A resolution by the Presidium of the SCARF published: a taxpayer has successfully proven his right to a setoff of the overpayment amount

“Mobile TeleSystems” OJSC (MTS OJSC) submitted to the tax authority corrected VAT tax declarations. According to the documents, the amount of VAT increased and had to be paid additionally. The tax authority set the existing excessive payment of VAT off against the VAT payment according to the corrected tax declarations and informed the company respectively by setoff letters.

Subsequently MTS OJSC, in connection the incomplete account of VAT tax deductions, additionally submitted to the tax authority corrected tax declarations, where the VAT amount payable to the budget was decreased in comparison with the VAT amounts indicated in the previous declarations. MTS OJSC requested, on the basis of those, to set the amount of the excess payment off against the future VAT payments.

However, the inspectorate refused to perform the setoff exclusively for the motive of expiry of the three-year period fixed for submitting such request by clause 7 of Article 78 of the TCRF.

MTS OJSC appealed to court against the tax authority’s refusal (case № A40-52351/09-126-304). Advocates at the Firm - Alexey Popov, Partner, Advocate; Maxim Rovinskiy, Advocate, chief of tax and customs law practice; Igor Pastukhov, Advocate, tax advisor - represented the company’s interests during arbitration.

The Court of Arbitration of the city of Moscow initially upheld the claim of the company. The Ninth Arbitration Court of Appeal left the ruling of the first instance court unchanged. However, the Federal Court of Arbitration of the Moscow District revoked both the ruling and the decision and remitted the case to the Court of Arbitration of the city of Moscow for reconsideration.

The Court of Arbitration of the city of Moscow reconsidered the case on August 03, 2010, once again upheld the position of MTS OJSC, but neither the second instance nor the instance of appeal sustained it. The latter courts based their dismissal on the following fact. For setoff of excessively paid tax amounts, it is necessary to present proof of crediting those to the budget in monetary form and in the amount exceeding the tax obligations of the company (this is proven by payment orders). The tax authority has conducted setoffs and operations of registration of respective entries of payments to the budget on the personal account card, which is not the same as crediting of monetary amounts to the budget. The three-year period of applying to the tax authority to perform the setoff should be calculated from the dates of payment of taxes indicated in the initial tax declarations, since the changes introduced by submitting corrected tax declarations pertain to the indicators contained in the initial declarations.

On November 10, 2011, the Presidium of SCARF expressed its concluding opinion on the case. Advocate Igor Pastukhov represented the interests of MTS OJSC during the session. SCARF revoked the resolutions of the Ninth Arbitration Court of Appeal and of the Federal Court of Arbitration of the Moscow District and left the ruling of the Court of Arbitration of the city of Moscow, dated August 03, 2010, unchanged.

As the Presidium of SCARF upheld the claim of MTS OJSC, it pointed out that crediting of cash to the budget system as well as performance of setoff by a tax authority was acknowledged as tax payment. Performance by a taxpayer of a tax obligation, amount of which exceeds the amount of his actual obligations, is considered excessive tax payment.

Payment of the tax is done in the forms fixed by clause 3 of Article 45 of the TCRF, therefore the period fixed by clause 7 of Article 78 of the TCRF is calculated from the day of arising of circumstances, which are considered performance of tax obligations by the taxpayer (including from the day, when the tax authority decides to perform the setoff) until the day he submits the setoff request.

In this case, the three-year period for setoff of the excessively paid tax amounts is to be calculated from the dates of setoffs performed by the inspectorate, which means that MTS OJSC filed the setoff request within the fixed period.

Full information on the case is available here.