The RF Supreme Arbitration Court sets time for VAT recovery from a business partner.
Legal Update No. 192.
Goltsblat BLP advises that Resolution No. 7090/10, dated 29 September 2010, of the Presidium of the Supreme Arbitration Court has been published. It highlights the Court's approach to certain aspects of recovery by a supplier from a buyer of VAT not originally specified in the contract.
Parties to a civil law contract often agree a price exclusive of VAT, on assuming that the given business transaction is not VATable. Yet the tax authority might charge the supplier VAT on the price of the contract after it is fulfilled, if, for example, the Presidium of the Supreme Arbitration Court changes its approach to taxation of the transactions covered by the contract.
Consequently, two main questions arise:
Does the supplier have the right to collect additional VAT from the buyer?
If so, when does the statute of limitations for entering a suit begin running?
The Presidium of the Supreme Arbitration Court clearly answered the first question: VAT is charged on top of the price, so it may be recovered from the buyer whether or not this is stipulated in the contract.
The second question is more problematical. Pursuant to Article 196 of the Civil Code of the Russian Federation, the general statute of limitations is three years, running, according to Article 200(1) of the Civil Code of the Russian Federation, from the day a person becomes or should become aware of the infringement of rights.
Yet, the statute of limitations with respect of an obligation subject to an established performance period starts running on expiry of the given period (Article 200(2) of the Civil Code of the Russian Federation).
The Presidium of the Supreme Arbitration Court considers that the requirement to pay VAT is not a separate claim, independent of that to pay for the services under the contract. Article 200(2) of the Civil Code of the Russian Federation should, therefore, apply and the statute of limitations should run from expiry of the deadline for payment for services rendered.
This position by the Presidium of the Supreme Arbitration Court is disadvantageous to suppliers, since the period during which suppliers may apply to court is substantially reduced, yet it corresponds to Article 173(2) of the Tax Code of the Russian Federation, pursuant to which the taxpayer has the right to declare tax for deduction within three years of the period when the deduction right originally arises.
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