Recently, most medium and large retail businesses across Russia shifted to internet-connected cash desks that every day, in real-time, report to the Federal Tax Administration approximately 70 million B2C transactions. According to official sources, since July 1st 2017 when the mandate entered into force, over 6 billion B2C electronic receipts have been issued so far for a total amount of 3.6 trillion roubles.
These are certainly impressive numbers, warranting a further look at what’s inside the legal and technical framework behind this successful IoT real-time tax control.
What is a Certified Cash Desk?
On the retailer side, a certified cash desk (CCD) is an IoT-device equipped with internet connectivity, computing hardware, secure storage and tax controls. CCD’s are able to issue electronic documents containing transaction data, archive these transactions locally, and report them real-time to the Federal Tax Administration (TA) regional offices via a Fiscal Data Operator. CCD’s can also print out B2C receipts and other accounting formats, compliant with the regulations set in Federal tax law No. 54-FZ.
IoT innovation means that a brand new CCD can be on-boarded online within a few minutes without physically visiting the tax office. This can be done by simply triggering an automated on-boarding procedure that registers the device to the Federal TA service after a simple procedure requiring only minimal taxpayer information to personalise the device.
The Federal TA has already registered around 1 million CCDs, which is 88% of the total estimated amount of medium and large retailers that were mandated to use CCD. Retailers can select CCDs among 84 approved models that can be ordered online from authorised manufacturers. Budget versions are priced at 18 thousand roubles (300 USD). Since the first wave of compliance gave good results, a new mandate is expected, requiring the use of CCD for small retailers, impacting an estimated 3.5 million businesses.
Authorised Fiscal Data Operators – Infrastructure benefits
On the infrastructure side, following the already established distributed-clearance model for B2B e-invoicing, the Federal TA has authorised 12 companies to act as Fiscal Data Operators (FDO) that act as state agent brokers between the retailer and the Federal TA. When the CCD issues a B2C receipt, it also reports in real-time the transaction to a FDO. The FDO acknowledges receipt of the transaction and simultaneously further transmits the transaction data to the Federal TA service. In case of internet connectivity loss, transaction data is saved and stored in the fiscal local storage for up to 30 days and is sent to the FDO as soon as connectivity is re-established. Upon expiry of the 30 days without connection, the fiscal storage is blocked. The FDO archives all transaction data for 5 years, after which it is deleted.
Before this new IoT tax-control, retailers had to keep 9 hard copy books for each legacy cash desk machine, resulting in a total of half a billion hard copy books within a year, a serious burden for human resources. Now, thanks to IoT-technology, transactions are reported online and are collected at a personal retailer account at the Russian Federal Tax Authority web site. This retailer account is also enabled to collect other legally important corporate document flows. A forthcoming tax control change will void the need of tax reporting by specific categories of tax payers since the reported transactions already contain all the necessary information.
Business environment benefits
On the business environment side, IoT tax controls encourage fair competition among retailers since dishonest merchants will no longer be able to illegally avoid or minimise their tax obligations, which in the past gave them unfair commercial competitive advantage. Additionally, the retail and service industries are becoming increasingly transparent due to all transaction information being immediately transmitted to the Federal TA agencies. As earlier mentioned, further savings are foreseen when businesses will be relieved from unnecessary account reporting and tax inspections thanks to this remote monitoring and risk-oriented approach.
On the consumer side, the framework improves consumer rights protections as transactions with the seller can be controlled for legality using a mobile app developed by the Federal TA, which can be downloaded for free on smartphones from the AppStore and Google Play. The receipt received by the consumer during the transaction includes a QR-code, which may be easily read using the mobile app, verified, received electronically and saved in the application. Moreover, the consumer does not need a physical credit card copy slip; instead they can receive it by e-mail or phone. Electronic slips are easier to save and restore.
Businesses across Russia have supported the transition to IoT-based real-time tax controls, emphasising the reduction of administrative barriers and the creation of a trustful retail environment.
Guest contribution by:
Alexander Melikjanyan – Chairman of the Board of Directors, Taxcom LLC
Marina Krasheninnikova – Tax & e-invoicing expert