VAT Guide for Freelancers in Russia

Regardless of where you’re based, you have to deal with Russian VAT rules if you have clients in Russia. VAT, or Value Added Tax, is a consumption tax levied on almost all goods and services. While you might already know that, you might be unaware of the specific rules surrounding your product, which you should follow if you want to stay tax compliant.

The standard VAT rate in Russia is 20%, with reduced rates of 16.67% and 0% applied based on the products you sell. This guide includes everything you, as a freelancer, need to know about VAT (or НДС in Russian) in a nutshell. Let's get started!

What are the different VAT rates in Russia?
There are three different VAT rates in Russia, and freelancers must charge the amount that applies to their products and services:

  • The Standard Rate - Unless the items or services you offer fall under the reduced rate or zero-rated category, you should charge the standard VAT rate of 20%.
  • The Reduced Rate - The reduced rate is set at 16.67%. It applies to items such as some foods, livestock, certain children’s supplies, medicine, water, books, etc.
  • The Zero Rate - When items are zero-rated, they are still VAT-taxable, but the rate of VAT you must charge your consumers is 0%. This rate covers exports and associated services, suburban rail passenger transport, and so on. Although there are no charges on zero rates, you should record sales of goods and services and create a report based on your returns.

Who is required to account for VAT in Russia?

VAT comprises the largest source of federal revenue for Russia. There is no sales registration threshold, which means that even if you make just a single sale in the country, you must register for Russian VAT regardless of your yearly sales revenue or the service you provide.

VAT Guide for Expat Freelancers in Russia

Expatriates working in Russia are subject to comprehensive rules and, in most cases, employment visa/work permit requirements. A work permit, however, usually only allows you to work for the business that acquired it for you. Freelancing, hence, is largely illegal for foreigners in Russia. 

Xolo can help you register for taxes as a freelancer in Russia and handle all the necessary paperwork on your behalf. With Xolo Go, you can use a slice of our company as a legal framework to invoice your clients anywhere in Russia and beyond. 

When should you register for VAT?

Applications for VAT registration can be submitted online; the taxation period being from 1st January to 31st December. You need to report VAT to the Federal Tax Service of Russia every quarter. 

VAT returns must be filed and taxes must be paid no later than 25th of the month following the end of a reporting quarter.

How to register for VAT in Russia

In Russia, tax is managed by the country’s tax authority, the Federal Tax Service of Russia, governed by the Ministry of Finance. You can register for VAT online, by following these instructions from the tax authorities and submitting an application for the same.

Once registered, you will receive a VAT registration number which links you in the Russia tax system as a legal business and tracks taxes you pay, the tax credits you receive, the tax you charge from customers, etc. 

Alternatively, you can also register with the help of an agent. You can hire an accountant (or agency) to handle your VAT returns and dealings with the tax office. Xolo provides services like Xolo Go and Xolo Leap, which help with precisely this and any other VAT concerns you may have.

Financial Obligations of VAT Registered Freelancers in Russia

Registering for VAT is only the first step. From the day of your registration's effective date, you must:

  • Charge the correct VAT rate
    • Once you’re registered for taxes, you’re expected to charge 20% VAT on every sale to a Russian resident
  • Pay any VAT owed to the tax office
  • File VAT returns
    • You’re expected to file tax returns every quarter. You have 25 days to file and pay after the end of each period.
  • Maintain VAT records and a VAT account, for at least 6-10 years.

VAT invoices are basically tax receipts, an official record of how much tax you charged and collected, and hence official proof of how much tax you owe the government. Russian invoices must include the following information:

  • Your business name and address
  • Your business VAT number
  • Invoice date
  • Invoice sequencing number
  • Description of the goods or services
  • Rate of VAT applied to each item
  • The total amount, including VAT

If this sounds overwhelming, Xolo can help! We automatically generate, send, and store all your invoices digitally, so you won’t have to worry about misplacing them over the next decade.

How Xolo Can Help?

Tax registration process can be tricky at times, but we hope this guide has helped clear your doubts! If you’re still confused about the different schemes and numbers and paperwork, Xolo offers a range of solutions that handles all the hassle while you focus on your core competencies. 

With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC. 

  • Signing up takes only 10 minutes, and once you do, taxation, corporate compliance, and all the tricky VAT calculations are all automatically taken care of in the background!
  • We charge a flat rate of 5% from every withdrawal to your personal bank account. No surprise fees, no contracts, and no BS.

Xolo Leap is the easiest and most effective way to create your own company through Estonian e-Residency! Reduce time spent on mundane business administration and focus on what you do best!

  • We offer different tiers of service depending on the solopreneur’s, or as we call them, Xolopreneur's, individual needs.
  • Once you get your business set up, you can literally run it from anywhere in the world! So whether you’re a digital nomad or looking to gain access to the global market - this is the place for you! 

Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Russia in no time!