Service contract with a foreign company. We conclude an agreement with foreign partners

VAT under contracts with foreign partners

The sale of goods, works and services is subject to value added tax (subparagraph 1 of paragraph 1 of article 146 of the Tax Code of the Russian Federation). Moreover, in order for the sale to be subject to VAT, it must be carried out on the territory Russian Federation.

If services are provided or work is performed by foreign partners or for foreign partners, then the question is "do I need to pay VAT?" can face the taxpayer.

It is not uncommon for foreign partners to provide work or services to Russian companies. Both parties should be aware of the tax implications of such transactions in the Russian Federation.

The fact is that when two Russian companies cooperate and the client transfers money to the executor (contractor), the recipient is obliged to pay VAT from this amount. With foreign contractors, everything is different. Russian tax office cannot fully control the income and revenues of foreign organizations. Therefore, a Russian client of a foreign company, who is recognized as a tax agent, is obliged to withhold and pay to the budget tax from the amounts to be transferred abroad. For failure to fulfill the assigned duties, a fine is provided, which is equal to 20% of the tax amount (Article 123 of the Tax Code of the Russian Federation). At the same time, there are cases when Russian company has the right not to withhold tax.

As already noted, the object of VAT taxation is considered to be operations on the sale of goods (works, services) on the territory of the Russian Federation (Article 146 of the Tax Code of the Russian Federation). Thus, value added tax is levied only on works and services, the place of sale of which is recognized as the territory of the Russian Federation.

Clause 1.1 of Art. 148 of the Tax Code of the Russian Federation for the purpose of calculating VAT, a condition is determined when the territory of the Russian Federation is not recognized as the place of sale of works (services).

In other words, the place of sale of works (services) is determined depending on their specific type, as well as on the place of business of the buyer and seller of works (services).

Payment of VAT by a tax agent

In accordance with paragraph 1 of Art. 161 of the Tax Code of the Russian Federation in the sale, in particular, of works (services), the place of sale of which is the territory of the Russian Federation, by foreign taxpayers who are not registered with tax authorities as taxpayers, the tax base is determined as the amount of income from the sale of these works (services ) including tax. The specified tax base is determined by tax agents, which are recognized as organizations and individual entrepreneurs who are registered with the tax authorities, who purchase work (services) from the relevant foreign persons on the territory of the Russian Federation.

Thus, tax agents are required to calculate at a rate of 18%, withhold from the taxpayer and pay the corresponding amount of tax to the budget, regardless of whether they fulfill the taxpayer's obligations related to the calculation and payment of VAT.

In accordance with paragraph 4 of Art. 174 of the Tax Code of the Russian Federation for the sale of works (services) on the territory of the Russian Federation by foreign taxpayers who are not registered with the tax authorities, the tax is paid by tax agents simultaneously with the payment of money to foreign firms. This is confirmed by the letters of the Ministry of Finance of Russia dated 26.04.06 No. 03-08-05, dated 16.09.05 No. 03-04-08 / 241 and dated 15.07.04 No. 03-04-08 / 43 "On the deduction of VAT paid by tax agent ".

A bank servicing a tax agent is not entitled to accept an order from him to transfer funds in favor of foreign companies, if the agent has not submitted a payment order to the bank to pay tax from the account.

In the letters of the Ministry of Finance of Russia dated 24.03.06 No. 03-04-03 / 07 and dated 20.07.06 No. 03-04-08 / 156, if VAT is not included in the price of the contract, then the obligation to transfer tax to the budget rests on the buyer at his own expense. In this case, a tax rate of 18% should be applied to the cost of works (services) (excluding value added tax).

Example:

The Russian company transferred 200 thousand rubles. a foreign counterparty that is not registered with the tax authorities of the Russian Federation, which has provided information processing services to it. Thus, the customer of services (a Russian organization) must pay VAT in the amount of 36 thousand rubles to the budget. (200 thousand rubles x 18%).

In the event that the contract specifies the cost of work (services) including VAT, the amount of tax will be calculated in accordance with paragraph 4 of Art. 164 of the Tax Code of the Russian Federation.

It should be noted that in accordance with paragraph 3 of Art. 171 of the Tax Code of the Russian Federation, tax amounts paid by a buyer-tax agent registered with the tax authorities are subject to deductions, but provided that the works (services) were purchased by a taxpayer who is a tax agent, to carry out operations recognized as objects of taxation, or for resale, and when purchasing them he withheld and paid tax from the taxpayer's income.

The amount of VAT that a tax agent is not entitled to deduct, he can take into account as part of other expenses when calculating corporate income tax on the basis of sub. 1 p. 1 of Art. 264 of the Tax Code of the Russian Federation.

Since 2006, when transferring any types of rights to intellectual property objects, regardless of whether these are exclusive or non-exclusive rights, the place of sale is defined as the place of business of the buyer. Previously, based on the place of business of the buyer, the place of sale was determined only when patents, licenses, trade marks, etc. were sold. (i.e. the seller transferred all rights to these objects). In situations where the buyer was allowed to use intellectual property objects for a certain period of time, the place of sale was determined as the seller's place of business (see the letter of the Ministry of Taxes and Duties of the Russian Federation dated 05.17.04 No. 03-1-08 / 1222/17).

Since 2006, a rule has also been provided for determining the place of sale of marketing services: the place of sale of marketing services is determined "by the buyer".

Determination of the place of sale under an international leasing agreement.

If a Russian entrepreneur transfers to a foreign organization that is not registered with the Russian tax authorities lease payments for cars imported into the territory of the Russian Federation under an international leasing agreement, then the place of sale of services for leasing vehicles is determined at the location of the seller. Since the car is leased by a foreign organization that does not have a permanent establishment in Russia, there is no VAT taxation here (letter of the Ministry of Finance of Russia No. 03-04-08 / 66 dated 23.03.06).

Determination of the place of implementation of services for holding international exhibitions and internships.

The place of implementation of services for holding conferences, seminars, symposia, forums, exhibitions and congresses is determined at the place of registration of the organizer. Where internship and training services are provided, the location will play a major role. If the company organizes internships in Russia, then VAT must be charged, and if outside the Russian Federation, then it is not (letter of the Ministry of Finance of Russia dated 03.30.06 No. 03-04-03 / 08).

Thus, when concluding contracts for the performance of work (provision of services) with foreign partners, taxpayers should correctly and specifically formulate the subject of the contract.

Ziborova O.V.
Internal Auditor
United Consulting Group CJSC

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Lawyers Answers (6)

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Lawyer, Moscow

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Good afternoon, Yuri.

I think it will be here for you better work exactly as an individual entrepreneur - in this case, your tax will not be 13%, but 6%.

Plus, you need to understand that if you are engaged in such activities on a regular basis, then in any case you must act as an individual entrepreneur, since this is an entrepreneurial activity.

To do this, you need to know the legislation of China, there may well be nuances, perhaps it makes sense for you to give the contract for verification to Chinese lawyers so that they tell you everything in detail about the risks of the contract.

Sincerely,


Dmitry Vasiliev.

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Clarification of the client

And why actually it is impossible to work in this case as a physicist and receive salary from a foreign company, independently transferring personal income tax 13% to the budget?

That 6% is better than 13 is understandable.

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Lawyer, Tomsk

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Hello.

as an individual entrepreneur (STS 6%) in terms of currency transactions, reporting (currency control, declarations)?

As an individual entrepreneur, in any case, you need documentary registration of incoming income, while the law does not require a physicist to attach documents confirming the source of income to the declaration - i.e. you can just write the amount. Of course, the tax inspector may then ask to show documents in support of receipts - if you have a systematic income, you may consider entrepreneurial activity without registration with the corresponding additional taxes on common system taxation (if you do not have an individual entrepreneur at all so far) or according to the simplified tax system (if you already have an individual entrepreneur and the inspector considers that you concealed income and did not pay tax as an entrepreneur).

Given the fact that money will come from abroad, the physicist may have problems with the bank - with an amount of more than 600,000 rubles, and in some cases even up to this limit, the bank sends information to Financial Monitoring to verify the sources and reasons for receiving money within the framework of the fight against terrorism and money laundering, in addition, if you use a personal account of a citizen for income from entrepreneurial activities, this is a violation of the terms of the account service agreement and the bank may block such an account.

With that in mind, I think you'd better act through an IP. Just check on taxes on the side of China - for example, such services may be taxed akin to our VAT on the side of the customer's country, i.e. you will "miss" some amount.

Also in the agreement there is a wording that the Agreement is governed and interpreted in accordance with the laws of China without the application of its conflict of laws rules, the arbitration will take place in China and on Chinese... Are there significant risks for me to work on such conditions, especially as an individual entrepreneur?

If you don't get paid, you will go to China to sue according to their legislation, and then through their authorities try to enforce the court's decision. Think how ready you are for this.

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Clarification of the client

Thanks for the detailed answer, but a counter question as to the previous lawyer

Why is it actually impossible to work in this case as a physicist and receive a salary from a foreign firm, independently transferring personal income tax 13% to the budget?

Is this an entrepreneurial activity and cannot be considered an ordinary labor activity?

It seems that the law does not prohibit working for foreigners?))

Or is it necessary to close the IP to work as a physicist?

In both cases, you need an agreement, and it seems that in both you can also get under Finmonitoring?

The main question is that the firm insists on working with me as a physicist.

received
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Lawyer, Moscow

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And why actually it is impossible to work in this case as a physicist and receive salary from a foreign company, independently transferring personal income tax 13% to the budget? That 6% is better than 13 is understandable. Or is it necessary to close the IP to work as a physicist?

If you only have this single contract and that's it, then you can work as a physical. person (although I do not see any special advantages in this), but if you have other similar contracts, then in this case it is exactly entrepreneurial activity and if the risk is that if you work as an individual. person, then you will be attracted to you will be presented with claims in connection with illegal business activities.

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Clarification of the client

Those. are these questions of part-time employment under several employment contracts?

Still, I am more concerned about the issue from the point of view of responsibility to a foreign company or country in the case of a physicist or individual entrepreneur.

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Lawyer, Moscow

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Those. are these questions of part-time employment under several employment contracts? Still, I am more concerned about the issue from the point of view of responsibility to a foreign company or country in the case of a physicist or individual entrepreneur.

Responsibility under Russian law is no different here - everything is the same.

The question is not a part-time job, but the fact that you will not have an employment relationship, if there are many of them, but it will be pure entrepreneurial activity.




"Civil Code of the Russian Federation (Part One)" dated 30.11.1994 N 51-FZ (as amended on 28.03.2017, as amended on 22.06.2017) Civil Code of the Russian Federation Article 2. Relations regulated by civil legislation

Civil law regulates relations between persons engaged in entrepreneurial activity, or with their participation, on the basis that entrepreneurial is an independent activity carried out at its own risk, aimed at systematic profit from the use of property, the sale of goods, the performance of work or the provision of services by persons registered in this capacity in the manner prescribed by law.

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Lawyer, Moscow

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It seems that the law does not prohibit working for foreigners?)) Or, to work as a physicist, it is necessary to close the sole proprietor? In both cases, you need an agreement, and it seems that in both cases you can also get under Finmonitoring? The main question is that the firm insists on working with me as a physicist.

If the firm insists and is not ready to consider other options, then this is strange, but for you it is not critical in general, it depends on how many such counterparties you have. Although, on the other hand, the fine for illegal business activities is minimal.

When a company plans to cooperate with several foreign partners in different directions, it is necessary to determine the specifics of working with foreign counterparties and the tax consequences for both parties.

Consider this topic For example:

CJSC Holding-R plans to cooperate with several foreign partners in the following areas:

- marketing research by the Dutch company "Research-N", which has a permanent representative office in Russia;

- purchase of the right to use the video image created by the German company "Info-G";

- lease of a building located in Russia and owned by the Cypriot construction company "Build-C".

We plan the workflow in advance

The first thing you need to pay attention to is to establish a proper document flow in the company. In many organizations, the chief financial officer of the company (financial director or chief accountant) is not involved in the process of negotiating contracts with “foreigners”. As a result, they forget to stipulate in the contract the obligations of the foreigner to pay taxes, to submit the documents required by the Russian side as a tax agent. Yes, and the contract itself ends up in the accounting department, when everything has already happened and it is too late to correct anything - all that remains is to overpay taxes at your own expense, or, worse, to pay fines. Therefore, I repeat, the first thing that can be advised to the Holding-R company is to organize the movement of documents in such a way that the specialists accounting and taxation necessarily participated in the negotiation of the terms of contracts prior to their signing.

Legislative edging

Normative documents that should be guided by the employees of "Holding-R" are, first of all, the Tax Code (and not only the 2nd, but also the 1st part); Federal Law No. 173-FZ of December 10, 2003 “On Currency Regulation and Currency Control”; Instruction of the Central Bank of the Russian Federation of June 15, 2004 No. 117-I and, finally, the Annual Letter of the Federal Tax Service "On the direction of the List of existing bilateral treaties of the Russian Federation on the avoidance of double taxation" (the last - dated January 15, 2009 No. BE-22-2 / [email protected]).

In article 7 of part 1 of the Tax Code, we read: if an international treaty of the Russian Federation containing provisions concerning taxation and fees establishes rules and regulations other than those provided for by the Code and the regulatory legal acts on taxes and (or) fees, then the rules and norms of international treaties of the Russian Federation are applied. According to the latest list of such treaties, Russia has 74. The title of these documents already refers to which taxes this Agreement has been concluded with. First of all, these are taxes on income (on capital), sometimes property taxes.

And not a word is said about other taxes, including VAT. There is only one international agreement on VAT today: the Agreement between the Government of the Russian Federation and the Government of the Republic of Belarus dated September 15, 2004 "On the principles of collecting indirect taxes when exporting and importing goods, performing works, rendering services."

Accordingly, when taxing VAT, we are guided by the norms of the Tax Code only. When taxing profits, first by the norms of the Tax Code of the Russian Federation. But if there is an international Agreement and the indication of Article 312 of the Tax Code of the Russian Federation is observed (namely, if there is confirmation that the "foreigner" has a permanent residence in this state), then the international Agreement applies. The confirmation must be certified by the competent authority of the relevant foreign state before the date of payment of income, in respect of which an international treaty of the Russian Federation provides for a preferential tax regime (Articles 306-310 of the Tax Code of the Russian Federation).

When “foreigners pay themselves

At the stage of preparing an agreement with the Dutch, German and Cypriot partner of the Holding-R company, first of all, it is necessary to find out if they have permanent representations (PP) in Russia for tax purposes. The definition of this term is given in article 306 of the Tax Code of the Russian Federation, as well as in all international agreements. According to the terms, the Dutch company "Research-N" has a PP in Russia. The income received by the “foreigner” for the provision of marketing services will be associated with the activities of his permanent establishment. Thus, it is necessary to obtain a notarized copy of the certificate of registration of the recipient of the “foreigner” income with the tax authorities of the Russian Federation from the Dutch counterparty of the Holding-R company. It is necessary to issue a copy no earlier than in the previous tax period (subparagraph 1 of paragraph 2 of article 310 of the Tax Code of the Russian Federation), and also mention this fact in the agreement, for example, in this way:

Research-N, duly registered with the tax authorities of the Russian Federation, is solely responsible for the submission of tax returns and calculations and the payment of corporate income tax, VAT and other taxes, as well as related penalties and fines in relation to works (services), performed under this contract. Since Research-N will provide services through its branch registered with the tax authorities of the Russian Federation, which is independently responsible for the provision of tax returns, calculations and payment of taxes, Holding-R should not withhold any taxes, including tax on profit of organizations and VAT by paying accounts "Research-N".

This is where Holding-R's participation in paying taxes as a tax agent under an agreement with a Dutch company ends.

We go to the agents

If there is no permanent establishment, as in the case of German and Cypriot counterparties, and the income of "foreigners" from sources in the Russian Federation (that is, from "Holding-R") falls into the list of Article 309 of the Tax Code of the Russian Federation, then the company becomes a tax agent for the tax on profit and VAT.

When there is no PP, and the income of the foreign partner is subject to taxation, it is necessary to find out if there is an international agreement with the respective country. As you know, agreements with Germany and Cyprus were signed back in 1996 and 1998. Based on this, Holding-R will have to stipulate in the contracts the obligation of the German and Cypriot companies to provide confirmation that they have a permanent location in their states.

This confirmation must be issued by the competent authority of the foreign state. Upon receipt of this document, before payment of income, Holding-R, as a tax agent, will tax the income of “foreigners” at the rates established in the Agreements, which are somewhat lower than those specified in the Tax Code.

In the contract, you can write, for example, like this:

"In order to avoid double taxation, Research-N must, within 10 calendar days from the date of signing this agreement, submit to Holding-R a confirmation of permanent residence in the Netherlands issued by the competent authority."

What does the Confirmation look like?

The Tax Code does not establish a mandatory form of documents confirming the permanent residence of a foreign partner in a foreign state. Most often, such documents are a certificate drawn up in the form established by the domestic legislation of a foreign state, or a certificate written in any form. It is affixed with the seal (stamp) of the competent (or authorized by it) body of the foreign state and the signature of the authorized official of this body. Usually it is the Ministry of Finance of the respective state.

The document issued must indicate a specific period for which the permanent residence of the company is confirmed (for example, a calendar year). This period should correspond to the one for which the income paid to the foreign organization is due. The tax agent is provided with one confirmation of the permanent location of the foreign organization for each calendar year of income payment. In addition, this document must be apostilled. The date of submission of the Confirmation is the date specified in it when issued by the authorized bodies (letter of the Ministry of Finance of the Russian Federation of July 21, 2009 No. 03-08-05).

Tax base: options are possible

It is important for Holding-R to immediately record that its income from business activities with Info-G and Build-C will be taxed in accordance with the legislation of the Russian Federation and Double Taxation Treaties.

When determining the price of the agreement, it is necessary to fix that taxes are included in the cost of the agreement and will be withheld by the tax agent (if there is such an obligation), and the amount under the agreement will be transferred to “foreigners” minus tax.

It is not always possible in practice to include such a condition in a contract. The most common wording is that the price of the contract is set without taxes and is subject to transfer to a foreigner in full without withholding taxes, and the obligation to pay tax on the territory of the Russian Federation is borne by the Russian side at its own expense. This is the worst case scenario, as the company will have to pay other people's taxes at its own expense. These are usually large sums.

Russia - Germany

The Russian counterparty is faced with the position of a tax agent in the case of the acquisition of services, works or anything equivalent to them for the purpose of calculating taxes (Article 148 of the Tax Code of the Russian Federation). By default, the place of sale is considered to be the territory of the Russian Federation, if the activities of the organization performing work (providing services) takes place in the territory of the Russian Federation. Thus, the place of sale is determined "by the seller". But there are a number of exceptions when the place of implementation of the work (service) is determined “by the buyer”. They are listed in subparagraph 4 of paragraph 1 of Article 148 of the Tax Code of the Russian Federation: the provision of such services is subject to VAT if the buyer is located in Russia. These include, in particular, the granting of the right to use the video image. In this case, the German company Info-G will receive income in the form of royalties, royalties and royalties, or income from copyright and licenses. In accordance with the Agreement with Germany (as well as with Cyprus, Great Britain, the United States), these amounts will not be subject to income tax in Russia.

As for VAT, it follows from the content of subparagraph 4 of paragraph 1 of Article 148 of the Tax Code of the Russian Federation that Holding-R becomes a tax agent for value added tax.

Russia - Cyprus

Income from real estate, including from the lease of a building by a Cypriot company, is subject to income tax in Russia. In other words, upon concluding this transaction, Holding-R becomes a tax agent for income tax and VAT, since services for renting property located on the territory of the Russian Federation are named in subparagraph 1 of paragraph 1 of Article 148 of the Tax Code of the Russian Federation.

In the contract with the Cypriot counterparty, when determining the price and the procedure for settlements, it is necessary to provide for both withholding of income tax and withholding of VAT.

Note to tax agents

Recall that the tax base for VAT is determined by the tax agent in the performance of each transaction as the amount of income including VAT (clause 1 of article 161 of the Tax Code of the Russian Federation). VAT is paid simultaneously with the transfer of funds to a foreign organization (paragraph 2, paragraph 4, article 174 of the Tax Code of the Russian Federation).

The amount of value added tax paid by the organization - the tax agent to the budget is subject to deduction from the total amount of VAT (clause 3 of article 171 of the Tax Code of the Russian Federation), subject to the usual conditions (clause 1 of article 172 of the Tax Code of the Russian Federation). In addition, a prerequisite for a tax agent is to have payment documents that confirm that VAT has been transferred to the budget. Moreover, a Russian company has the right to receive a deduction even if VAT is paid at its own expense. This conclusion is also made by the Ministry of Finance in its letters dated August 1, 2006 No. 03-08-05, dated August 24, 2007 No. 03-08-05 / 2, dated October 7, 2008 No. 03-03-06 / 1 / 560.

Unlike VAT, which can be refunded regardless of whose funds it was transferred to the budget, the income tax is more and more complicated. If Holding-R does not provide for income tax withholding in the agreement with a foreigner and pays it to the budget at its own expense, then the company will no longer be able to take this amount into account as income tax expenses when calculating its own taxable profit.

As for the tax on income received by a foreign organization from sources in the Russian Federation, it is calculated and withheld by the tax agent for each payment of income in the payment currency (clause 1 of article 310 of the Tax Code of the Russian Federation).

Thus, at the end of the reporting (tax) period, the newly minted tax agent "Holding-R" provides information on the amounts paid to foreigners and withheld taxes for the past reporting (tax) period to the tax authority at the place of its finding.

The calculation form for today is established by order of the Ministry of Taxes and Tax Collection of the Russian Federation dated April 14, 2004 No. SAE-3-23 / [email protected]"On approval of the form of tax calculation (information) on the amounts of income paid to foreign organizations and taxes withheld".

In this case, the tax calculation is compiled separately for each reporting period in which income payments were made to foreign organizations, and not on an accrual basis from the beginning of the year (letter of the Federal Tax Service of Russia for Moscow dated June 27, 2008 No. 20-12 / 060969).

Summing up

So, let us summarize what the main points of the Holding-R company must be learned before starting to work with foreign partners:

1. If a foreign counterparty has a representative office that receives income from a resident of the Russian Federation, the latter does not participate in withholding taxes of the foreigner.

2. If there is no representative office and the income is indicated in article 309 of the Tax Code of the Russian Federation, then the Russian organization becomes a tax agent for income tax.

3. If in cooperation with a “foreigner” the place of sale of goods (and more often of works or services) is the Russian Federation, then the Russian company becomes a tax agent for VAT (Articles 146-148 of the Tax Code of the Russian Federation).

4. If the “foreigner” has not submitted a Proof of tax residency in his country, then all taxation of his income is made in accordance with the Tax Code.

5. If the “foreigner” has submitted a Confirmation and there is an international Agreement for the avoidance of double taxation, then income tax is paid in accordance with the Agreement (up to exemption from taxation).

6. As an agent, a Russian company must withhold tax (at the time the income is paid to it) and transfer funds to the budget, as well as submit a special tax calculation for income tax for the reporting (tax period).