1. The State Tax Service has finally confirmed that VAT, withheld by Russian enterprises from payments to foreign suppliers which are not registered in Russia for tax purposes, is creditable as input VAT for the Russian enterprise (Letter of the State Tax Service of 30 July 1996, No. VG-6-06/525).
2. Under an amendment to the VAT law that entered into force on 28 April 1995, a reverse charge mechanism was implemented to collect VAT in cases where a Russian enterprise used services or purchased goods from a foreign supplier which was not registered with the Russian tax authorities. The law required VAT to be withheld from the amount transferred abroad but failed to unequivocally permit such VAT to be treated like normal input VAT. In this way, the Russian system differed from the European "reverse charge VAT mechanism" under which a customer takes over the obligation of its supplier to collect and pay over VAT but is allowed a credit against output VAT. Without such credit, the
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