21.10.07

The Ministry of Finance issued a letter on September 21, 2007 (# 03-07-15/138) explaining that leasing of premises in Russia to foreign citizens or foreign organizations accredited in Russia shall be tax exempt if the rep office is not conducting commerical activity and the the corresponding foreign state makes similar provisions for Russians and Russian organizations accredited in Russia, or if a similar provision is established by international agreement of the Russian Federation.

The Federal Tax Service has accepted the document. The list of associated foreign countries is compiled by the federal executive department of international relations in cooperation with the Ministry of Finance.

According to the letter, starting August 1, 2007 (for quarterly tax payers – starting October 1, 2007) tax invoices made out for leasing space to citizens and/or organizations of countries included in the list will not include VAT.

If prior to the list’s publication, a country was not tax-exempt but is now included in the list (for example, Guyana, Mexico, Panama, and Eritrea), then leasing services rendered to its citizens and/or its organizations before August 1, 2007 (or before October 1, 2007 for quarterly tax payers) will have VAT included in the tax invoice.

In respect to countries which were exempt from VAT before the list’s publication but are not included in the list currently (for example: Zaire, Spain, and Italy), VAT-exemption will only apply to leasing services rendered to that country’s citizens or organizations before August 1, 2007 (or before October 1, 2007 for quarterly tax payers).

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