Unlike current regulation in the European Union, Russia’s laws do not issue any requirements for electronic invoicing in Russia, despite the fact that it has been authorized since 2012. Digitized invoicing is struggling to develop in the country due to interoperability problems and the many limitations it presents. Nonetheless, some changes to tax regulation seem to point in the direction of more digitization. We’ve compiled a list of the rules to follow when e-invoicing in Russia.
The who, what, and how of e-invoicing in Russia
Who is involved?
Although not required, invoice digitization has become common practice in Russia in the mass distribution, pharmaceutics and automobile sectors. An increasing number of medium and large companies have begun using digital invoices in their sales exchanges.
The Russian “clearance approach”
E-invoicing in Russia is a response to the clearance approach. The approach requires that companies communicate some sales information to authorities before they even send an invoice to a client. What’s more, e-accounting services must now include invoice summaries, so information can be automatically transmitted to the tax administration.
Once information has been automatically sent, the tax administration can compare purchasers’ and suppliers’ electronic reports in just a few days. Should there be any incoherence, sales partners must transmit digitized invoices electronically to justify their transactions. At this point, an electronic signature is required for each invoice.
Ever since a new regulation entered into effect on July 1, 2017, retail stores are also required to use certified cash desks. That way, B2C transactions can be communicated in real-time to tax authorities via a federal data transmission operator.
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Digitization rules to follow
A regulated data format
Electronic invoices must comply with the UTD standard, a regulated XML standard that includes fields defined by the Russian tax administration.
Electronic signature required
In Russia, all invoices must be signed electronically and approved by a local certification authority. In order to ensure content integrity and invoice authenticity, the electronic signature must pass through encryption software made available by an authorized software provider.
By using a proxy, providers can call on a third party to sign invoices electronically. Whatever the case, the computer equipment and software used for electronic signing must be located in Russia, either with a supplier or with a certified operator.
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Sending and inspecting electronic invoices with EDEOs
Electronic invoices sent by a supplier to a customer must pass through a certified operator known as an Electronic Document Exchange Operator (EDEO). This service provider performs confidential information exchange operations using telecommunication.
Delivery receipts exchanged on the EDEO network are regularly audited by Russian tax authorities. In the event of inspection, contracting parties must be able to electronically justify their sales relation by providing several items: a sales contract, service provision contract or shipping notice, invoice, and exchanged delivery receipts.
Although regulated, interoperability between EDEOs remains complex. To improve the situation, the Russian government created a centralized system to which all EDEOs must be connected. The four main operators committed themselves in this sense by signing an agreement which simplified the use of e-invoicing in Russia.
E-invoicing in Russia: what about conservation?
Electronic invoices must be kept in their original format. Sales partners are subject to a four-year invoice storage obligation that begins at fiscal year closing.
In addition to electronic invoices, providers and customers must conserve any technical messages sent out by EDEOs, providers, or buyers. These include confirmation and sent/received notifications, correction notes, qualified certificates, and verification keys. EDEOs, on the other hand, are required to store data and information regarding electronic invoice exchange for a period of at least four years.
Due to regulation on the confidentiality of personal data, uncertainty remains with regard to archiving. But while privacy rights limit how personal data can be collected in Russia, tax law does not make any such restrictions for e-invoices, which inevitably contain personal information. And although exceptions exist, the principle of security tends towards companies conserving such archives.
In spite of these technical constraints, Russia remains ahead of China, a protectionist country with limited trust in foreign economic players. This is particularly true when it comes to exchanging data with an impact on government finances. Only economic players with capital held by a Russian company can receive government authorization to practice e-invoicing in Russia. Commercially exchanging with local companies can be a herculean, if not impossible, task.