Russian Federation: Interest On A Late Refund Of VAT Is Assessed Disregarding The Date On Which The Taxpayer Applied For A Refund Of The Tax In Question

Last Updated: 21 July 2011
Article by Vladimir Voinov and Peter Popov

Pepeliaev Group advises that on 24 April 2011, the Russian Supreme Arbitration Court published on its official website Resolution No. 14233/10 of the Court's Presidium dated 17 March 2011. The Resolution considered the issue of the payment of interest on a late refund of VAT (clause 10, article 176 of the Russian Tax Code) in cases in which a taxpayer who has submitted a tax return declaring an amount of VAT to be refunded has not applied to the tax authority for the tax in question to be refunded.

When examining the above case, courts of three different levels held that interest on an amount of VAT which had not been returned to a taxpayer but was liable to be refunded following a desk tax audit should be assessed disregarding the date on which the taxpayer applied for a refund of the tax in question.

Submitting the case to the Presidium of the Supreme Arbitration Court ("SAC") for examination under the supervisory procedure for court decisions (the SAC's Ruling No. 14223/10 dated 16 December 2010), the SAC's panel of judges noted that until the tax authority has no obligation to pay back tax which should be refunded until it receives a written application from a taxpayer for a VAT refund. The SAC's panel of judges, in addition, was guided by the line of authority developed in the Presidium of the SAC's Resolutions No. 5351/04 dated 5 October 2004, No. 10848/04 dated 21 December 2004, No. 7528/05 dated 29 November 2005 and No. 13584/06 dated 27 February 2007. According to these cases, the tax authority is obliged to pay interest when the time period is breached for a refund as long as there are grounds for refunding the amounts of tax and only after the taxpayer has submitted an application for a tax refund.

Having examined the case, the Presidium of the SAC left the decisions of the lower courts unamended. It held that their conclusions were justified and noted that article 176 of the Tax Code, in the form in which it has been in force since 1 January 2007, does not tie a tax refund with the taxpayer submitting an application for a refund. In other words, the new approach to assessing interest has nothing to do with a change in the SAC's position; rather, it reflects changes to tax law on this issue.

Moreover, the Presidium of the SAC interpreted clause 6, article 176 of the Tax Code, which makes reference to a taxpayer's application for a VAT refund, as meaning that an application is necessary if the refund is to be made to a specific bank account. Without such an application, the tax authority may make the refund to any settlement account of the taxpayer of which the authority is aware. The Presidium therefore rejected, and viewed as unjustified under current legislation, the tax authority's approach that it had no obligation to pay back a refundable amount of VAT until it had received an application for the refund from the taxpayer.

Pepeliaev Group's comments: It is important to pay attention to the particular nature of the case which was under consideration, this being as follows:

1) In this case, there was no dispute over the taxpayer's entitlement to a refund of VAT – the outcome of the desk tax audit was a decision from the tax authority that an amount of VAT should be refunded. Therefore, further analysis is required of the issue of to what extent the Presidium of the SAC's Resolution No. 14233/10 dated 17 March 2011 is applicable to a situation in which the tax authority has initially refused to refund VAT and the taxpayer has had to go to court to protect a right that has been breached;

2) In examining the case, the courts proceeded on the basis that the tax authority should have refunded the value added tax upon the expiry of a period of three months plus twelve days after the tax return was filed. This represents the three-month duration of the desk tax audit under article 88 of the Tax Code plus the period established by clause 10, article 176 of the Tax Code. To this end, the courts did not consider the issue of when the tax audit was actually completed, instead focusing on the time lim it for the audit to be held as established by law;

3) The Presidium of the SAC's Resolution No. 14233/10 dated 17 March 2011 contains no reference to the fact that the interpretation of legal rules contained in such Resolution is of general application or that it should be applied when arbitration courts hear similar cases. Moreover, the Resolution itself does not specifically deal with the issue of what is down to the actual circumstances of the case and is therefore not to be applied in similar situations.

Conclusions and recommendations

The new Resolution of the Presidium of the Supreme Arbitration Court may change the practice for refunding VAT under article 176 of the Tax Code and for resolving disputes relating to it:

  • firstly, the tax authority is obliged to reimburse VAT without the taxpayer applying for a VAT refund;
  • secondly, the tax authorities may, if they do not receive an application, refund the VAT to any account they know of, leading to potential problems when funds from this account are used;
  • thirdly, it cannot be excluded that there will be a new approach taken to calculating time periods for protecting a taxpayer's rights to a VAT refund.

In connection with the issue in question, Pepeliaev Group's lawyers recommend that taxpayers ensure their applications for a VAT refund reach the tax authority in good time: this will guard against the risk of VAT being refunded, for example, to an account which the taxpayer does not use. In our opinion, if the taxpayer needs to substitute a different account to receive the VAT refund after it has submitted the application, then, before the tax authority takes a decision to refund the tax and sends the appropriate payment instruction, the taxpayer has the right to revoke an application it has previously made instead submitting a new one specifying a different account. For tax returns which indicate that VAT is to be refunded and when, moreover, there are no grounds for it to be offset, it should be borne in mind that it is necessary to ensure court protection of the right to the VAT refund after the expiry of the time period for an audit to be conducted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions