Position of Russia’s Supreme Arbitration (Commercial) Court on Out-of-Court Appeals against Post Tax Audit Decisions.
Legal Update No. 250.
Goltsblat BLP advises of the publication of Resolution No. 18421/10 of the Presidium of the Supreme Arbitration Court of the Russian Federation (SAC) dated 24 May 2011 interpreting the procedure for pre-trial appeals against decisions refusing VAT reimbursement.
In the case concerned, a company applied to a state arbitration (commercial) court seeking that a tax authority’s decision to refuse VAT reimbursement be partially invalidated. The company had not appealed the decision under the administrative procedure believing that it did not have to with regard to a decision refusing VAT reimbursement.
The Russian SAC Presidium refused to satisfy the taxpayer’s claims holding that decisions to entirely or partially refuse reimbursement of tax claimed by the taxpayer and decisions on partial reimbursement of tax, since they are based on circumstances identified during a tax audit, may be challenged in court only after a superior tax authority has considered a relevant taxpayer complaint and checked its arguments and the circumstances underlying both the refusal to reimburse and a decision to hold (or refuse to hold) the taxpayer fiscally liable.
The Presidium also noted that the company’s argument that the contested decision to refuse VAT reimbursement did not qualify as an individual regulatory act that is subject to mandatory pre-trial appeal procedure runs counter to provisions of the effective legislation.
The SAC Presidium thus deviated from literal interpretation of the effective Tax Code provisions as well as the essence of the position adopted by a first instance court in its ruling on this case that the SAC Presidium has sustained. These provisions of the Russian Tax Code stipulate that only decisions imposing fiscal liability or refusing to do so need to be appealed in a superior tax authority. According to the broad interpretation by the SAC Presidium, before a taxpayer applies to a court seeking that a tax authority’s decision to refuse VAT reimbursement be invalidated, it should comply with the administrative procedure for appealing at least the decision on imposing (refusing to impose) fiscal liability for a tax offence in a superior tax authority.
In view of the ambiguous wording of the Resolution of the Presidium of the Russian SAC considered here, we believe it advisable to appeal decisions on imposing (refusing to impose) fiscal liability as well as decisions on refusal to reimburse VAT in superior tax authorities before going to court.
For additional information, please contact:
Partner, Head of Russian/CIS Tax Practice,
T: +7 (495) 287 44 44,
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