Russia upholds Sony appeal in insurance case
Russia’s Constitutional Court has found a section of the Russian Tax Code to be invalid during a dispute between Sony Mobile and the Russian tax authorities. The ruling affects VAT paid on insurance taken out to guard against non-payment for goods or services, and will save taxpayers 18% on such insurance payouts. The decision is likely to be most beneficial for companies selling consumer goods. “Companies that defer payments for goods, work and services they have sold and insure against the risk of non-payment… will save 18% on amounts of insurance payouts they receive,” said Natalia Faizrakhmanova, a senior associate at Pepeliaev Group.
The ruling means that companies paying VAT on shipments of goods should not include insurance payouts received for goods which were not paid for by debtors. Under the old rules, VAT was paid twice – once when the goods were shipped, and again when an insurance payout was made if payment was not received. It is this double taxation against which the Court has now ruled. Faizrakhmanova, who worked on the case, said that the new case law will “without doubt” provide more certainty for taxpayers. “The Constitutional Court voiced its position unequivocally: if VAT is paid when goods (work, services) are shipped, then it should not be paid when the corresponding insurance payout is received,” she added.