The Russian VAT appears to be similar to VAT in other European countries. For instance, VAT is collected in stages by businesses; credits are allowed for VAT on purchases, VAT is not applicable for exports and imposed on imports. A VAT taxpayer calculates its net VAT liability using the 'credit method'. This means that the taxpayer calculates its VAT liability on its taxable sales and then subtracts the VAT on its purchases for which it is entitled to credit.

Value added tax is levied at the rate of 18 per cent for most goods and services. The rate of 10 per cent is currently imposed on the supply of certain goods i.e. goods for children, food, medicine.

Foreign entities working in Russia or with Russian undertakings should consider their VAT status, as they can be liable to VAT for some transactions. Liability of foreign persons does not depend on whether they have permanent office in Russia or not. It is not regulated by double tax treaties and, therefore, is a matter of the Russian unilateral legislation only. If a foreign entity is liable to Russian VAT, tax will be withdrawn at source by a Russian payer. In case a foreign entity wants to credit VAT paid, it must register in the Russian tax inspection.