How to draw up an international software import contract

In this article, we decided to share the experience of localizing foreign software distribution contracts. Surely you know the term "localization" in relation to the withdrawal of software to the Russian or foreign market. It is also necessary to deal with any international contract if you do not want to receive tax problems.

For example, in negotiations with a foreign vendor, you agreed on a good margin, but did not take into account that you need to withhold VAT or source tax from the remuneration. As a result, you can not only not make money on sales of imported software, but also get a loss. Or you simply do not want to contact customs clearance, payment of duties and taxes when importing software into Russia.

Want to make an informed choice? Under the cut, we described a number of problems and solutions.

Choose the subject of the contract

In practice, we often have to deal with various distribution agreements of foreign vendors. Some of them are built according to the scheme of the supply agreement without transferring any rights to use the programs to the distributor, another provides for the transfer of rights to use the programs to the end user through the chain from the vendor through the distributor on the basis of a license agreement .

In both cases, the role of the distributor in the contract comes down to the search for end users of software products, accepting orders from them, collecting fees and transferring them to the vendor. The distributor may also be entrusted with the technical support services of the acquired software, but this does not affect the choice of the design of the contract with the vendor.

What are the fundamental differences between a software supply agreement and a license agreement?

In accordance with the provisions of the Russian legislation on a supply contract, a supplier-seller engaged in entrepreneurial activity is obligated to transfer the goods produced or purchased by him to the buyer within the stipulated time or period for use in entrepreneurial activity or for other purposes not related to personal, family, home and other similar use (Article 506 of the Civil Code of the Russian Federation).

In general, other provisions of the contract of sale apply to the supply contract, which do not contradict the special provisions of the supply contract.

Similarly, the provisions of the contract of sale apply to the sale of property rights, unless otherwise follows from the content or nature of these rights (Clause 4, Article 454 of the Civil Code of the Russian Federation.

The subject of the supply agreement is the obligation to transfer the goods into the ownership of the buyer (Clause 1, Article 1). .454 of the Civil Code of the Russian Federation.) In this case, a product means a certain thing (Clause 1 of Article 455 of the Civil Code of the Russian Federation) .In this regard, the seller is responsible for the quality of such a thing, its consumer characteristics, as well as its return in case of non-compliance with the specified parameters. In addition to this for sale It is the responsibility of the carrier to deliver such goods or transfer them to their location,

so that these provisions relate exclusively to the distribution of tangible media containing software.

However, in most cases, modern distribution agreements do not provide for the transfer of software on separate tangible media. On the contrary, the transfer of software is carried out by providing access to it (via the Internet).

In this case, a copy of the software is provided by transferring data to the user's device, which does not allow us to consider it as a specific thing.

In addition, the software is the result of intellectual activity (intellectual property), acting as a separate object of civil rights (Article 128 of the Civil Code of the Russian Federation).

As a result, the granting of the right to use software products is carried out on the basis of articles 12325 and 1286 of the Civil Code of the Russian Federation in accordance with a license agreement.

In addition to the software itself, the license agreement shall indicate the territory, term, and permitted methods of its use. The transfer of a copy of the program to the user is not the main subject of the contract, but the obligation arising from it. This distinguishes it from the supply contract in the substantive part.

Customs clearance software

In connection with the above features, distributors often have difficulty with the question of the need for customs clearance of software purchased under the contract.

It is interesting to note the clarifications given in due time by the Federal Customs Service in the Letter dated March 17, 2006 N 15-14 / 8524 “On the Customs Clearance of Information Transmitted over the Internet”.

In it, the FCS indicated that the legislation “does not classify the transfer of information products by electronic means of communication to international information exchange, but when importing (exporting) to (c) the territory (s) of the Russian Federation information products determines the movement of information (documents) on a physical medium ...

The commodity nomenclature of foreign economic activity of the Russian Federation and the Customs tariff of the Russian Federation do not contain, respectively, classification codes or customs duty rates for software or any other information products.

In view of the foregoing, the current legislation of the Russian Federation on customs does not provide for customs clearance of information products transported across the customs border of the Russian Federation by electronic means of communication.

Thus, customs clearance is not subject to information (computer program, mobile content) transported on the Internet via fiber optic communication or via satellite channels, but goods transported through the customs border of the Russian Federation containing the specified information, i.e. "material carrier (laser disk, diskette, cassette, etc.)."

The normative acts indicated in this Letter have ceased to exist, however, the logic of modern legislation and law enforcement has been preserved.

So at present, in the Customs Code of the Russian Federation, goods directly mean movable property moved across the customs border, including information carriers (paragraph 35, paragraph 1, article 4 of the Labor Code of the Russian Federation).

Accordingly, customs clearance is not performed for software downloaded over the network. At the same time, when delivering software on tangible media, all necessary customs procedures must be followed.

Import tax risks

From the point of view of tax law, the exercise of the right to use programs under a license agreement is exempt from VAT on the basis of paragraphs 26, paragraph 2 of article 149 of the Tax Code of the Russian Federation, in contrast to the sale of software as goods under a supply agreement, according to which 18% VAT is charged on the price of goods .

For imported goods, VAT is also paid in full. However, it should be borne in mind that VAT is levied depending on the chosen customs procedure at the same time as customs duties are paid. In the absence of customs clearance of the imported software, VAT is not actually withheld.

Nevertheless, due to the use of the design of the supply contract, which by definition relates to operations with goods subject to customs clearance upon import into the Russian Federation, there is a significant risk of accruing VAT arrears, penalties and fines based on the results of the distributor's tax audit.

Conclusions and recommendations on the contractual registration of software imports

Distribution agreements for the supply of programs using the Internet do not correspond to the actual relations of the parties and the requirements of Russian civil law.

Indication of the obligation to supply software as the subject of a distribution agreement is misleading and makes it impossible to legally exempt the remuneration from Russian VAT, since such an agreement cannot be qualified as a license.

In addition, such a distribution agreement does not provide the distributor with the right to use the supplied software and sublicense it. In this regard, the distributor is deprived of the opportunity to conclude licensing agreements with end users for which a VAT exemption is granted.

In addition, the recognition of a distribution agreement as a supply contract creates difficulties in applying the provisions of the double taxation avoidance agreement regarding copyright income (royalties), since here income is derived from the sale of property rather than rights.

In addition to the supply contract, other tax and accounting requirements apply. For capitalization and write-off of goods, it is necessary to draw up primary documentation other than documentation for granting a license.

As a result, in order to confirm the grounds for conducting currency settlements under the agreement, the distributor's bank may require the submission of documents commonly used under the international supply agreement (waybills and consignment notes), as well as confirmation of customs clearance.

In this regard, we recommend the localization of distribution agreements for the supply of programs in accordance with the requirements of Russian legislation, depending on the actual distribution scheme of such software.

Making a distribution agreement in the form of a license agreement will eliminate the above civil and tax risks in full, and will greatly simplify the subsequent conclusion of agreements with end users, since it will reduce the retail price by the amount of Russian VAT.