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Mandatory registration of foreign companies providing services in electronic form

Features of taxation of foreign companies providing services in electronic form were introduced in the tax code of Russian Federation on January 01, 2017. Initially, the «tax on Google» was directed to foreign companies without presence in Russia, selling services in electronic form to buyers – individuals.

The services in electronic form according to the art. 174.2 of the tax code include: granting the rights to use computer programs (including computer games), databases through the Internet; rendering advertising services in the Internet, providing the advertising space in the Internet; rendering services in placement of offers on acquisition of goods in the Internet; granting rights to use electronic books (publications) and other electronic publications through the Internet, including by providing remote access to them for viewing or listening through the Internet.

Such companies had to be tax registered in the Russian Federation, maintain a register of buyers of services, report on income and pay VAT.
At October 31st, 2018, only 174 foreign companies rendering services in electronic form were registered in tax authority as VAT payers.

Since January 01, 2019, the tax code will enter into force another set of amendments relating to work with foreign companies providing services in electronic form.

The essence of the changes:

Foreign companies providing services in the electronic form will include not only those companies that provide services to individuals in the territory of the Russian Federation, but also those that provide services to legal entities in the territory of the Russian Federation.

What a foreign company should do:

1. The providers of electronic services for legal entities having a direct contract and settlements with the buyer of services must be registered in the tax authority of the Russian Federation in the period up to 15.02.2019 (p.4.6. of article 83 of the tax code).

Exceptions: if there is an intermediary between the buyer and the seller of services who will act as a tax agent (can act on the basis of an Agency agreement/ order/ Commission, etc.) and transfer payments to the tax office for a foreign company (p. 10 of article 174.2 of the tax code).

Registration is possible by submitting an application on the website https://lkioreg.nalog.ru/ru. After submitting the application, the contact person will receive a login and password to access the account, as well as a certificate of registration.

2. To report and pay the VAT.

A foreign company must submit reports through its personal account on a quarterly basis, by the 25th day following the last month of the quarter. Payment of tax must be made within the same period.
The tax will be calculated based at the rate of 15.25%.

3. In addition to registration, it is recommended to open an account in a Russian Bank in order to pay the VAT and be sure that the tax service received it.

https://lmasupport.com/en/mandatory-registration-of-foreign-companies-providing-services-in-electronic-form/

Mandatory registration of foreign companies providing services in electronic form Features of taxation of foreign companies providing services in electronic form were introduced in the tax code of Russian Federation on January 01, 2017. Initially, the «tax on Google» was directed to foreign companies without presence in Russia, selling services in electronic form to buyers – ...

Risks of re-qualification of fixed-term contracts

What can happen if the employer does not comply with the restrictions for the conclusion of fixed-term employment contracts, and enters into a fixed-term employment contract, instead of an employment contract for an indefinite period? According to the art. 59 of the Labor code, an employment contract concluded for fixed-term period in the absence of sufficient grounds established by the court is considered to be concluded for an indefinite period. The same applies to the repeated conclusion of fixed-term employment contracts with the same employee for the performance of the same work function.

Conclusion of employment contracts and civil law contracts with employees

At the moment of hiring a new employee of the company there raise the question of possibility of concluding with the employee not an employment contract, but civil contract (usually a services contract), or the conclusion of a fixed-term employment contract instead of an employment contract for an indefinite period. The company's interest is not so much in saving, but rather in the ability to quickly terminate the contract if the employee does not meet expectations, or in the case if the need in such employee disappears.

The conclusion of employment contracts is governed by the mandatory provisions of labor legislation, while the civil contract is governed by the dispositive provisions of civil legislation.

The main difference between employment contracts and civil contracts is the subject of the contract. At the conclusion of the employment contract, the employee undertakes to perform the labor function indicated in the contract, under the civil contract the contractor undertakes to provide certain services and transfer their result to the customer. That is, within the framework of the employment contract, the subject is the process of performing the labor function by the employee, and under the civil contract – the final result of the contractor's services. Moreover, if under the employment contract the employee is obliged to perform the labor function personally, then under the civil contract the contractor has the right to involve third parties to perform their duties.
Special attention should be paid to the degree of independence of relations between the two types of contracts. The employee, associated with the employer by the employment contract, is directly subordinated: he must obey the job description, daily routine, the requirements of the supervisor, the employer undertakes to create the employee necessary working conditions for the performance of labor functions. The contractor under the civil contract is independent in methods, order, time of performance of the duties, he doesn't submit to the customer.

Another significant difference is the period of the employment contract and the civil contract. The civil code does not contain a limitation on the duration of contracts. At the same time, the labor code expressly provides that an employment contract is concluded for an indefinite period (Art. 58). The labor code also provides for the possibility of concluding fixed-term employment contracts for a period of not more than five years, when labor relations cannot be established for an indefinite period (art.58) But the employer needs to carefully assess the possibility of concluding a fixed-term employment contract with an employee, according to the labor code, a fixed-term employment contract is rather an exception, the situations in which it is possible to conclude it are specified in article 59 of the labor code, the list is exhaustive.

Thus, at the conclusion of the civil contract companies are encouraged to assess the essence of legal relations and carefully check the content of contracts for features of employment relations. A similar recommendation concerning the conclusion of fixed-term contracts - you need to make sure that there are sufficient grounds for the conclusion of this type of contract.

If, in fact, between an individual and the company is formed an employment relationship, but the company formalizes them as civil contract, it is possible to say that the rights of the employee are violated, he loses the guarantees provided by the labor legislation.

The labor code contains a special procedure for judicial protection of violated rights of an employee – an employee has the right to apply to the state labour inspection, to the court in, or to send a corresponding application to the prosecutor's office; in the trial there is a mandatory prosecutor, the employee is released from the obligation to pay court costs. According to statistics, in most cases, the court takes the side of the employee.

Risks of re-qualification of fixed-term contracts
What can happen if the employer does not comply with the restrictions for the conclusion of fixed-term employment contracts, and enters into a fixed-term employment contract, instead of an employment contract for an indefinite period? According to the art. 59 of the Labor code, an employment contract concluded for fixed-term period in the absence of sufficient grounds established by the court is considered to be concluded for an indefinite period. The same applies to the repeated conclusion of fixed-term employment contracts with the same employee for the performance of the same work function.

Conclusion of employment contracts and civil law contracts with employees At the moment of hiring a new employee of the company there raise the question of possibility of concluding with the employee not an employment contract, but civil contract (usually a services contract), or the conclusion of a fixed-term employment contract instead of an employment contract for an i...