Position taken by the Presidium of Russia's Supreme Arbitration Court on the interest accrual period for late partial VAT refunds.
Legal Update No. 241.
Goltsblat BLP advises of publication of Resolution No. 4883/10 dated 12 April 2011 of the Presidium of the Supreme Arbitration Court of the Russian Federation (SAC) on a case concerned with charging interest for late partial VAT refunds.
In the given case, a company filed an application with an arbitration court seeking that the tax authority be required to adopt a decision to accrue and pay interest for violation of the deadlines set for refunding a portion of VAT claimed for refund.
The tax authority objected that if, as a result of an office tax audit, tax offences were identified, even if relating to a portion of the tax refund claimed from the budget by the tax payer, the total tax so claimed may not be refunded until the decisions listed in clause 3, article 176 of the Tax Code of the Russian Federation are adopted. This rule also applies to undisputed tax.
Supporting the lower courts' position, the Presidium of the SAC states that, in accordance with article 176 of the Tax Code of the Russian Federation, undisputed tax may be refunded on the basis of a tax authority decision irrespective of whether or not the office tax audit identified any violations of the legislation on taxes and levies.
The SAC also clarifies that, once the tax audit is completed, the tax authority may not, with reference to clause 3, article 176 of the Tax Code of the Russian Federation, postpone refunding the portion of the tax with respect to which no violation is identified until the tax audit statement is executed or the decision to refund the tax is adopted .
So, in accordance with the position taken by the SAC Presidium, interest on late refund of the VAT portion not disputed by the tax authority is to be charged from the 12th business day following completion of the tax audit (the tax audit completion date is to be indicated in the tax audit report) through the day preceding that when the funds are credited to the tax payer's bank account.
Taxpayers receiving VAT refunds in violation of the set deadlines may claim interest from tax authorities and are likely to win in court considering that the SAC Presidium explicitly states in its Resolution that the interpretation of the legal provisions specified therein is universally binding and must be applied when similar cases are considered.
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