On 7 February 2012, the Presidium of the Supreme Commercial Court of the Russian Federation (the “SCC”) reviewed a case relating to retailers’ paying VAT on bonuses paid by suppliers. The retailer in question had received a bonus from a supplier to display the supplier’s goods in its shops, as well as to fulfil the terms and conditions of a delivery agreement. The retailer did not pay VAT on the amount of the bonus.

The courts of the first three instances supported the retailer, indicating that the money received from the bonus was not connected with the fulfilment of specific actions in the interest of the supplier; therefore, the bonus did not provide a basis for VAT to be applied. However, the SCC’s panel of judges decided to forward the case for review. Upon review, the Presidium of the SCC confirmed the right of retailers not to pay VAT on bonuses received from suppliers, in particular for volume of sales.

The Presidium of the SCC has not yet made public the reasoning for its decision. When the judgment is published we will be able to comment on the decision.

[Decree No. 11637/11 of the Presidium of the Supreme Commercial Court of the Russian Federation, dated 7 February 2012, has not yet been made public; Ruling No. SCC-11637/11 of the Supreme Commercial Court of the Russian Federation, dated 17 November 2011]