Taxation of Cross-Border Trade: Challenges and Solutions

The aggregate volume of the main segments of the Russian e-business market estimated at Rb 1,357.3bn, Rb 2,031.2bn and Rb 2,347.0bn in 2013, 2015 and 2016, respectively, keeps growing.  It is to be noted that in Russia growth rates of various sectors of e-business are much higher than those of the economy as a whole.

The main segment of the e-business is e-commerce which includes internet trading inside Russia and cross-border trade. The aggregate volume of the main segments of the Russian e-business market estimated at Rb 1,357.3bn, Rb 2,031.2bn and Rb 2,347.0bn in 2013, 2015 and 2016, respectively, keeps growing.  It is to be noted that in Russia growth rates of various sectors of e-business are much higher than those of the economy as a whole. The main segment of the e-business is e-commerce which includes internet trading inside Russia and cross-border trade. 

Apart fr om the topic of imports, the topic of exports of Russian goods plays an important role in the context of cross-border trade. The terms of application of a zero VAT rate in cross border trade exports  need to be upgraded further to promote exports.

As a member-state of the Eurasian Economic Union (EEU), Russia together with the Republic of Belarus, Kazakhstan, Kyrgyzstan and Armenia is working on the option of supranational regulation of cross-border trade: in particular, the tax-free minimum which is gradually cut have been set for postal items. It is noteworthy that the upper limit of it is set at the supranational level, while the EEU member-states are free to set it below the upper lim it. However, Belarus takes a more active position in respect of these issues and that situation has created ambiguous consequences.

On January 17, within the frameworks of the expert discussion at the Gaidar Forum the following issues will be discussed: the volumes and dynamics of Russia’s cross-border trade, problems related to market settlements, various options of taxation of low-cost goods in cross-border trade  with use of foreign experience, the first results of introduction of the institute of the authorized economic operator  from 28 January 2019, as well as establishment of the procedure for substantiation of a zero  VAT rate in exports, provided that consumers are individuals. Taking into account the fact that Russia is a member-state of the EEU, it is proposed to discuss the issue of harmonization of cross-border trade terms within the EEU.

Natalia Kornienko, Head of the Tax System Development Department, Moderator of the Discussion