SOLUTION OF CK OF THE SUPREME COURT OF THE RUSSIAN FEDERATION

of April 22, 1997

The right to tax benefit on the exported goods arises in case of the actual crossing by goods of border of the Russian Federation

The Magnitogorsk Iron and Steel Works Open Joint Stock Company (OJSC) and Kulikova appealed to the Supreme Court of the Russian Federation with the claim for recognition illegal (invalid) the paragraph of the sixth item 9 of the Instruction of the State Tax Administration of the Russian Federation of October 11, 1995 of N39 "About Procedure for Calculation and Tax Discharge on Value Added" (in edition of August 22, 1996), referring to the fact that the provisions containing in this paragraph are not based on the Law of the Russian Federation of December 6, 1991. "About the value added tax" (with subsequent changes) also violate their bonus rights about exemption of this tax in case of self-produced commodity export, the provided Art. 5 of this Law.

According to applicants, application of the specified Instruction provision on which the value added tax assesses the amounts of advance payments received by joint-stock company from foreign firms on account of the forthcoming export of products of joint-stock company violates the rights both the companies, and shareholders regarding receipt of salary and dividends.

Besides, applicants believed that entering into the Instruction of this Provision the State Tax Service of Russia changed the Law on the value added tax, than exceeded the authority.

In judicial session the representative of JSC Magnitogorsk Iron and Steel Works and Kulikova's representative supported the requirements. Kulikova in court was not, asked to consider case in its absence with participation of her representative.

Representatives of the State Tax Administration of the Russian Federation, and also representatives of the Ministry of Finance of the Russian Federation recruited in case in quality of interested persons did not agree with requirements of applicants and asked court to refuse allowance of the application, referring to the fact that the called provision of the Instruction does not contradict the Law and the right to tax benefit on the exported goods arises in case of the actual crossing by goods of border of the Russian Federation.

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