VAT memorandum

Sub-clause 1, Clause 2, Article 149, Chapter 21 “Value Added Tax” of the Tax Code of the Russian Federation (the Code) provides for value added tax exemption for the following medical devices marketed on the territory of the Russian Federation:

  • Vital and life-saving medical devices;
  • Spectacles (except sunglasses), lenses and frames (except sunglasses frames);
  • Technical means, including motor vehicles, materials that can be used exclusively for disability prevention or rehabilitation purposes;
  • Prosthetic and orthopedic products and raw materials and supplies for production thereof and semi-finished products thereto;

VAT exemption for raw materials and components (spare parts) used in production of the said goods has been repeatedly reviewed by federal authorities, but has not been approved, as in the absence of clear-cut criteria for identification of such raw materials and components it could lead to exemption of an unlimited range of goods and thus to income losses for the federal budget.

At the same time, taking into consideration the principle of equality in taxation stipulated by Article 3 of the Code, it has been decided to apply the effective VAT exemption established by Sub-clause 2, Article 150 of the Code solely to raw materials and components that have no equivalents produced in the Russian Federation.

In this connection, corresponding Federal Law No.225-FZ “On Amendments to Part Two of the Tax Code of the Russian Federation” dated 30 June 2016 was adopted and became effective as of 1 October 2016.

Concerning proposals for VAT exemption for the services of repair, maintenance and testing of medical devices and manufacturing of high-technology medical devices and components thereof by residents of special economic zones, these proposals can be reviewed in the preparation exercise for amendments to Chapter 21 “Value Added Tax” of the Code proceeding from the current economic conditions.

The Action Plan on Support to Access of Non-Governmental Organizations to Provision of Social Services approved by Decree of the Government of the Russian Federation No.1144-r dated 8 June 2016 provides for drafting in December 2016 of a federal law on amendments to Article 149 of the Code stipulating VAT exemption for leasing payments with respect to medical devices.

It should be recalled that Decree of the Government of the Russian Federation No.19 dated 17 January 2002 became null and void due to enactment on 13 October 2015 of Decree of the Government of the Russian Federation No.1042 “On Approval of the List of Medical Devices Which Sales within the Territory of the Russian Federation and Import to the Territory of the Russian Federation and Other Territories under Its Jurisdiction Shall Not Be Subject to (Shall Be Exempt from) Value Added Tax” dated 30 September 2015.

Feel free to contact BWTeam for details of VAT imposition on your products.