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The other side of the coin: when interest can be demanded from the Federal Tax Service

The other side of the coin: when interest can be demanded from the Federal Tax Service

LEGAL DIGEST \ 20.11.2018

The Russian Tax Code provides for cases when an inspectorate of the Federal Tax Service is obliged to accrue and pay interest to a company for using its money. We have reviewed the most recent court judgments on this matter issued in favour of companies.

Subject to articles 78 and 79 of the Tax Code, if an inspectorate misses the deadline for returning an amount of taxes paid or levied in excess, interest will be accrued on such amounts for each calendar day of the delay at the refinancing rate set by the Central Bank of Russia.

Yet, the current court practice shows that it proves difficult to recover such amounts from a tax inspectorate. Companies’ appeals to higher tax authorities do not achieve the desired goal and, therefore, many companies are forced to go to court to assert their rights, with some of them actually being successful. A St Petersburg company managed to recover the rather significant amount of RUB 33 million in interest from the inspectorate.

An analysis of the court practice points to the conclusion that tax authorities are obliged to pay interest when they have violated:

  • time frames for suspending transactions on an account, or they have unlawfully suspended such transactions;
  • time frames for repaying tax paid or levied in excess;
  • time frames for refunding VAT under a tax return indicating the amount of the refund.

Consequently, tax authorities are liable if their unlawful actions, decisions or an omission have resulted in losses for a company. Such losses should be repaid in full, including lost profits, with the monies from the federal budget.

For tax dispute resolution, please contact Acsour’s Legal Department.