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Tax authorities to repay taxes to British Airways

June 2010 - Tax & Private Client. Legal Developments by Vegas Lex Law Firm .

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20 May 2010saw the final session of the Federal Arbitrazh Court for the Moscow Circuit (FAC MC) hearing the case of British Airways (BA), the national flag carrier of the United Kingdom, closing the proceedings against the tax authorities, which were supported by the Tax Litigation Group of the Vegas Lex Law Firm representing BA.

Back in 2008, the tax office charged BA with more than RUR 30 million of additional tax claims related to the assessed profit tax and VAT. While the profit tax decision of the tax office was declared illegal by the RF Supreme Arbitrazh Court (RF SAC) earlier, in the Resolution of the Presidium of the RF SAC No. 6624/09 of 17 November 2009, it is until today that the VAT issue was pending. The tax authority believed that foreign airlines should pay VAT on cargo operations (whereas passenger transportation by foreign air companies is directly exempt from VAT by the Russian Tax Code).

The proceedings lasted for almost two years and took, as lawyers say, "two rounds". The courts of the first and appellate levels had consistently supported the tax authority's approach, and it was only the FAC MC that could finally issue a legal and fair resolution revoking the rulings of the lower courts and declaring the tax authority's decision illegal.

This resolution of the FAC MC takes effect immediately. This means that the tax authority will have to repay circa USD 1 million to BA from the federal budget.

Besides, as noted by Oleg Bazhenov, Head of the Tax Litigation Group of Vegas Lex, who represented BA in this case, the tax authority will be obliged also to pay interest to the airline for the entire period when the illegally recovered VAT was included in the federal budget.

 


 

For more detailed information:

Stepan Guzey, Senior Attorney, Tax Arbitration Group Vegas-Lex law firm.

Tel.: 8 903 183 57 11 , 8 495 933 08 00

E-mail: Guzey@vegaslex.ru

www.vegaslex.ru