Russia Considering VAT Reductions And Incentives For The Domestic Tourism Industry

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The Russian Ministry of Finance is looking into proposals from President Vladimir Putin to reduce the amount of VAT payable on tourism related services in order to give the industry a much-needed boost. VAT in Russia currently stands at 20%.

Russian tourism industry leaders have shown that the current VAT rate in the sector is 2-3 times higher than in Southeast Asia.

Additional measures have also been requested affecting Russia’s national ‘tourism cashback’ programme, a travel subsidy stimulus in the country. Under this programme, Russian tourists can pay for their travel expenses with a Mir Bank card and receive compensation of 20% of the tour cost. All regions of the country took part in the programme, which finished last month. Since the beginning of the year, more than 1.6 million Russians used the facility, purchasing tours and accommodation in hotels with cashback in 2021 for more than 34 billion rubles, while in the form of cashback, tourists received about 6.7 billion rubles in cashbacks. The money is returned to the cardholders once their trip has finished.

The most popular tours in the Russian domestic industry are trips to Crimea, Krasnodar in the Far East (skiing) and Stavropol. Health and spa vacations to the Tyumen and Altai regions are also popular.

There are issues to be resolved, included the definition of which businesses should be included in VAT reductions or exemptions. Will it affect only the hotels, tourist companies selling tickets, or include catering services, transport companies, SMEs involved in the production and sale of souvenirs and so on. Proposals have also been made to extend the facilities to the overseas tourism sector. A decision on the VAT issue and an extention of the cashback scheme is expected next month.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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