Russia: Supreme Court rules that VAT arrears can be recovered from fiscal agent


The Supreme Court of the Russian Federation has ruled in support of the tax authorities’ position that VAT failed to be paid by a fiscal agent can be recovered from the latter.

Governmental bodies are not recognised as VAT payers. However, they can enter into civil transactions with business entities, such as selling or leasing property etc. In those cases the business entities are to pay VAT as fiscal agents.

A tax inspectorate called to account a company which neglected its duties of fiscal agency under the transactions with a governmental body and failed to pay VAT. The company was fined and ordered to repay tax arrears for VAT and penalty interest for late payment. The first instance court, court of appeal and court of cassation agreed only with imposing a fine. The courts reasoned that under the circumstances the company operated only as a fiscal agent, not as a VAT taxpayer, and should not pay the disputed amounts of VAT at its own expense, which in fact were received by the governmental body and should be recovered from the latter.

However, the Supreme Court revoked that decision rendering lawful the recovery of VAT and penalty interest at the expense of the company which was liable for VAT before the public accounts. The Supreme Court agreed with the tax authorities that there were no infringement of the company’s interests, since the disputed amounts of VAT could be recovered by the company from the governmental body in the frames of a civil lawsuit.

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