May 1998

by Tatyana Kapelush

In recent months Russian laws and regulations governing the treatment of goods imported into the country have undergone some important changes, including modifications to the excise tax, customs duties, and the value-added tax (VAT). New payment schedules for the excise tax and new formulas for calculating import duties are likely to complicate customs requirements for U.S. exporters. Changes to the VAT, on the other hand, eliminate this tax on some important types of transactions.

Excise Tax Amendments
Recent amendments to the Russian Federation's Law "On the Excise Tax" stipulate that the sale of excisable goods should be recognized on the date such goods are shipped. For excise-tax purposes, the term "sale" includes gratuitous transfers, barter, and reciprocal offsets. Since February 18, 1998, excise tax must be shown as a separate line on all payment and supply documents. Excise tax must now be paid on first-time excisable goods imported to Russia where clearance under interstate customs agreements is not applicable. Excisable goods used to produce non-excisable goods are also subject to excise tax.

New deadlines for excise tax payment are now in force, as well. Tax on excisable goods sold between the first and the fifteenth days (inclusive) of the reporting month must be paid no later than the thirtieth day of the following month. Excise duties on goods sold between the sixteenth and the last day of the month must be paid no later than the fifteenth day of the second month following the reporting month.

Excise tax rates have been increased on most goods. Notably, the tax rate for automobiles has increased from 5 percent to 10 percent, although cars with engine capacity of less than 2,500 cubic centimeters are now exempt. Also tax exempt are: ethylated therapeutic, preventive, and diagnostic substances registered in the State Register of Medical Substances; medical supplies; substances prescribed by pharmacists; and cosmetics registered with the appropriate federal bodies.

New Import Duties
As of February 1, 1998, the Russian Government imposed new, combined import duty rates for certain food products, dishes, and clothing, whose rates were formerly calculated as a percentage of customs value. The combined rate is directed at small traders suspected of under-reporting the true value of imports. The combined rate, which totals 30 percent of the customs value of imports but no less than 1 ECU ($1.33) per kilogram, will also apply to second-hand clothing.

Other changes affect foreign firms' representation offices in Russia. Only companies legally registered in Russia may now clear goods through customs. Representation offices must use local customs brokers. The State Customs Committee will also advise the tax authorities in the city where a representative office is located of the import of large consignments of goods to ensure compliance with Russian tax obligations.

Vehicles shipped to Russia for use by representative offices can be sold at the end of a three-year period without the payment of customs duties. Prior approval must be obtained from customs in order to avoid paying duty, however.

VAT Invoices/Amendments
VAT invoicing has also been simplified and brought closer into line with established international practice. VAT invoices are no longer required for transactions involving securities (except for brokerage and intermediary services) and many banking and insurance operations. VAT invoices may now be signed by any individual authorized by the head of the company. Also, the requirements to indicate statistical codes and bank details are abolished. Several amendments have also been adopted relating to the maintenance of purchase and sales records.

The State Tax Service has amended its VAT regulations, as well. Charter of aircraft and ships outside Russia are now exempt from VAT (documentation is required). Transportation services provided by Russian companies for imported goods are also exempt, provided the cost is included in the goods' customs value. VAT is now payable on export sales if payment for the goods is not received within 180 days of customs clearance. The Tax Service has also announced a simplified list of documents required when claiming an offset of input VAT (when the goods are actually exported, additional documentation is required). For more information, visit the BISNIS CustomsCorner, at www.mac.doc.gov/bisnis/customs.htm.

Tatyana Kapelush works for BISNIS in Moscow.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)