BGP Litigation senior lawyer Denis Savin commented for Interfax on the return to a company of RUB 303 million of VAT on the returned advance payments after a customer repudiated of an agreement

“The buyer terminated the agreement in May 2013, therefore the seller acquired the right to a deduction in the second quarter of 2013," says BGP Litigation senior lawyer Denis Savin. The courts of first instances decided that if termination of contracting agreements and return of advance payments occurred in different tax periods, the VAT amounts earlier subject to deduction upon downpayment were to be recovered in the period of termination of the agreement (and the one year period for the deduction was to be calculated therefrom), he believes.

But the court of cassation resolved to the contrary. “Article 172 of the Tax Code of the Russian Federation limits the deduction period to one year if the goods (works, services) are returned, against generally accepted three years. It is evident that in practice there is a time lag between the date the buyer refuses from the goods and the date the money is returned. In other words, if you count from the date the money is returned (and not from the date the goods, works, services are returned), a taxpayer will have more time for deduction, on average by one or two quarters,” D. Savin notes. 

“Organizations that missed the one-year period for claiming deduction, are given a chance to accept these deductions, if there was a time lag between the date of returning the goods and the date of returning the money,” D. Savin forecasts. 

The full article (in Russian) is available here: "Компания в суде отстояла право на возврат НДС по авансовым платежам".