Russian Federation: Tax Alert - 6/97 - 30 April 1997 - Vat Exemption For Export

Last Updated: 10 June 1997
1 In this Tax Alert, we will discuss Amendment No. 4 of 3 April 1997 to the VAT Instruction (Instruction of the State Tax Service of 11 October 1995 No. 39), which clarifies and, to a certain extent, liberalises the VAT exemption for exports of goods and related services outside the CIS, and a limited number of "exported services".


2 The amendments affect the export of goods outside the CIS and certain types of "exported" and therefore VAT exempted services, listed in paragraph 14 of the VAT Instruction, which can broadly be described as follows (the Cyrillic characters relate to the corresponding sub-items of paragraph 14 of the VAT instruction):

  • transport of and services relating to goods exported outside the CIS;
  • transport of and services relating to foreign transit goods through the CIS;
  • transport of oil and gas products outside the CIS, including pipeline transport;
  • passenger and luggage transport with a final destination outside the CIS;
  • telecommunication services rendered outside the CIS;
  • processing of raw materials, if the final product is to be exported outside the CIS;
  • works and services rendered to foreign legal entities by Russian taxpayers

-carried out in space if the results are used outside the CIS;
-carried out in connection with foreign vessels;
-carried out in connection with foreign aircraft.

  • 180 days to confirm actual export
3 In order to receive the exemption from VAT for the export of goods outside the CIS and for the services described in a, b, c and f (which relate to the export of goods) above, the following procedures have now been introduced:

  • within 10 days after the goods have been declared for export with the customs authorities, the exporter should formally notify the tax authorities about the fact of export. Notification should be in writing and should be signed by the head of the company and the chief accountant;
  • the exporter then has 180 days within which to submit to the tax authorities documents which confirm that the goods have been physically exported outside the CIS;
  • if the 180 days period expires without such documentary proof being submitted, the tax authorities will levy VAT on the turnover of these goods or services. It is likely that late payment interest will be charged for the period of "deferment", although taxpayers may try to apply for the "technical error exemption" under Presidential Decree No. 685 of 8 May 1996. The application of penalties and interest in this context is unclear.

4 The amendments to the Instruction do not change the previously existing rule that input VAT incurred in relation to export sales can only be recovered when proof of goods (services) being physically exported is submitted to the tax authorities. The new rules, however, require exporters to include export sales in total VAT chargeable sales if the proof of fact of export is not filed within 180 days.

5 For export sales made before the new amendments enter into force and for which input VAT has been claimed by the exporter without proof of export being filed with the tax authorities, exporters are allowed until 1 June 1997 to submit the required documents in which case no output VAT or penalties will be charged. However, when the tax authorities have already required an exporter to pay output VAT and penalties, in the absence of documentation supporting export, these will not be reimbursed from the budget.


6 In situations where the VAT exemption must be supported by the actual export of goods or services mentioned in a, b, c and f above, the document serving as a proof of export is a copy of the customs freight declaration which has been signed by the customs office where the goods have been declared for export (these are usually regional customs where the producer of the goods is located) and the customs at the border where the goods leave the Russian Federation. Special rules apply for export by aircraft, rail, vessel or pipeline.

7 If the goods leave Russia through a CIS country where customs control no longer exists, the confirmation from the Russian border customs can be replaced by a stamp or signature on any of the transport accompanying documents of either the customs on the final CIS border (i.e. by customs authorities of a CIS country) or by customs of a country outside the CIS confirming that the goods have been exported from the CIS. Instead of signing the Customs Freight Declaration, other documents (transport documents, bill of lading) confirming the clearance by the customs authorities of a CIS or a third country may be accepted. Under individual rulings to be granted by the State Tax Service and the State Customs Committee, a proof can be given in the form of a signature of the regional customs on the Customs Freight Declaration and entry of the exported goods in a special register.

8 The requirement to submit document proving the actual arrival of the goods in the country of destination had already been successfully challenged in court and has now been taken out of the instruction. In addition, original documents are no longer required, copies (presumably including faxes) are acceptable instead, on the condition that the director and chief accountant of the enterprise claiming the VAT exemption sign such documents to certify that the copy is the same as the original.


9 As before, exporters and suppliers of exempt services must maintain separate accounting for supplies and services relating to VAT exempt production. VAT charged on such supplies ("input VAT") cannot be offset in the normal way:

  • if the supplies relate to services mentioned in a, b, c and f above (auxiliary to the actual export of goods) and the actual export of the goods is not confirmed within 180 days, the input VAT is normally offset. At the same time, obviously, VAT becomes payable on the turnover from the purportedly exempt sales;
  • if the supplies relate to services mentioned in d, e and g above (services which are considered as "exported"), offset of input VAT is allowed if the "exporter" is a registered Russian taxpayer and has actually received a payment on a Russian bank account.

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.

For further information contact Alla Shaulina on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: or enter a text search 'Coopers & Lybrand' and 'Business Monitor'.

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