The Tax Administration Updates

Federal Law of October 13, 2008, № 172-FZ "On introducing amendments to Art. 174 of Part 2 of the Tax Code of RF" introduced amendments with respect to procedures of payment of VAT.

Prior to the start of the third quarter of the year, in compliance with Art. 174 of the Tax Code of RF, payment of VAT under sales of goods (works, services, property rights) in the territory of RF, as well ass under completion of works (provision of services) for a corporation’s own needs was made by results of each tax period (quarter) not later than on the 20th date of the month following the respective tax period.

The newly introduced amendments have set new procedures, similar to payment by installments. From now on, amounts of VAT the taxpayer has calculated by quarterly tax files are to be paid monthly to the budget in equal portions (not later than on the 20th day of the month) over three months following the respective tax period.

The amendments became effective since the day of their official publication, i.e. since October 13, 2008 and cover the relations with respect to payment of the tax over the tax periods starting the third quarter 2008. So, taxpayers will be bound to submit the VAT file for the third quarter not later than on October 20, while the respective payments should be effected in equal portions not later than on October 20, November 20, and December 20, 2008.

Naturally, tax officers will find the task of administering the tax to become somewhat more challenging than before. However, it can be assumed that the respective software would be capable of compensating complexities associated with control over the timely payment of VAT not at once, as it was before, but over three months, as per the newly passed Law.

The timely amendments would allow one to alleviate stress for the business community vis-à-vis the previous obligation to pay VAT in full at once, which was one of the most profound challenges facing medium-sized businesses, as far as cash turnover is concerned.

N. Kornienko, Head of the Tax Policy Department