In June 2012, the Supreme Commercial Court of the Russian Federation (the “SCC”) reviewed a case on the validity of interest being accrued on the amount of unlawfully collected monetary funds. Specifically, the company in question fulfilled the requirement of the tax authorities to pay tax which was subsequently disputed and found to be unlawful by the court of first instance.

Consequently, the excess payment was offset, but the company believes interest should be accrued on this amount. The tax authorities, however, believe that pursuant to the law, interest may only be accrued in the case of a tax refund, not a tax offset. The courts have ruled in favour of the company.

In denying the position of the tax authorities to send the case for review, the SCC has confirmed that the provisions of article 79 of the Tax Code of the Russian Federation apply to an offset, a refund of unlawfully collected taxes, advance payments, duties, penalties, and fines, and that these apply to taxpayers, as well as to those who pay duties, and to tax agents.

[Ruling No. VAS-4954/12 of the Supreme Commercial Court of the Russian Federation, dated 18 June 2012]