The Presidium of the Supreme Commercial Court of the Russian Federation (the “SCC”) has issued a decree on a case in which a tax agent did not comply with the procedure for calculating VAT. The SCC believes that even though the tax agent did not withhold VAT from sums paid to a foreign company, this does not exempt it from paying this tax to the budget, even at its own expense.

The SCC has also recognised that it is not permitted to withhold VAT from a foreign company (counterparty) after fulfilling the conditions of an agreement. At the same time, the SCC has specified that by paying VAT, the tax agent may deduct this VAT in accordance with the standard procedure.

The SCC’s review of this case concerns only a tax agent’s obligations in respect of VAT. Therefore, it remains unclear whether it is possible to apply similar conclusions to the tax on income of foreign companies and to the tax on income of individuals.

We plan to report on the publication of the decree of the Presidium of SCC on this case in an upcoming issue.

[Ruling No. VAS-15483/11 of the Supreme Commercial Court of the Russian Federation, dated 1 February 2012]