You Can’t Agree About Taxes


When a Russian company pays abroad to a service company, it acts as a tax agent for the Treasury: it must withhold VAT and pay it on the foreign company’s behalf. If it doesn’t, it will have to do so anyway plus pay penalties and interest - regardless of any agreement on this matter between the parties.

Joint Stock Company "Ulyanovsk Motor Plant" had a contract with a foreign company. The agreement specified that the money for the services had to be paid in full and without any tax deductions. Theoretically speaking, the foreign company was the actual payer of VAT, yet in this case - because it wasn’t registered in the Russian tax office - the Russian company had to pay the tax on top of the services’ fees. This was the decision of the Supreme Commercial Court No 15483/11 of June 3, 2012.