Establishing the tax free system in Russia

18 May 2017

The Ministry of Finance of the Russian Federation prepared a draft law on establishing the tax free system in Russia. The draft law provides the application of 0% rate of VAT to the sales of goods by retail enterprises if the goods acquired by foreign individuals are exported by them outside of customs territory of the Eurasian Economic Union (includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia).

It is expected that the bill will be passed in the nearest time and the tax free system will start operating from 1 October 2017, first of all in Moscow, Saint-Petersburg and Sochi. In 2018 the number of cities covered by the tax free system will be extended.

The tax free system will be applicable to all goods including foodstuffs, which are not subject to excise tax. The only exception for excisable items will be made for spirits.

VAT reclaim will be possible if the total value of purchased items exceeds RUB10,000 (about USD175 or EUR160). Foreign buyers will reclaim the full amount of VAT except some percentage will be withheld as a fee of tax free system operators. The percentage will be defined by agreement between a retailer and the operator. 

The normal tax rate of VAT in Russia is 18%.



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Vitaly Sinitsin Vitaly Sinitsin

Tax and Legal Practice Director
Energy Consulting
Phone: +7 495 980 9081

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