VAT relief for medical devices from 2022

The current provisions of the Russian Tax Code (RTC) pose a risk in terms of applying the VAT exemption and 10% rate ('VAT relief') to medical devices (medical equipment and products with medical purpose) after 2021. The draft law proposed by the Ministry of Health is designed to eliminate this risk for all medical products and is currently undergoing a regulatory impact assessment.

In our view, the risks emerge from the current wording of the RTC which makes VAT relief conditional on the type of medical product registration certificate (subparagraph 4 of paragraph 2 of Article 164 and subparagraph 1 of paragraph 2 of Article 149 of the RTC). That is, the VAT relief applies:

  • irrespectively of the moment of application of the VAT relief – if a registration certificate submitted to the Tax Authority was issued in accordance with EEU (Eurasian Economic Union) law;
  • until 31 December 2021 – if a registration certificate submitted to the Tax Authority was issued in accordance with the legislation of the Russian Federation.

Thus, from 1 January 2022, the application of VAT relief will not be possible for those medical devices that have a registration certificate issued in accordance with the Russian legislation (letters from the Ministry of Finance dated 9 March 2021 N 03-07-11/16270, dated 29 April 2021 N 03-07-11/33154, dated 30 August 2021 N 03-07-11/69854).

At the same time, the legislation allows the circulation of medical devices that have an indefinite registration certificate issued under the Russian law, including after 1 January 2022 (Eurasian Economic Commission Board Regulation No. 28).

This situation creates risks of the VAT relief not being applied to most of the medical products circulating in Russia. In order to eliminate such risks, the Ministry of Health has proposed a law revoking VAT-related restrictions imposed on Russian registration certificates starting from 31 December 2021. The draft law is currently undergoing a regulatory impact assessment.

We believe that the draft law will be adopted in its current form and will enter into force before the end of the year, thereby eliminating the risks defined above. Moreover, we consider that it may not be possible to simultaneously transfer most medical products with Russian-issued certificates to EEU legislation before the end of 2021.

We will continue monitoring the situation regarding the draft law and will keep you posted.

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