VAT exemptions for imported medical goods: current law enforcement and court practice

29 August 2023
Tax Messenger
Importers of medical goods often fail to claim an exemption from import VAT when declaring goods — for example, in situations where, at the customs clearance stage, they lack documents confirming their eligibility for the benefit (e.g., a correct registration certificate or other document confirming the designated purpose of goods). In these cases, importers pay import VAT at the standard rate of 20%.
For reference, the following categories of goods may be exempted from import VAT (Article 150.2 of the Russian Tax Code):

  • Medical goods listed in Decree No. 1042 of the Russian Government of 30 September 2015 (hereinafter, "Decree No. 1042")
  • Raw materials and components intended for the production of medical goods listed in Decree No. 1042. For this to apply, a document must be submitted to the customs authorities supporting the designated purpose of such raw materials and components, as well as the lack of domestic substitutes (Article 150.2.4 of the Russian Tax Code).
Having received supporting documentation after goods are released, importers usually apply to the customs authorities for an adjustment of the customs declaration (CD) to obtain the benefit and a refund of overpaid import VAT.

However, in situations like these, the customs authorities often refuse to make such adjustments and deny an exemption from import VAT.

The main argument of the customs authorities is that eligibility for an import VAT exemption must be verified at the time of importation of medical goods.
Despite the continuing law enforcement practice of denying requests to adjust CDs so that benefits can be recovered after goods are released, court practice has been favorable for importers.

The courts have supported the position of importers and found the customs authorities' denials to be illegitimate on the following grounds:

  • Initially declaring goods without claiming a benefit does not mean that the benefit is waived
  • When a СD is submitted, the declarant is required to have only those documents that support the information in the СD (Article 108.3 of the EAEU Customs Code). Therefore, the declarant must confirm its eligibility for the benefit at the time of import only if the benefit is declared in the CD
  • An importer is eligible for the benefit after goods are released, as tax law does not prescribe otherwise, nor does it restrict the ability to obtain supporting documents after goods are released
  • An importer that obtains the documents required to confirm its eligibility for the benefit after goods are released may initiate a CD adjustment (clause 11. e of Resolution No. 289 of the EEC Board of 10 December 2013), and it is up to the customs authority to decide whether to grant the benefit
  • Customs law does not require that an importer, in order to apply a VAT benefit after goods are released, have objective reasons for the late receipt of documents supporting the benefit
  • Documents received after goods are imported verify eligibility for the benefit at the time of import

Below are examples of favorable rulings on this issue:

  • Documents obtained confirming the designated purpose of goods after their release (i.e. importation): A41−10 540/2020, A40−15 520/2020, A41−11 944/2020, A40−191 299/2022, A40−298 517/2022, A41−67 641/2022, A56−95 776/2022
  • Correct registration certificate obtained after goods are released (i.e. imported): A40−134 673/2022, A41−18 898/2022, A56−28 470/2021, A56−59 959/2022
Despite the established court practice, including at the level of the Russian Supreme Court, the customs authorities persist in taking a conservative approach and denying import VAT exemptions that are declared post factum (i.e. after goods are imported). Unfortunately, a similar conservative approach is applied to many other customs matters (e.g., determining and documenting customs value, classification, other customs benefits, etc.).

However, even when we understand that the chances of settling a matter out of court are remote, we are convinced that it is important to formulate a correct and thoroughly elaborated legal position when preparing an application for a CD adjustment or during customs audits as support for a subsequent appeal. Under such an approach, the chances of a successful appeal are much higher.

How B1 can help

  • Analyze whether customs benefits may be applied to medical goods, including the benefits set forth in Decree No. 1042 of the Russian Government of 30 September 2015 and Decree No. 688 of the Russian Government of 15 September 2008
  • Provide practical support in amending CDs to secure customs benefits after goods are released
  • Provide full or partial support during customs audits
  • Represent companies' interests in pre-trial and trial appeals

  • Alexandra Gorokhova
    Global trade and Customs
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