By what principle is the place of implementation of works and services determined?
In Art. 148 of the Tax Code of the Russian Federation establishes 4 main criteria by which the place of sale is determined:
- at the place of activity of the performer of works (services);
- at the location of the property with which the work (services) is associated;
- at the place of actual provision of services;
- at the place of business of the buyer of works (services).
For some types of work (services) there are separate rules for determining the place of sale. Let's talk about this in more detail.
What does the criterion “at the place of activity of the performer” mean and when is it used?
Work or services are considered performed (rendered) in the Russian Federation if its territory is the place of activity of the contractor, that is, the contractor is registered in Russia. In the absence of Russian registration, the place of activity of the performer is determined on the basis (clause 2 of Article 148 of the Tax Code of the Russian Federation):
- the place specified in the constituent documents of the organization;
- places of management of the organization;
- location of the permanent executive body of the organization;
- location of the permanent representative office in the Russian Federation (if the work was performed (services provided) through this permanent representative office);
- place of residence of an individual entrepreneur.
This criterion is a general rule. It applies to all works and services that are not specified in the individual provisions of Art. 148 Tax Code of the Russian Federation. Examples of works or services include:
- on the translation of technical documentation (letter of the Ministry of Finance of Russia dated October 6, 2008 No. 03-07-08/225);
- product certification (letter of the Ministry of Finance of Russia dated May 24, 2011 No. 03-07-08/155);
- production of advertising videos (letter of the Ministry of Finance of Russia dated April 27, 2010 No. 03-07-08/131);
- registration and sale of air tickets, including for air transportation carried out by foreign airlines (letter of the Ministry of Finance of Russia dated July 1, 2014 No. 03-07-RZ/31594);
- design services (letter of the Ministry of Finance of Russia dated July 31, 2012 No. 03-07-08/223), etc.
Clause 2 of Article 148 of the Tax Code of the Russian Federation
The place of activity of an organization or individual entrepreneur performing types of work (providing types of services) not provided for in subparagraphs 1 - 4.1 of paragraph 1 of this article is considered to be the territory of the Russian Federation in the event of the actual presence of this organization or individual entrepreneur on the territory of the Russian Federation on the basis of state registration, and in its absence or in relation to branches and representative offices of the specified organization - on the basis of the place specified in the constituent documents of the organization, the place of management of the organization, the location of the permanent executive body of the organization, the location of the permanent representative office in the Russian Federation (if the work is performed (services are provided) provided through this permanent establishment) or the place of residence of the individual entrepreneur. (As amended by Federal Laws No. 119-FZ dated July 22, 2005; No. 238-FZ dated July 21, 2014)
For the purposes of this chapter, the place of activity of an organization or individual entrepreneur that provides for use aircraft, sea vessels or inland navigation vessels under a lease (time charter) agreement with a crew is not recognized as the territory of the Russian Federation, if these vessels are used outside the territory of the Russian Federation. Federation for the extraction (catch) of aquatic biological resources and (or) scientific research purposes or transportation between points located outside the territory of the Russian Federation. (As amended by Federal Law No. 245-FZ dated July 19, 2011)
For what kind of work and services is the property location criterion used?
The following are considered to be provided at the location of the property (subclauses 1, 2, clause 1, Article 148 of the Tax Code of the Russian Federation ):
- Work or services directly related to real estate located on Russian territory, including construction, installation, construction and installation, repair, restoration work, landscaping work, rental services.
- Work or services directly related to movable property, aircraft, sea vessels and inland navigation vessels located on the territory of the Russian Federation, including installation, assembly, processing, processing, repair and maintenance. Moreover, in this case, it does not matter who owns the property - a Russian or a foreign person (letter of the Ministry of Finance of Russia dated September 19, 2012 No. 03-07-08/272).
If real estate or movable property is located abroad, work and services are considered to be implemented outside the Russian Federation (subclause 1, 2 clause 1.1 of Article 148 of the Tax Code of the Russian Federation , letters of the Ministry of Finance of Russia dated October 24, 2013 No. 03-07-08/44890, dated November 2 .2012 No. 03-07-08/310, etc.).
Important! The place of sale of services for the organization of the specified works (services), as well as services for the assessment of this property, is determined at the location of the contractor (letter of the Ministry of Finance of Russia dated July 20, 2010 No. 03-07-08/207, dated June 22, 2010 No. 03-07-08 /183).
Clause 1.1 of Article 148 of the Tax Code of the Russian Federation
Unless otherwise provided by paragraph 2.1 of this article, for the purposes of this chapter, the territory of the Russian Federation is not recognized as the place of implementation of work (services), if: (As amended by Federal Law No. 245-FZ dated July 19, 2011)
Clause 1 of the work (services) is directly related to real estate (with the exception of aircraft, sea vessels and inland navigation vessels, as well as space objects) located outside the territory of the Russian Federation. Such works (services), in particular, include construction, installation, construction and installation, repair, restoration work, landscaping work, rental services;
Clause 2 works (services) are directly related to movable property located outside the territory of the Russian Federation, as well as to aircraft, sea vessels and inland navigation vessels located outside the territory of the Russian Federation. Such works (services) include, in particular, installation, assembly, processing, processing, repair, maintenance;
clause 3 , services are actually provided outside the territory of the Russian Federation in the field of culture, art, education (training), physical culture, tourism, recreation and sports;
clause 4, the buyer of works (services) does not carry out activities on the territory of the Russian Federation. The provisions of this subparagraph apply when performing those types of work and services that are listed in subparagraph 4 of paragraph 1 of this article;
clause 5, transportation services (transportation) and services (work) directly related to transportation, transportation, chartering are not listed in subclauses 4.1 - 4.3 of clause 1 of this article. (As amended by Federal Law No. 245-FZ dated July 19, 2011)
(Clause introduced - Federal Law dated July 22, 2005 No. 119-FZ)
What services are considered sold at the place of provision?
This criterion is used when determining the place of sale of services in the field of culture, art, education (training), physical culture, tourism, recreation and sports (subclause 3, clause 1, article 148 of the Tax Code of the Russian Federation ).
If these services are actually provided on Russian territory, they are recognized as realized in the Russian Federation. And it doesn’t matter whether they are provided by a Russian or foreign entity.
And vice versa, when these services are provided by a contractor from Russia outside our country, the Russian Federation is not recognized as the place of their implementation - for example, when a Russian organization provides services abroad:
- on training in the operation and maintenance of equipment, installation and modernization methods, etc. (letters of the Ministry of Finance of Russia dated December 5, 2011 No. 03-07-08/342, dated September 2, 2011 No. 03-07-08/273);
- in the field of recreation and health resorts (clause 3 of the letter of the Ministry of Finance of Russia dated April 27, 2010 No. 03-05-04-01/27).
What are engineering services?
Article 148 of the Tax Code of the Russian Federation, which regulates the procedure for determining the place of sale of services, mentions the phrase engineering services. The concept of this word is also briefly explained there. So what services are called engineering? And how is VAT calculated on services belonging to this group? Engineering services are usually provided during the construction process. These include the following types of services:
- engineering, consulting and development services at the preparation stage of the production process;
- consultations in preparing the construction or operation of industrial, agricultural, and infrastructure facilities;
- pre-design and design services (design development, etc.).
Engineering services may also include supervision of the project after it has been put into operation. Thus, engineering is understood as a field of activity that includes the development of various construction projects and the provision of engineering and consulting services on a commercial basis. From French, the root of the word is translated as a mechanism, and at the same time as a skill. Regarding the calculation of VAT on services related to engineering, it is carried out in the usual manner (at a rate of 18%). The only determining factor is the place of their implementation. The place of sale of such services will be the location of their buyer. Therefore, if engineering services are provided to a foreign person, then in the Russian Federation they are not subject to VAT, since the place of their sale will not be recognized as Russia.
For what kind of work or services is the buyer’s place of business important?
Works and services, the place of sale of which is determined by the buyer’s place of business, are listed in subparagraph. 4 paragraphs 1 art. 148 Tax Code of the Russian Federation. By purchasing these services from foreign entities that are not registered with the Russian tax authorities, the buyer becomes a VAT agent and is obliged to withhold tax from the income of the foreign contractor and transfer it to the budget (clauses 1, 2 of Article 161 of the Tax Code of the Russian Federation).
For more information about VAT agents, read the article “Who is recognized as a tax agent for VAT (responsibilities, nuances).”
Such services include, in particular:
- transfer, grant of patents, licenses, trademarks, copyrights or other similar rights;
- development of computer programs and databases, their adaptation and modification;
See the article “When purchasing computer programs from a foreign company, you may not have to pay VAT.”
- consulting, legal, accounting, auditing, engineering, advertising, marketing services, information processing services, R&D;
See the article “Is your advertiser a foreigner? You are a tax agent."
- provision of staff if the staff works at the buyer's place of business;
See the article “When leasing personnel, “agency” obligations for VAT may arise.”
- leasing of movable property, with the exception of land vehicles, etc.
Note that Russia is considered the place of activity of the buyer if he is present on its territory on the basis of state registration, and if there is none, then on the basis of:
- the place specified in the constituent documents of the organization;
- place of management of the organization;
- the location of its permanent executive body;
- location of the permanent establishment (if works or services were purchased through this permanent establishment);
- place of residence of an individual.
