The Firm

ISUZU Corporation in Russia

Practice area: Litigation, Tax law

Protected Assets:
RUB 7,500,000

Results:
The decisions of the Interdistrict Federal Tax Service of Russia for Major Taxpayers in the Ulyanovsk Region were declared invalid insofar as they related to additional VAT assessments, reductions of VAT amounts previously claimed for reimbursement, the accrual of penalties, and the taxpayer’s liability under Article 122(1) of the Tax Code of the Russian Federation.
Case No. 11АП-6357/2016, F06-14925/2016

Case Overview:

Following desk tax audits, the tax authority held Isuzu Rus JSC liable for VAT on the grounds that it considered the company’s application of the 18% VAT rate to deliveries of goods from Japan to Russia to be unlawful.

Scope of Services

The attorneys who are now part of our law firm’s team provided full legal support in the complex litigation between Isuzu Rus JSC and the tax authority before the appellate and cassation courts. They prepared numerous procedural documents, participated in court hearings, and advised the accounting department of Isuzu Rus JSC on all arising issues.

Significance and Results for the Client

The appellate and cassation courts ruled in favor of Isuzu Rus JSC, as our attorneys successfully defended the position – despite extensive appellate and cassation complaints from the tax authority – that the foreign trade contract underlying the VAT dispute was a mixed contract containing elements of both a freight forwarding agreement (transportation from the Port of St. Petersburg to the warehouse in Ulyanovsk) and an agency agreement with the ocean carrier (sea transportation from Japan to the Port of St. Petersburg).

Ultimately, the courts confirmed the legitimacy of Isuzu Rus JSC’s deduction of input VAT on freight forwarding services, stating that the transportation of goods from St. Petersburg to Ulyanovsk and its organization by the taxpayer – based on the contract terms and the actual legal relationship – could not be considered a separate stage of international transportation.

The courts, based on the documents presented, established that the international transportation was completed at the Port of St. Petersburg. Meanwhile, the tax authority insisted that these services should be taxed at a 0% VAT rate.