In a letter dated 18 September 2012, the Federal Tax Service of the Russian Federation (the “FTS”) commented on the qualification of premium or remuneration paid by the seller of goods to the buyer for achieving a purchase target threshold. Making this qualification is relevant when resolving the issue of the reduction of the price of already supplied goods by the amount of the premium paid and, in turn, the correction of the seller’s VAT base and the buyer’s tax deductions.
For food products, it was specified that, regardless of the terms of the contract, such premia (remuneration) do not affect the price of already supplied goods. Therefore, there is no reason for correcting the VAT base.
For the sale of non-food products, such premium (remuneration) can affect the price of goods in certain cases, while in others it will not, depending on the terms of the supply agreement.
In the above letter, the FTS only comments on the first case scenario. It refers to the position of the Supreme Commercial Court of the Russian Federation stated in a Ruling dated 7 February 2012 No. 11637/11. According to that Ruling, premia paid by sellers and directly connected with the supply of goods amount to a kind of trade discount affecting the goods’ price and the VAT base. The payment of a premium results in a reduction in the goods’ price. In turn, this leads to a correction in the VAT base and the VAT amount calculated by the seller from sale of the goods for which the premium is paid. Consequently, the buyer must decrease the VAT amount previously deducted from the purchased goods.
Despite the latest clarification of the FTS, the conflicting positions of courts and tax authorities on the issue of VAT calculation in respect of premia and of justification of premium payment for the purposes of profits tax remain problematic. In the above letter, the FTS did not provide criteria to determine whether a premium can be deemed as not affecting the initial goods’ price of goods. This issue therefore remains open.
[Letter of the Federal Tax Service of the Russian Federation No. ЕD-4-3/15464@ “On addressing a letter of the Ministry of Finance of Russia”, dated 18 September 2012]