Google tax: 180 ° reversal
Google and Apple have amended contracts with software developers. Who should pay VAT on electronic services now?
Exactly a year ago, we posted two articles on Habré about how developers pay taxes when working with Google and Apple sites: Taxes on the sale of Google applications and advertising, and What taxes should be paid when displaying revenue from applications in Apple iTunes .
Since then, both companies have changed their approach to paying VAT when selling Russian developers' applications to the exact opposite, and have made appropriate amendments to their contracts. Therefore, it is time to update the information and again dive into the topic of "Google tax".
Under the cut, we will tell you on the example of the last legal conclusion what threatens the new approach of the Internet giants to pay VAT to ordinary developers.
The topic of the conclusion: "Issues of VAT collection from the sale of services in electronic form."
Reviewed case: the company develops mobile applications that are distributed through Apple's iTunes and Google Play. Receives 70% minus the agency fee. Pays VAT on 30% of the commission of the site as a tax agent. Applies the tax regime of the simplified taxation system, but plans to switch to the general taxation system (ESS) due to the growth in the volume of annual revenue. In this regard, there are questions about the need to pay VAT on the entire amount of sales through the Google and Apple sites, since the latest edition of the contracts explicitly states that the sites do not pay VAT on Russian developers .
For many, the latest news may come as a surprise, but Apple changed the Apple Developer Program License Agreement on June 4, 2018, and Google made relevant amendments to Google Play Software Distribution Agreements earlier - February 26, 2018.
Let us see what these amendments threaten to the Russian developers on the ESSE.
1. Contractual terms of sale on iTunes Apple site
Under the terms of Section 2 of Addendum A (Exhibit A) to the License Agreement for the use of the Apple Developer Program License Agreement, Apple acts as a commission agent when offering to sell and download the Licensed Applications by End Users located in Russia. At the same time, the said section contains a direct explanation that, for the purposes of this Agreement, a “commission agent” means an agent who commits actions and concludes transactions on his own behalf, but in the interests of another person, as basically defined in many civil law systems.
When applications are downloaded by End Users located in other jurisdictions, Apple may act as an attorney for the assignment agreement. A list of such countries is also contained in Appendix A to the Agreement with Apple.
According to Clause 1, Article.1005 of the Civil Code of the Russian Federation, under an agency agreement, one party (agent) undertakes to perform for a fee on behalf of the other party (principal) legal and other actions on its own behalf, but at the expense of the principal or on behalf and at the expense of the principal.
Under a transaction made by a third party agent in his own name and at the expense of the principal, the agent acquires the rights and becomes obliged, even if the principal is named in the transaction or entered into a direct relationship with the third party to execute the transaction. In a transaction concluded by an agent with a third party on behalf of and at the expense of the principal, the principal and obligations arise directly from the principal.
Thus, the rights under the Apple deal with the Russian face arise from Apple. The developer acting as principal on the basis of Appendix 2 to the Apple Software License Agreement (Apple Developer Program Agreement Agreement Schedule 2) is not considered a party to a deal entered into by Apple on its behalf, even if it was named in a transaction or entered into a direct relationship with a third party for its execution.
With this in mind, Section 1 of Schedule B (Exhibit B) to the Agreement states that Apple charges and transfers to the competent tax authority the taxes described in Section 3.2 of Schedule 2 of Schedule 2 for sales of Licensed Applications to End Users located in Russia.
However, it was stipulated that these conditions apply to developers who are not residents of Russia. Apple does not calculate and pay taxes for developers located in Russia, and such developers are independently responsible for calculating and paying such taxes as may be required under the terms of national law.
In other words, the provisions of article 174.2 of the Tax Code of the Russian Federation do not apply to the sale of applications by developers from Russia, since there is no sale of services in electronic form by a foreign organization (Apple in this case represents the interests of a Russian entity as an agent).
Thus, to determine the tax responsibilities of a Russian developer, one should be guided by other provisions of the RF Tax Code, based on the subject matter of the transaction concluded with the End User.
On the basis of Article 1000 of the Civil Code of the Russian Federation, the developer as the principal shall be obliged to accept from the commission agent everything executed under the commission agreement and release the commission agent from the obligations assumed by him to a third party on the execution of the commission order.
According to the Agreement with Apple, transactions with the End User are concluded on the terms of the Developer’s License Agreement with the End User, which are set out in Exhibit A as standard application licensing rules or as text provided by Apple when loading such an application on the site . Therefore, the End User acquires and makes subsequent use of the software under the License Agreement.
Thus, when Apple acts as a commissioner, the developer, as a client, accepts payment and discharges Apple from obligations under the License Agreement concluded by Apple with the End User.
When Apple acts in relations with End Users, the location of which is not considered the territory of Russia, as an attorney (ie, transactions are made on behalf of and at the expense of the developer-principal), the developer also acquires rights and obligations under the End User License Agreement .
With this in mind, the developer for OSNO is exempt from paying VAT on the amount of the right to use computer programs and databases under a license agreement on the basis of clause 26 of clause 2 of Article 149 of the Tax Code of the Russian Federation (sold at the location of the buyer in Russia) or .4 p.1.1. Art. 148 of the Tax Code of the Russian Federation (sales at the location of the buyer outside the territory of Russia).
2. Contractual terms of sale on the Google Play site
Based on clause 3.3 of the Google Play Software Distribution Agreement (hereinafter referred to as the Agreement with Google), the developer acts as a principal, and Google acts as an agent for the developer, and is the official seller of Products sold or provided to users from the countries of the European Economic Area (EEA). In this case, the developer is the official seller of products sold or provided to all other users.
With this in mind, under the Agreement with Google, in the sale of Content in the EEA countries, Google acts as a commission agent, and in all other cases - as an attorney for an order agreement.
Thus, in the case of the acquisition of Content by users in Russia and other countries outside the EEA, the rights and obligations under the transaction with such users arise directly from the Supplier. For transactions with users in the EEA, Google Commerce Limited has rights and obligations with their subsequent transfer to the supplier acting as the principal under the Agreement with Google.
Based on this, clause 3.4 of the Agreement with Google states that for Products sold in the EEA and in countries from this list[including Russia], Google determines whether the Product is taxed, and if so, Google, the Payment Processing Partner or the Authorized Provider collect and pay Taxes on the sale of Products to relevant tax authorities. Google may periodically change the list of such countries and regions, after notifying the developer of this. For Products sold in other countries and regions, the developer undertakes to independently determine whether the Product is taxed and to clarify the tax rate. In addition, the developer is responsible for the payment of taxes to the appropriate tax authorities. All Taxes are deducted from the sales price of sold Products, and the balance (sales price minus Transaction Fees and applicable Taxes) is paid to the developer.
Taking into account the fact that the payment of VAT is stipulated during the sale of services in electronic form by a foreign organization (Article 174.2 of the Tax Code of the Russian Federation), Google specifically stipulates in the above list various rules for the payment of Russian VAT for residents and non-residents of the Russian Federation, according to which developers from Russia are solely responsible calculating and paying VAT when purchasing applications and content on the Google Play Market by users from Russia; otherwise, Google is responsible for calculating and paying VAT at 18% for all paid content purchased the Google Play Store users in Russia.
As indicated above, this position seems to us reasonable due to the fact that in the first case, the implementation is carried out by a resident of Russia, and in the second - by a foreign organization.
However, the subject of such implementation is the granting of the right to use computer programs and databases under a license agreement, since clause 5.3. The contract with Google directly establishes that the developer provides the user with a non-exclusive and worldwide valid indefinite license to perform, display and use the Product.
It also provides that the developer may optionally enter into a separate End User License Agreement (EULA) to use the Product of the developer, which will regulate the user's rights with respect to the Product. However, in the event of a dispute, this Agreement will take precedence.
With this in mind, when selling software to users located in Russia, the provisions of paragraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation (sold at the location of the buyer in Russia) on VAT exemption are applicable. In other cases, you must be guided by the conditions of Clause 4, Clause 1.1. Art. 148 of the Tax Code of the Russian Federation (sale at the location of the buyer outside the territory of Russia) on the absence of the obligation to calculate VAT due to the fact that the territory of the Russian Federation is not recognized as the place of sale of works (services).
3. Conclusions from the review results
When distributing software from Russian developers through the Apple and Google sites, Russian VAT is not paid for the following reasons:
1. Developers with a permanent location in Russia do not fall under the definition of foreign organizations providing services in electronic form, i.e. do not have to pay VAT under Art. 174.2 of the Tax Code of the Russian Federation on the sale of "electronic services"
2. Foreign sites, in turn, do not include the Russian VAT price for the end user and do not take it "from above" because they act as an intermediary for the seller and the buyer, i.e. it is not their “realization”.
3 Developers in again do not have to pay VAT on the amount of rights exercised under software licensing agreements.
Here is a simple algorithm for solving a tax puzzle!
The topic of VAT payment for sales (services) within applications will be discussed by us in the next article . See you soon!