An exemption from customs duties and VAT for goods imported into the Russian Federation to guard against and counteract the spread of the Coronavirus infection
FAO companies’ CEOs, as well as chief accountants and employees in financial, legal and tax departments
Pepeliaev Group advises that the Russian Government has adopted its Resolution No. 419 dated 2 April 2020 “On the implementation of Decision No. 21 of the Board of the Eurasian Economic Commission dated 16 March 2020 and on amending the List of medical goods whose sale within the Russian Federation and import into the Russian Federation and other territories falling under its jurisdiction are not subject to (are exempt from the application of) VAT”.
The Resolution:1. Regulates the procedure for confirming the right to the benefit with respect to the payment of import customs duty for which Decision No. 21 of the Board of the Eurasian Economic Commission dated 16 March 2020 provides with respect to goods imported into the customs territory of the Eurasian Economic Union (“EAEU”) for the purpose of implementing measures aimed at guarding against and counteracting the spread of the 2019-nCoV coronavirus infection. Determines that documents about the designated purpose of goods are issued by state executive authorities of constituent entities of the Russian Federation.
2. Expands the list of medical goods whose sale in and import into the Russian Federation is exempt from the payment of VAT. The List approved by the Russian Government's Resolution No. 1042 dated 30 September 2015 is supplemented by section V ‘Essential medical devices imported into the Russian Federation’. It includes: tests to identify COVID-19; an insulating mask; a plastic face shield; a medical eye mask; PVC spectacles; a protective medical suit; medicines to be used in treating the coronavirus infection; an artificial apparatus for ventilation of the lungs; and other products designed to combat the spread of the coronavirus infection.
3. It is stipulated that, with a view to applying the new section V of the List, one should be guided by the stated codes of the EAEU's Customs Classification of Foreign Trade and the name of the goods taking account of the reference to the corresponding codes, namely code OK 005-93 from the All-Russian Classifier of Products or code OK 034-2014 from the All-Russian Classifier of Products according to Types of Economic Activity. There is a condition that a document should be submitted to confirm the designated purpose. The document concerning the designated purpose is issued by an executive state body of a constituent entity of the Russian Federation and should confirm the subsequent transfer of the goods free of charge to non-profit organisations that are active in the healthcare sector, including medical healthcare institutions.
The import of the goods referred to in section 5 of the List is not subject to (is exempt from) VAT provided that goods declarations are registered for such goods to be placed under the customs procedure of release for domestic consumption up to 30 September 2020 inclusive.
Comments from your advisersThe Resolution touches on two main aspects:
- the first concerns the reduction to zero of duty on goods imported with a view to the battle against the spread of the coronavirus infection. The exemption is provided for by sub-clause 1.7.32 of clause 7.1 of Decision No. 130 of the Commission of the Customs Union dated 27 November 2009 “On the single customs-tariff regulation of the EAEU” and is granted if a document is presented regarding the designated purpose of the goods. The Resolution determines the competent authorities that give such confirmation, which are state executive authorities of constituent entities of the Russian Federation;
- the second is an exemption from the payment of VAT of the import into Russia and the sale in Russia of goods intended for the battle against the coronavirus. After the duty was reduced to zero, business expected the same measures with respect to VAT. It follows from the Resolution that the exemption from the payment of VAT will be received by only those importers who import goods and transfer them free of charge to non-profit organisations. This corresponds to the announcement made on 3 April 2020 by Prime Minister Mikhail Mishustin at a joint session of the Presidium of the Coordinating Council and Working Group of the State Council for Combating the Spread of the Coronavirus Infection. The rule in question formally concerns only VAT benefits, and in terms of the customs duty benefit, the Government did not directly establish a condition concerning the transfer to non-profit organisations free of charge. However, the very same state body was vested with the power to issue confirmation of the designated purpose for the tariff benefit and for the VAT benefit, such body being a state executive authority of a constituent entity of the Russian Federation. It is obvious that, if the condition in question is met, the regional authority will issue a single confirmation for both benefits. However, if the condition is not met, i.e. if the documents confirming compliance with this condition are not attached to the application or if the goods are imported for resale, the risk cannot be excluded that the regional authority will refuse to issue a confirmation not only for the VAT benefit to be applied. They could also refuse to do so for the customs benefit to be applied, having further extended the condition for a free-of-charge transfer to the benefit for customs duty.
What to think about and what to doIt is worth companies analysing whether the goods they import fall under the exemption from the payment of import customs duty and VAT, as well as taking all steps necessary to obtain the documents confirming the right to apply the benefit (exemption).
A single application for both benefits can be filed with respect to goods intended to be transferred free of charge to non-profit companies. With respect to goods that are intended for resale, an importer can request that it obtain the relevant benefit with respect to customs duty by sending an application to this effect.
Taking account of the retrospective reference for benefits to be applied with respect to medical goods imported starting from 16 March 2020, the importer is entitled, after receiving confirmation of the designated purpose, to send to the customs authority an application to amend (supplement) the information stated in the goods declaration with the goods declaration being adjusted, together with an Application for a refund of customs duties and tax paid in excess. In this case, we recommend that you put forward, in your communication with the authorised executive body of the relevant constituent entity of the Russian Federation, a request that, in order to confirm the designated purpose, it should be reflected that the effect of such designated purpose extends to goods with respect to which customs declarations have been registered starting from 16 March 2020.
Help from your adviser
Pepeliaev Group’s lawyers are ready to provide multifaceted legal support when the legal grounds are formed for obtaining a benefit in relation to the payment of customs duty and for the application of the VAT exemption. They will also assist in obtaining the documents that are necessary for such benefit and exemption to be applied.