For the attention of: chief accountants, financial directors and heads of tax departments of subsoil users.

Pepeliaev Group advises that on 29 January 2013 the Presidium of the Russian Supreme Commercial (‘Arbitration’) Court examined the calculation of Mineral Extraction Tax when mixed minerals are extracted, where the tax base is assessed using the calculation method for one type of minerals, and a different method for another type of minerals (Ruling No. VAS-11498/12 dated 6 November 2012 to refer the case to the Presidium).


A company has been extracting three types of minerals: ore, carbonate rock and crushed stone. When assessing the tax base, the calculation method was only used for ore and carbonate rock. However, in compliance with article 340(4) of the Russian Tax Code, the company included in the total expenses the costs incurred on all types of minerals being extracted, and apportioned these costs between the three types of minerals in proportion to their output. This resulted in decreased Mineral Extraction Tax being payable to the stated budget, since part of the costs incurred on the extraction of ore and rock had been apportioned to crushed stone which was taxed in accordance with the sale price. The tax authority stated that the tax base should have been apportioned individually for each type of minerals and that there had been no grounds for the apportionment actually used.

Conclusions of the Supreme Commercial (‘Arbitration’) Court The Presidium of the Supreme Commercial (‘Arbitration’) Court upheld this stance of the tax authority. However, the court is likely to reaffirm that income may be apportioned pro-rata, as referred to in article 340(3) of the Tax Code, only in relation to minerals for which the tax base is determined using the calculation method.

Conclusions and recommendations

The assessment method used by the taxpayer is set out in the Mineral Extraction Tax return; accordingly, it has been used by many subsoil users. Now such companies find themselves confronted by risk. If a company is in tax arrears, the tax authorities may collect the tax and charge additional late payment interest and sanctions. With regard to overpaid taxes, the balance can only be refunded after three years. Taking this into ac-count, we recommend that the companies re-examine their Mineral Extraction Tax lia-bilities to identify such overpayments and tax risks.