The Russian Constitutional Court has upheld Sony Mobile’s appeal, which was prepared by lawyers from Pepeliaev Group

Russia's Constitutional Court has held to be invalid the requirement of the Russian Tax Code that a taxpayer should include in its tax base for VAT not only the cost of goods (work, or services) sold, but also the amount of an insurance payout the taxpayer has received because the buyer has breached its obligation to pay for the goods (work or services). The Constitutional Court stated that if a taxpayer has calculated (paid) tax on an operation to sell goods (work or services), this requirement is lacking any economic justification and is at odds with the principle prohibiting double taxation. The Constitutional Court published the corresponding conclusions in its Resolution No. 19-P dated 1 July 2015. Sony Mobile was represented by Pepeliaev Group senior associate Vlaimir Voinov, who noted that situations involving double taxation are common in practice. As a result, the Constitutional Court’s decision could also be significant in terms of developing court and administrative decisions in Russia. As he sees it, the principle of tax neutrality is no less important. “Tax legislation should not have a material influence on a taxpayer’s selection of different methods for doing business which lead to the same result,” commented the lawyer. “This is because tax legislation does not regulate the procedure or conditions for taxpayers to carry out financial and business operations.