On 31 July 2020 the President signed Federal Law No. 265-FZ dated 31.07.2020 “On amending the Russian Tax Code regarding the “tax manoeuvre” in the IT industry1 (hereinafter, the ‘Law’). The Law introduces significant changes to how the VAT exemption is to apply to software and databases.
The Law partly relates to the VAT exemption for software and databases, and was adjusted during consideration in the Russian State Duma. The final version of the Law does not make reference to licence agreements as conditions for application of the VAT exemption. As such, once the changes have come into force, the VAT exemption should apply to software and databases (those listed on the Unified Register of Russian Programs for Computers and Databases, with the exception of “advertising software”) provided under other types of agreement other than just licence agreements (e.g. mixed agreements containing licence and service elements). However, applicability of the VAT exemption to ‘Software as a Service’ (“SaaS”) is still an open question.
Source KPMG
