The Ministry of Finance of the Russian Federation (the "Ministry") has clarified that VAT must be restored and paid into the budget when fixed assets that have not been fully amortised are liquidated.

However, the Supreme Arbitration Court of the Russian Federation (the "SAC") has indicated that since the Tax Code provides an exhaustive list of cases for which VAT must be restored – and the list does not include this specific case – then a taxpayer is not obliged to restore VAT.

Consequently, because the Ministry is extremely persistent in its approach to this matter, disputes with the tax authorities may arise if a company ceases to use fixed assets and goods for VATable operations, particularly when the fixed assets are liquidated or the goods are spoilt, stolen or lost in a fire.

[Letter No. 03-07-11/61of the Ministry of Finance of the Russian Federation, dated 18 March 2011]