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Reimbursement VAT to be Returned by the Tax Authorities Despite Disputes
The Presidium of the Supreme Arbitration Court developed a legal position whereby the part of VAT that has been lawfully claimed back by the taxpayer shall be returned upon completion of the audit irrespective of whether the auditors have any objections to the other part of VAT claimed back by such taxpayer.
Facts of the case
This position of the tax office was set out in the relevant audit report. However, the decision to reimburse the lawfully claimed part of VAT was only issued after the expiry of the limitation period for filing taxpayer's objections in relation to the other part (no objections have been filed). Such a decision to reimburse a part of VAT was issued together with a ruling that declined to allow reimbursement of the remaining VAT. The approved VAT was reimbursed upon the taxpayer's request.
The taxpayer addressed the tax authority claiming interest on the part of VAT that was recognised as reimbursable during the audit, assuming that the period for reimbursing the VAT started on the date when the tax office issued its audit report upholding the taxpayer's claims for a part of the VAT. The audit was completed within the statutory deadline.
According to the tax office, if any violations have been identified with regard to any part of VAT claimed back by the taxpayer, the VAT must not be reimbursed (including the part to which the tax authority has no objections) until the decision is issued in due course on violations committed by the taxpayer.
The Presidium of the Russian Supreme Arbitration Court upheld the approach and when the audit was completed, the tax office must not delay reimbursing the VAT claimed back by the taxpayer, provided it has no objections with regard to such VAT. In this case the VAT should be reimbursed within the established timeline following completion of the audit.
The Supreme Court earlier expressed its position that the tax office must reimburse the VAT if it is subject to reimbursement and may not be offset irrespective of whether or not the taxpayer has applied for such reimbursement. This position and the resolution in question taken together are likely to shift the administrative VAT recovery practice in favour of the taxpayer.
However, the earlier commencement of the tax authority's obligation to recover VAT entails an earlier commencement of the limitation period for protecting the relevant rights. For the VAT which the tax office recognised as reimbursable but which has not been actually reimbursed to the taxpayer, the limitation period for filing claims with the court starts on the date on which the tax audit is completed, irrespective of disagreements on other parts of VAT claimed for reimbursement. By calculating the limitation period for the reimbursable part of VAT from the same date as for the disputed part, a taxpayer may miss the deadline for recovering the reimbursable part.
Please note that the resolution in question does not clarify how the period for reimbursing VAT should be calculated if the objections in the audit report were unlawful and were recognised as such in administrative or court proceedings. In this case the approach may develop that erroneous conclusions set out in the audit report may not put the taxpayer in a worse position than it would have been had the tax office made the correct conclusions at the outset. Consequently, if the auditors' objections prove to be wrong, the timeframe for reimbursing VAT shall be deemed to have commenced on the date when the audit was completed (but no later than the final statutory deadline for the completion of a tax audit).
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