In its resolution of 22.03.2007, the Federal Arbitration Court of the Moscow Circuit upheld the ruling of the Arbitration Court of the City of Moscow and the resolution of the Ninth Arbitration Appeals Court, as well as the supplementary ruling of the Arb

As a result of a cameral tax inspection of the tax declaration submitted by LLC “Flower-Tex” for VAT for July 2005, the Inspectorate of the Federal Tax Service of Russia № 7 for the City of Moscow issued a decision of 15.11.2005 № 287, refusing full refund of the sum of value added tax.

LLC “Flower-Tex” filed an application with the Arbitration Court of the City of Moscow, calling for the acknowledgement of the Inspectorate’s decision as invalid.

In the course of the dispute, advocates of the Law firm “YUST”, acting on behalf of LLC “Flower-Tex”, indicated that the Inspectorate’s refusal to refund the tax on the grounds that the taxpayer failed to submit the entire corpus of documents required by law for the application of the 0% rate, and also the company’s refusal to apply tax deductions upon acquisition of goods is contrary to the Tax Code of the RF, the legal position of the Constitutional Court of the RF and established legal practice.

The Arbitration Court of the City of Moscow upheld the arguments advanced by the advocates of the Law firm “YUST”, and in its ruling of 31.08.2006 (allowing for the supplementary ruling of 16.10.2006) acknowledged the Inspectorate’s decision as invalid in full measure.

In satisfying the demands of the claimant, the court of the first instance acted on the grounds that the company had submitted its VAT declaration and all documents envisaged by art. 165 TC RF to the tax authorities on time. The court considered the export carried out by “Flower-Tex” confirmed in full volume, and thus reached the conclusion that LLC “Flower-Tex” had the right to apply 0% tax rate upon export and legally applied for a refund of the sum paid on acquisition of the exported goods from the budget.

Moreover, the documents submitted by the company pursuant to art. 172 TC RF confirm the right of the company to apply tax deductions regarding the declaration for July 2005; the court also reached the conclusion that there is no evidence of dishonesty in the actions of the taxpayer.

The resolution of the Ninth Arbitration Appeals Court of 22.11.2006 upheld the decision of the court of the first instance of 31.08.2006; the resolution of the Ninth Arbitration Appeals Court of 29.12.2006 upheld the supplementary ruling of the court of the first instance of 16.10.2006.

The resolution of the Federal Arbitration Court of the Moscow Circuit of 22.03.2007 on the matter left the court acts unchanged, and dismissed the relevant cassational complaint of the Inspectorate of the Federal Tax Service of Russia № 7 for the City of Moscow.