The Supreme Court of the Russian Federation on the legitimacy of late payment interest assessed for failure to make customs payments on time

7 August 2023
Tax Messenger
The reviewed case is particularly relevant in view of (1) thegreatly increased number of customs audits, which today generally result in additional customs charges (as confirmed by official statistics of the Federal Customs Service of the Russian Federation, which show that 100% of customs audits after the release of goods in Q1 2023 were completed in favor of the customs authorities), (2) the present trend of remanding judicial cases for further consideration (particularly on the inclusion of royalties and other intragroup payments as well as dividends in customs value).

In light of the Supreme Court’s position, we recommend analyzing the legitimacy of late payment interest assessed as a result of customs audits as well as in the event of a repeat demand for customs payments and late payment interest when a judicial case is remanded for repeat consideration.

On July 28, 2023 the Supreme Court of the Russian Federation (hereinafter, the Supreme Court) issued a ruling on Case No. А55-3526/2022, concerning the legitimacy of late payment interest assessed for failure to make customs payments on time (after the court-ordered refund of additionally assessed customs payments and late payment interest and a subsequent new round of judicial consideration that went in favor of the customs authority).
Facts of the case

  • The customs authority charged additional customs payments and late payment interest.
  • The Company appealed the customs authority’s decision in Case No. А55-31601/2019. The appellate court ordered the customs authority to refund the overpaid customs payments and late payment interest to the Company. The customs authority complied.
  • At the same time, the cassation court set aside the rulings of the lower courts and remanded the case for a new hearing. In the next round of consideration, the court supported the customs authority’s position. In fulfillment of the court ruling, the customs authority sent the Company a new demand for both customs payments and late payment interest (in a higher amount, however). The late payment interest was calculated from the day following the refund made to the Company’s Unified Personal Customs Account (hereinafter, the Account) until the new date indicated in the demand.
  • It is notable that, when the obligation to make customs payments arose, the Company’s Account included advances in excess of the outstanding debt (outstanding debt of over 19 million rubles versus a balance of more than 36 million rubles on the Account).
  • The Company deemed the assessment of late payment interest illegitimate and filed an appeal.

The position of the lower courts

The lower courts supported the customs authority’s position on the following grounds:

  • Late payment interest is not assessed if the customs authority is entitled to dispose of advances, including the right of direct debit (hereinafter, Disposal). A Disposal [Order] may be a statement on a) the refund of advances, b) the offset
  • of advances
  • against pledged cash or c) the use of advances in connection with the receipt of a demand. As a Disposal [Order] was submitted by the Company after the late payment interest was assessed and in fulfillment of the appealed demand, it cannot be deemed a Disposal [Order], i.e., when the demand was issued, the customs authority was not entitled to dispose of the advances.
  • The fact that the Company overpaid advances does not mean that it met its obligation to make customs payments, because the advances continued to belong to the Company and cannot be regarded as customs payments until the Company issues a Disposal [Order] to the customs authority or the customs authority takes possession of the advances.
The position of the Supreme Court

The Supreme Court of the Russian Federation reversed the lower courts’ rulings and decided in favor of the Company on the following grounds:

  • Funds contributed against forthcoming payments that are not identified by the Company in terms of specific types and amounts of duties, taxes, customs fees or specific goods are payable to Federal Treasury accounts (Articles 28 and 35 of Federal Law No. 289-FZ).
  • Advances paid are assigned a Budget Classification Code and treated as a separate type of federal budget revenue when they are credited to Federal Treasury accounts.
  • The fact that advances were designated as specific customs contributions after the receipt of a Disposal [Order] or at the initiative of the customs authority (Articles 35 and 71 of Federal Law No. 289-FZ) does not mean that the funds were not in the Treasury and were not used by the government until that moment.
  • The decisive criterion for assessing late payment interest is the fact of having caused losses for the budget.
  • The fact that advances have been made to the federal budget in an amount exceeding the additionally assessed customs payments may mean that there are no budget losses requiring compensation in the form of late payment interest.
  • The fact that the funds remitted as advances belong to the Company (Article 48, clause 4, of the EAEU Customs Code) may not be regarded as having caused losses to the budget.
  • The courts’ restricted interpretation of the law (Article 72, part 19, clause 8, of Federal Law No. 289-FZ) has resulted in inconsistent interpretation of customs law by arbitration courts.
  • In the Company’s case, during the period of late payment interest assessment, the balance of the Federal Treasury account exceeded the amount of the additional assessments. Therefore, in the absence of losses to the budget, the customs authority had no grounds for demanding late payment interest.

How can B1 help?

  • Full or partial support during customs audits
  • Analysis of the legitimacy of late payment interest assessed as a result of customs audits
  • Representation of the interests of foreign trade participants at the pretrial and trial stages of an appeal
  • Arrangement of personal meetings with the customs authorities

  • Alexandra Gorokhova
    Global trade and Customs
Contact us

Learn more about our services by filling in the feedback form, or send us a request for proposal by email. Select the appropriate option.
This website uses cookies to improve your user experience. If you continue on this website, you will be providing your consent to our use of cookies.