LETTER OF THE FEDERAL TAX SERVICE OF THE RUSSIAN FEDERATION

About procedure for the taxation of indemnification

The Federal Tax Service on procedure for collection of income tax from the payments made based on the judgment according to the Law of the Russian Federation of 07.02.1992 No. 2300-1 "About consumer protection" (further - the Law), reports the following.

In the considered situation by a court decision to physical person, according to the Law, the damages caused owing to the agreement performance infringing the consumer's rights are paid.

Item 3 of article 217 of the Tax Code of the Russian Federation (further - the Code) provides that all types of the compensation payments established by the legislation of the Russian Federation are not subject to the taxation income tax (within the regulations established in accordance with the legislation of the Russian Federation).

By Item 1 of article 210 of the Code it is determined that in case of determination of tax base all income of the taxpayer gained by it both in cash and in natural form is considered.

According to article 41 of the Code the income the economic benefit in cash or natural form considered in case of possibility of its assessment and in that measure in which such benefit can be estimated, and determined for physical persons according to Chapter 23 Code "Income tax" is recognized.

Item 1 of article 16 of the Law provides that the terms of the contract infringing the consumer's rights in comparison with rules, the established laws or other legal acts of the Russian Federation in the field of consumer protection are recognized invalid.

If as a result of the agreement performance infringing the consumer's rights it had losses, they are subject to compensation by the manufacturer (the contractor, the seller) in full.

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