of April 22, 1997
The right to tax benefit on the exported goods arises in case of the actual crossing by goods of border of the Russian Federation
The Magnitogorsk Iron and Steel Works Open Joint Stock Company (OJSC) and Kulikova appealed to the Supreme Court of the Russian Federation with the claim for recognition illegal (invalid) the paragraph of the sixth item 9 of the Instruction of the State Tax Administration of the Russian Federation of October 11, 1995 of N39 "About Procedure for Calculation and Tax Discharge on Value Added" (in edition of August 22, 1996), referring to the fact that the provisions containing in this paragraph are not based on the Law of the Russian Federation of December 6, 1991. "About the value added tax" (with subsequent changes) also violate their bonus rights about exemption of this tax in case of self-produced commodity export, the provided Art. 5 of this Law.
According to applicants, application of the specified Instruction provision on which the value added tax assesses the amounts of advance payments received by joint-stock company from foreign firms on account of the forthcoming export of products of joint-stock company violates the rights both the companies, and shareholders regarding receipt of salary and dividends.
Besides, applicants believed that entering into the Instruction of this Provision the State Tax Service of Russia changed the Law on the value added tax, than exceeded the authority.
In judicial session the representative of JSC Magnitogorsk Iron and Steel Works and Kulikova's representative supported the requirements. Kulikova in court was not, asked to consider case in its absence with participation of her representative.
Representatives of the State Tax Administration of the Russian Federation, and also representatives of the Ministry of Finance of the Russian Federation recruited in case in quality of interested persons did not agree with requirements of applicants and asked court to refuse allowance of the application, referring to the fact that the called provision of the Instruction does not contradict the Law and the right to tax benefit on the exported goods arises in case of the actual crossing by goods of border of the Russian Federation.
The judicial board on civil cases of the Supreme Court of the Russian Federation refused on April 22, 1997 allowance of the application on the following bases.
In item 9 of the Instruction disputed by applicants it is specified that the value added tax assesses the amounts of advance payments received by the Russian organizations (companies) from foreign and Russian persons on account of the forthcoming commodity export, works and services. After confirmation of real commodity export, works and services in accordance with the established procedure the value added tax from the advance payments received by the Russian organizations is subject to offsetting.
According to the subitem "and" of item 1 of Art. 5 of the Law of the Russian Federation "About the value added tax" (in edition of April 1, 1996) the exported goods as self-produced, and acquired are exempted from the value added tax.
According to Art. 97 of the Customs code of the Russian Federation commodity export - customs regime in case of which goods are exported out of limits of customs area of the Russian Federation without obligation about their import to this territory.
Therefore, the commodity export sign granting the right to tax benefit is the actual crossing by load of border of the Russian Federation. The goods are considered implemented for export if it is exported out of limits of the Russian Federation.
Therefore, according to court, the right of application of this privilege by the current legislation is put into dependence on whether commodity export was actually performed, and is not connected with delivery conditions, actions and intentions of the supplier.
Owing to Art. 10 of the Law of the Russian Federation "About the value added tax" the Instruction for application of this Law is developed and published by the State Tax Administration of the Russian Federation in coordination with the Ministry of Finance of the Russian Federation, i.e. the State Tax Service of Russia was effective within provided to it by the Law of competence.
According to the paragraph the second item 1 of Art. 4 of the called Law leviable turnover joins any money which is also received by the companies if their obtaining is connected with calculations for payment of goods (works, services).
Thus, the requirements containing in the Instruction and disputed by applicants do not contradict the Law, do not supplement it, at the same time also the rights of applicants to receipt of tax benefit are not violated.
According to the mentioned Instruction provision after confirmation of real commodity export, works and services in accordance with the established procedure the value added tax from the advance payments received by the Russian organizations is subject to offsetting.
In case of the disputes connected using this requirement of the Instruction, JSC Magnitogorsk Iron and Steel Works is not deprived of opportunity to take a legal action with specific requirements.
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