VAT place-of-supply risks for B2B services: marketing, IT, R&D and intercompany recharges

For international groups operating in Russia, VAT risks often arise not from tax rates, but from incorrect determination of the place of supply. This is especially relevant for cross-border B2B services such as marketing support, IT services, R&D activities, and intercompany cost recharges. Errors in this area may lead to unexpected VAT liabilities, disputes with tax authorities, and blocked deductions.

Why place of supply is a critical VAT issue

World map and business documents for VAT place-of-supply review

Under Russian VAT rules, the obligation to charge VAT depends on where a service is deemed to be supplied. For many B2B services, the place of supply is linked to the location of the customer, not the service provider.

This creates risks when services are delivered across borders within a group structure. Misinterpretation at this stage may result in VAT being charged incorrectly, or not charged at all, which is equally risky during a tax audit.

Marketing, IT and R&D services: typical problem areas

Marketing and IT services are often broadly described in contracts, which creates uncertainty in VAT treatment. Russian tax authorities closely analyze whether a service is truly advisory, technical, or operational in nature.

R&D services add another layer of complexity. If the results are transferred to a Russian entity and used in Russia, tax authorities may argue that the place of supply is Russia, even if the work itself was performed abroad.

Magnifying glass over a world map for cross-border VAT risk analysis

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Correct qualification of services is essential. The same activity may be treated differently for VAT purposes depending on how it is documented and how the results are used

Ivan Masley, Head of Corporate Legal Services, Outsourcing Solutions

Intercompany recharges: documentation matters

Cost recharges within international groups are one of the most sensitive areas for VAT. Tax authorities expect to see a clear economic substance behind each recharge.

Key risk factors include:

lack of detailed service descriptions;
absence of benefit justification for the Russian entity;
mismatch between contracts, invoices, and actual services provided.

Without proper documentation, recharges may be reclassified, leading to VAT reassessment and penalties.

Financial and compliance implications

Incorrect place-of-supply determination affects not only VAT payments, but also cash flow, deductibility, and overall tax risk profile.

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VAT errors in cross-border services often surface during audits, not at the reporting stage. Preventive structuring and documentation are far more effective than correcting issues after the fact

Julia Vernikovskaya, Financial Director at Outsourcing Solutions

Practical approach to risk management

To reduce VAT exposure, companies should:

review service classifications before payments are made;
align contracts with actual service content;
document the business purpose and benefit received in Russia;
ensure consistency across accounting, tax, and legal documentation.

VAT place-of-supply issues require a coordinated legal, tax, and accounting approach. Proper structuring of cross-border services and intercompany recharges allows companies to manage VAT risks in a predictable and compliant manner.

If your group provides or receives B2B services involving Russia, contact us to assess VAT exposure and implement a documentation framework aligned with Russian requirements and international standards.

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