DECISION OF THE SUPREME COURT OF THE RUSSIAN FEDERATION

of September 23, 1997 No. GKPI97-368

On behalf of the Russian Federation

The Supreme Court of the Russian Federation in structure:

the chairman - the judge of the Supreme Court of the Russian Federation               Yu.D.Redchenko,

in case of                                                                    Yu. V. Popova's secretary,

with participation                                                             of the prosecutor A. V. Fedotova

Having considered in proceeding in open court civil case according to the statement of Virgo private company for recognition by invalid subitems "and" Item 12 and Item 22 of the Instruction of the State Tax Administration of the Russian Federation of October 11, 1995 N39 "About Procedure for Calculation and Tax Discharge on Value Added" in the part limiting circle of export transactions which are exempted from the value added tax with export out of limits of the State Parties of the CIS - established:

The private company (further closed joint stock company) Virgo appealed to the Supreme Court of the Russian Federation with the above-stated requirement, having referred to the fact that, containing in subitem "and" Item 12 and Item 22 of the disputed Instruction, instructions regarding tax exemption on value added of the exported goods, works and services only out of limits of the State Parties of the CIS, contradict requirements of subitem "and" Item 1 of Art. 5 of the Law of the Russian Federation "About the Value Added Tax" which is not containing similar territorial restriction. The features established by item 2 of Art. 10 of the above-named Law are based not on territorial, and on subject criterion.

Having included the above-stated provisions in the Instruction, the State Tax Administration of the Russian Federation actually changed the Law "About the Value Added Tax", than exceeded the authority.

In judicial session representatives of Virgo Ltd Kashcheev D. G. and Kazakov A. Yu. the declared requirement was supported.

Representatives of the State Tax Administration of the Russian Federation Cheremiskin V. I., Balashov L.V. and Savelyev P. I., Ministries of Finance of the Russian Federation of Tsibizov O. F. and Semkina T. I., State committee of the Russian Federation Naumov A. A. did not agree with the requirement of the applicant and asked about leaving it without satisfaction, having specified that the disputed Items of the Instruction conform to requirements of item 2 of Art. 10 of the Law "About the Value Added Tax", providing features of application of this Law concerning goods, works and services of the State Parties of the CIS imported on the territory of the Russian Federation or exported from the territory of the Russian Federation by business entities.

Having listened to explanations of representatives of the applicant, the State Tax Administration of the Russian Federation, the Ministry of Finance of the Russian Federation and the State Customs Committee of the Russian Federation, having researched case papers and having heard the conclusion of the prosecutor of the Prosecutor General's Office of the Russian Federation Fedotova A. V., believing to refuse allowance of the application, the Supreme Court of the Russian Federation finds the requirement of the applicant unreasonable and not subject to satisfaction on the following bases.

According to item 2 of Art. 10 of the Law of the Russian Federation "About the Value Added Tax" of feature of application of the value added tax concerning goods (works, services) of the State Parties of the Commonwealth of Independent States imported on the territory of the Russian Federation or exported from the territory of the Russian Federation by business entities, can be established by the interstate agreement of the Russian Federation on the principles of collection of the value added tax when calculating for the goods (works, services) realized in the territory of the states agreement parties.

As it is established by court, the State Tax Administration of the Russian Federation in coordination with the Ministry of Finance of the Russian Federation with subsequent changes accepted on October 11, 1995 the Instruction "About procedure for calculation and tax discharge on value added", in subitem "and" Item 12, to which is specified that the goods exported out of limits of the State Parties of the CIS as self-produced are exempted from the value added tax, and the works acquired, exported out of limits of the State Parties of the CIS and service, and also transportation service, loading, unloading, overload of the exported goods and on transit of foreign loads through the territory of the Russian Federation.

This subitem of the Instruction is effective taking into account Item 2 of Art. 10 of the Law of the Russian Federation "About the Value Added Tax".

In a number of paragraphs of Item 22 of the same Instruction instructions according to which tax benefits are represented in case of commodity export (works, services) only out of limits of the State Parties of the CIS and on condition of provision of the corresponding proofs about it also contain.

According to representatives of the State Tax Administration of the Russian Federation Cheremiskina V. I. and Balashova L. V. the Instruction provisions stated above completely will be approved with requirements of item 2 of Art. 10 of the Law "About the Value Added Tax" and the intergovernmental solution of the participating countries of the CIS for the matter of November 13, 1992.

On same also representatives of the Ministry of Finance of the Russian Federation and the State Customs Committee of the Russian Federation referred.

According to the intergovernmental solution of the participating countries of the CIS stated above the governments of these states consider it expedient to unify rate of the value added tax and to make offers in parliaments of the states on establishment of rate at the level of 20 percent which will be applied when calculating between business entities of the agreeing State Parties of the Commonwealth, since 1993.

By the resolution of the Supreme Council of the Russian Federation of January 29, 1993 with amendments of April 30, 1993 it is determined that in case of sales of goods (works, services) to the states, being members of the Commonwealth of Independent States where to the goods (to works, services) realized to the Russian Federation are established raised in comparison with acting in the Russian Federation, rates of the value added tax, these raised tax rates are applied.

Follows from content of the State Parties of the CIS and the resolution of the Supreme Council of the Russian Federation given the intergovernmental decision that the Commonwealth realized to the states goods (works, services) shall be assessed with the value added tax that actually follows also from item 2 of Art. 10 of the Law of the Russian Federation "About the Value Added Tax".

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