of Wargaming in the CIS countries, told reporters that he had long expected the introduction of such a tax in Russia - according to the trend of world practice. For consumers of his company's products, the fee primarily affected in-game purchases. He believes that the burden of the 18% tax will eventually be passed on to the players.
• Ilya Karpinsky, deputy. head of the gaming line Mail. Ru Group, believes thatthe consequence of the adoption of the bill will be an increase in prices for applications, games, programs offered on the sites of foreign Internet markets. However, this will not scare away the latest Russian developers, who, using the same Play Market or App Store, receive the vast majority of their income.
• Sergey Orlovsky, founder of Nival, notes the biggest omission of the recently adopted "Google tax" - double VAT. the same name is sent to the state treasury when transferring funds for sold products from the Internet site to the developer of this application. The expert also believes that the tax will weaken the already shaky position of the electronic services market, which, in turn, can lead to a significant reduction in its diversity.
• Anton Yudintsev, co-founder of Gaijin Entertainment, shares a sad conclusion that the introduction of the new tax will primarily hit the pockets of direct consumers, which will lead to a decrease in the volume of purchases of electronic services. Such a turn of affairs will be unfavorable for Russian developers of mobile applications and will lead to a slowdown in the development of the domestic IT sector.

Experience from other countries

"The tax on Google in Russia is not the only one of its kind. Large American technology corporations pay similar VAT in the Netherlands, Luxembourg and Ireland. But at the same timeit is these states that offer the minimum tax burden, a kind of "tax paradise".

Since 2015, discussions have been underway on the introduction of a single tax in the EU, similar to the Russian one, which would also affect the interests of the mentioned US IT companies. Taxes similar to VAT on technology firms and corporations apply in South Korea and Japan. However, in terms of size, they are noticeably inferior to the Russian "Google tax" - 10% and 8%, respectively.

Who pays the "Google tax"

There are two possible schemes for transferring the "Google tax" to the treasury:

1. Payment of tax by a foreign corporation. In this case, the latter should provide electronic services to a private person (Russian citizen) in accordance with a direct contract.
2. Payment of tax by the addressee to whom the service was provided. In this case, the consumer can only be a legal entity - an individual entrepreneur, a Russian organization, a representative office of a foreign company in the Russian Federation. The fee is paid by them as withholding agents.

If a foreign firm purchased electronic services from a foreign IT company, then both parties to the transaction are en titled not to pay the "Google tax".

Taxpaying Companies

According to the Federal Tax Service, 111 foreign technology companies have already been registered. Among them are the following corporations:

• Google, in particular Google Play (after the name of this corporation and dubbed the law in the media);
• Apple (incl.h App Store);
• Microsoft;
• Financial Times;
• Aliexpress;
• Facebook Inc;
• eBay;
• Netflix International B. V., Wargaming Group Ltd;
• Bloomberg;
• Steam;
• Chelsea and others

Similar domestic corporations - Yandex, Rambler&Co, Mail. Ru Group, also pay taxes, following Russian law.

Consumers accumulating the effect of the law

"The tax on Google" is appropriate when the above-mentioned foreign company sells its electronic products or services to a Russian buyer - a person located on the territory of the Russian Federation. It can be:

• IP, organization registered in Russia.

• An individual who:

  • lives within the Russian Federation;
  • pays the bill with a card of a Russian bank or an electronic money transfer operator;
  • has a network address that determines its location on the territory of the Russian state;
  • uses a phone number whose international code is Russian to pay for services.

What is subject to the new tax

18% "Google tax" in Russia today is paid on purchases or use of the following types of products and services:

• video, audio, graphics, music, e-books;
• mobile applications, computer programs, video games;
• hosting providers;
• advertising platforms;
• Internet auctions;
• platforms for placing various advertisements for the sale, purchase, rent, provision of services, etc.;
• automated search services;
• domain registration;
• cloud data storage;
• providing visit statistics.

A complete list of products and services can be found when reading the new Article No. 1742 of the Tax Code of the Russian Federation. It is worth noting that it does not fall under Google taxation:

• provision of services, goods, works ordered via the Internet, but delivered or performed without his help;
• sale, transfer of rights to own information data on tangible media, including software, computer games;
• providing access to the World Wide Web;
• consultations via e-mail.

Bypass the Google Tax: Mission Possible

The introduction of the new tax did not please users who often buy applications and paid add-ons, extensions and premium versions for them through Google Play, the App Store, etc. It also affected users whose profile in games is linked to Google -account. There are currently three unofficial ways available to save 18% off new content costs:

1. Make a purchase through Facebook by linking your account to your profile on this social network.
2. Pay with Pay Pal.
3. Change the country of location in the Play Market to Belarus, Ukraine or any other country in whichno such tax applies. Such an operation is done through special applications that change this information in the user ID.

The law also affected many entrepreneurs who advertise their products or services through Google AdWords. How to get around the "Google tax" legally in this case? There are the following ways:

1. Pay for advertising through a US legal entity account.
2. Pay for advertisements through a private, natural person residing in the United States.
3. Purchasing or renting an old Google AdWords account registered before 2007. The first operation will cost about 3,000 euros, and the second - about 200 dollars. This case is very unreliable - when transferring an account, you can easily become a victim of scammers.
4. Reimbursement of tax paid from the budget - the scheme is only valid for taxpayers on many disadvantageous general taxation systems.
5. Payment for submitting an advertisement through a person registered in Belarus or Ukraine. The disadvantage of this method is that having, for example, a Ukrainian Google AdWords account, you need to pay all bills with a bank card of this country.

"Tax on Google", designed to increase revenues to the Russian budget, according to experts and ordinary users, is untimely, unfinished and unnecessary. The consequence of its adoption was that foreign IT corporations shifted the payment of the VAT introduced for them to consumers of theirproducts and services, increasing the cost of the latter by 18%, which could not but lead to a decrease in the number of purchases. Since the main suppliers of content for the Russian buyer were domestic developers, the innovation hurt them too.