Payment agent taxation

A payment agent in foreign trade works under an agency agreement (Chapter 52 of the Russian Civil Code). It transfers money to the beneficiary at the expense of the client, who is called the principal in the agreement. The agent’s taxes are calculated on its fee, not on the full amount that passes through it.

What is and is not the agent’s income

Money the agent receives from the principal to pay the supplier is not its income. The Tax Code expressly excludes it from an intermediary’s income (Article 251(1)(9) of the Russian Tax Code). The agent’s income is its fee. The agent pays tax on it under its own tax regime: corporate profit tax or tax under the simplified system. A foreign agent pays taxes in its own country.

VAT on the fee

The same rule applies to VAT: an intermediary’s tax base includes only its fee (Article 156 of the Russian Tax Code).

• A Russian agent on the general tax regime charges VAT on its fee and issues a VAT invoice (schet-faktura). The principal can deduct this tax.
• An agent on the simplified tax system generally did not charge VAT in the past. Under the new rules, some companies on the simplified system pay it too, so check the completion certificate and the VAT invoice.
• A foreign agent does not charge Russian VAT. Whether its service is subject to VAT in Russia depends on the place of supply under Article 148 of the Russian Tax Code.

The agent’s VAT relates only to its service. VAT on imported goods is paid on import, and the way the supplier is paid does not affect it: import VAT.

Payment agent vs. tax agent

These are different roles. A tax agent withholds and remits tax on behalf of someone else, for example VAT for a foreign seller of services. A payment agent does not pay tax for you. At the same time, a Russian company working with a foreign agent may in some cases itself become a tax agent for VAT (Article 161 of the Russian Tax Code).

What matters to the principal

• The amount paid to the supplier is the cost of the goods or services under your contract. It is confirmed by the agent’s report and the payment confirmation.
• The agent’s fee is an expense for you. In the completion certificate or the report, it is shown separately from the amount passed on to the supplier. If it is not, the expense is hard to account for, and VAT is mistakenly charged on the whole payment.
• The agreement and the payment order must show what the fee consists of: a percentage, a fixed part, an exchange rate difference.

When VEDmost arranges the payment, the agent provides its report and completion certificate, and we add them to the document package so that your accountants can close the payment: Documents.

This article is for general understanding and is not a basis for a tax position. We’ll tell you what to do in your deal after reviewing the agreement and the payment documents.