What types of work are exempt from VAT?
Paragraph 3 of Article 149 of the Tax Code of the Russian Federation provides two grounds for which R&D is exempt from VAT.
The first is enshrined in subparagraph 16 of paragraph 3 of Article 149 of the Tax Code of the Russian Federation, according to which research and development work is exempt from VAT if they:
- are carried out at the expense of budget funds, as well as funds from the Russian Foundation for Basic Research, the Russian Fund for Technological Development and extra-budgetary funds of ministries, departments, and associations formed for these purposes in accordance with the legislation of the Russian Federation;
- carried out by educational institutions and scientific organizations on the basis of business contracts.
Thus, this benefit is applied depending on the source of R&D funding. That is, if the work is carried out at the expense of budgets or the above funds, VAT exemption is applied by both their performers and co-executors, provided that payment for such work is made at the expense of budgets or funds of the Russian Foundation for Basic Research.
