The Lawyers of the Law firm "YUST" successfully represented OJSC “Petrolesport” in the dispute with a tax authority

The Supreme Court of Arbitration of the Russian Federation (SCA) by its Ruling No. VAS-14630/10 of November 3rd, 2010, refused to pass to the Panel of the SCA the case No. A56-84165/2009 to be reviewed according to the supervisory procedure. Previous court rulings on the case upheld the claims of the OJSC “Petrolesport” to the tax authority.

The claims from Petrolesport to the Saint-Petersburg Inter-District Inspectorate No. 13 of the Federal Tax Service of Russia to rule invalid five decisions and five demands of the tax authority, taken as a result of remote inspections of VAT declarations were merged and considered as a single case No. A56-84165/2009.

The court rulings on the case (Decision of the arbitration court of St.-Petersburg and Leningradskaya region of February 9th, 2010, Ruling of the 13th arbitration court of appeal of April 19th, 2010, and Ruling of the Federal Court of Arbitration of the North-Western Distict of July 27th, 2010) upheld the claims of Petrolesport in full, considering invalid all contested decisions of the tax authority.

The dispute concerned the right of Petrolesport to apply the 0% VAT rate to the operations of loading, transshipment and accompaniment of the goods imported into the territory of the Russian Federation (transported across the customs border by sea).The tax authority argued that the 0% VAT rate was only applicable to the goods imported in the Russian Federation under the free customs zone treatment. The courts dismissed the argument.

The courts, having analyzed the relevant provisions of tax legislation and having accentuated that par. 2 subcl. 2 cl. 1 Art. 164 of the Tax Code of the Russian Federation clarifies the provision of the subcl. 1 cl. 1 Art. 164 of the Code and extends the application of the 0% VAT rate imposed on the works (services) to the goods exported from or imported into the territory of the Russian Federation, upheld the taxpayer’s demands.

The court acts contained a conclusion that the legal relationship between Petrolesport and the international shippers (customers) were a set of works (services) related to unshipping of the goods transported to Russia by sea before receiving any customs treatment.

The courts based their conclusions on the fact that the completion of the works (services), after which the tax authority laid claims, was the final stage of the foreign goods’ transportation to the Russian Federation. Such operations between sea shippers and receivers of the goods are governed by agreements of sea shipping of goods. In accordance with the Law of the Russian Federation “On customs tariff”, the cost of works (services) fulfilled by Petrolesport for the receivers of the goods is a part of the transportation costs, and as such, is included in the customs costs of imported goods, which is the VAT base for goods transported across the borders of the Russian Federation.

The courts also took into account the fact that the tax authority did not contest the package of documents Petrolesport had presented to warrant the application of 0% VAT rate, and the existence of numerous clarifications by the Finance Ministry of the Russian Federation and by the Federal Tax Service of the Russian Federation of 0% VAT rate applied to the works (services) in question.

The Supreme Court Arbitration of the Russian Federation by its Ruling No. VAS-14630/10 of November 3rd, 2010, dismissed the request by the Saint-Petersburg Inter-District Inspectorate No. 5 of the Federal Tax Service of Russia (entered the case as the successor of the Saint-Petersburg Inter-District Inspectorate No. 13 of the Federal Tax Service of Russia) to pass the case No. A56-84165/2009 to the Panel of the SCA to be reviewed according to the supervisory procedure.

Three court instances came to the same conclusions in relation to the case No. A56-69613/2009 between the same sides.

Maxim Rovinskiy, an Attorney at the Law firm "YUST", represented the taxpayer in the arbitration courts together with the in-house counsel of Petrolesport.