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Court Rules On Adjusted VAT Invoices

Russia
17 Jan 2013

On 11 January 2013, the Supreme Arbitration Court issued Decision No. 13825/12 with regard to adjusted VAT invoices, which has attracted serious attention from the business community. Taxand Russia discovers why this decision is causing such debate.

Under Russian tax legislation, a seller issues a VAT invoice, and a purchaser may deduct VAT from its income based on that VAT invoice. However occasionally sellers grant bonuses to purchasers for buying a large volume of goods, for opening new shops or for paying the price long before the due date etc. These bonuses are usually given after goods are delivered and paid for, they relate to the volume or amount of goods, but they do not reduce the price of the single product.

Under new rules, and in line with a new form for VAT invoices, if a seller grants a bonus it must prepare a separate adjusted VAT invoice for every VAT invoice issued. This means that a seller must prepare an adjusted VAT invoice for every product sold, which may involve a huge number of documents. In this case, it may be impossible for some major companies to deduct VAT if they grant bonuses to their purchasers.

Volvo cars, Xerox, Jaguar Land Rover, Philips and some other major companies have filed a claim with the Supreme Arbitration Court to invalidate Russian Government's ruling No. 1137 dated 26 December 2011, which concerned the form of an adjusted VAT invoice. This form must be used for every VAT invoice which needs to be adjusted. The claimants applied for this form to be changed, with a new form to be created which could be used as a general form. This would have meant that one adjusted VAT invoice could be issued for any amount of supplies. It would have saved taxpayers from compiling pointless documentation and enabled major companies to deduct VAT.


Your Taxand contacts for further queries are:
Andrey Tereschenko
T. +7 495 967 00 07
E. a.tereschenko@pgplaw.ru

Ivan Zelenin
T. +7 495 967 00 07
E. i.zelenin@pgplaw.ru

Taxand's Take


The Supreme Arbitration Court decided that the Government's ruling is absolutely in line with the Russian Tax Code and there is no reason to cancel it. So major companies which grant bonuses to their purchasers are faced with a difficult decision. They could refuse to give bonuses, which would be to the detriment of their business relationships, to elect not to deduct VAT with regard to bonuses, or to engage more accountants to prepare countless VAT invoices. In any case, the issue of granting bonuses after goods are sold (or with no link to the sale of goods) has become quite important and risky from a tax perspective.

Taxand's Take Author

Andrey Tereschenko