Yandex, Ozon, Wildberries ask Russian govt to support e-commerce

MOSCOW. March 25 (Interfax) - Russia's leading e-commerce companies, Wildberries, Ozon and Yandex , owner of Yandex.Market, have appealed to the government to take measures to support the domestic e-commerce sector, including by granting it the same tax breaks as the IT sector and ensuring continuous operation in other CIS countries, a source familiar with the contents of a letter they sent to the government last week told Interfax.

The press services of Yandex.Market, Ozon and Wildberries confirmed that such a letter was sent.

"Today, without additional investment in IT infrastructure, marketplaces will have a difficult time maintaining the high rate of development that the sector has demonstrated for the past ten years. Moreover, small and medium businesses, for which marketplaces are the most effective sales channel, could suffer from the reduction of the activity of Russian e-commerce companies," Ozon said.

Among other things, the companies proposed to resolve the problem of double collection of value-added tax on the goods of Russian online retailers in Kazakhstan and Belarus.

Since January 1, 2022 in Kazakhstan and starting July 1, 2022 in Belarus, Russian online retailers are supposed to pay VAT on goods sold in these countries, although they also still have to pay VAT in Russia. This is a 20% VAT in Russia, 12% in Kazakhstan and 20% in Belarus.

The companies said that Kazakhstan and Belarus are "just two countries in the world in which a double VAT is charged on the distance sale of goods," which significantly limits the potential of exports to these countries through e-commerce.

They proposed to harmonize tax rules in the Eurasian Economic Union (EAEU) or work out a mechanism for confirming a zero VAT rate on exports from Russia.

The companies also proposed a range of measures to minimize risks from the suspension of operations in Russia by payment systems Visa and Mastercard. These include developing local payment systems in CIS countries, including Mir and Belcard; ensuring that the cards of the local payment systems of Russia, Belarus and Kazakhstan are accepted at bank machines and as a means of payment across the CIS; developing express payment systems similar to the Russian Central Bank's EPS and intersystem integration of CIS central banks; as well as developing Russian analogues of ApplePay and GooglePay for contactless payments across the CIS.

The companies also proposed to ensure that Russian, Belarusian and Kazakh credit institutions are connected to a financial messaging system, which they reckon will make it possible to prepare for Russia's exclusion from SWIFT.

Ozon, Wildberries and Yandex also proposed that the measures to support the information technology sector that President Vladimir Putin approved on March 2, as well as the tax breaks provided under the earlier "tax maneuver" for the IT sector be extended to e-commerce companies.

The measures to support the IT sector include exemptions from profit tax and inspections by oversight bodies for three years; soft loans to continue operations and finance new projects at rates of up to 3%; deferrals on military service for current employees of IT companies under the age of 27 years; and an expansion of the list of IT companies eligible for tax preferences, among others.

The "tax maneuver" introduced in 2021 cut the federal portion of the profit tax for Russian IT companies to 3% and the regional portion to zero, and reduced social security contribution rates to 7.6%. The tax breaks apply to companies with at least seven employees that earn at least 90% of their revenue from the sale of software development and adaptation services.

"The stable operation of marketplaces hinges primarily on the stability of IT infrastructure, so it's logical to consider marketplaces as IT companies," Yandex.Market said.

The companies also proposed to introduce a moratorium on fines for incorrect reporting of the movement of goods in the Chestny Znak and Mercury marking and tracking systems, and on currency controls for relations with counterparties from the EAEU. They also proposed an experiment to transfer fiscal data from e-commerce companies directly to the Federal Tax Service without the use of fiscal memory devices.

The e-commerce companies' other proposals overlap those that Russian online retailers association AKIT sent to the government at the beginning of March. Interfax reported on March 18 that AKIT proposed to lift the ban on online sales of prescription drugs and alcohol. AKIT's other proposals included capping acquiring commissions at 1% for retailers, expanding the mechanisms of priority development areas, expanding cooperation with self-employed individuals and imposing a moratorium on inspections.