Chapter 11. Methods of Enforcement of Obligations Relating to

Payment of Taxes and Fees

Article 72. Methods of Enforcement of Obligations Relating to Payment of Taxes/Charges

1. Obligations to pay taxes or charges may be enforced through the following methods: property pledge, guarantee, penalty, suspension of operations in bank accounts and attachment on a taxpayer's property.

2. The current chapter prescribes methods for the enforcement of obligations relating to the payment of taxes or charges, and the procedure and conditions of the application of such methods.

With respect to the taxes and charges payable in connection with the movement of goods across the customs border of the Russian Federation, other methods may also be used for the enforcement of obligations in a manner and on conditions prescribed by the customs legislation of the Russian Federation.

3. The rules stipulated by this Chapter, with the exception of Articles 76 and 77 of this Code, shall also apply to the method of providing security for the fulfilment of the obligations to pay taxes and dues to the governmental extra-budgetary funds. The agencies of the governmental extra-budgetary funds, which exercise control over the payment of these taxes and dues, shall enjoy the rights and bear the duties of tax bodies.

Article 73. Property Pledge

1. If time frames are changed for the fulfilment of obligations to pay taxes and charges, the obligation to pay taxes and charges may be secured by a pledge.

2. A property pledge is formalized in an agreement effected between the tax authority and the pledger. The latter may be the taxpayer or payer of fees him/her/itself and a third person alike.

3. If a taxpayer or payer of fees fails to fulfil an obligation relating to the payment of the amount of tax or fee due and penalty, the pledgee tax authority enforces this obligation from the value of the pledged property in a manner prescribed by the civil law of the Russian Federation.

4. The subject of pledge may be property that is pledge able under civil law unless this article prescribes otherwise.

Property pledged under an agreement between the tax authority and pledger may not be the subject of pledge under another agreement.

5. The pledger may continue to have possession of the pledged property or transfer it at the pledger's expense to the tax authority (pledgee), and the latter is responsible for preservation of the pledged property.

6. Any transactions with pledged property, including transactions undertaken for the repayment of arrears, may only be undertaken by agreement with the pledgee.

7. Legal relationships arising out of a pledge as a method of enforcement of a tax obligation are subject to civil law rules unless otherwise prescribed by the legislation on taxes and fees.

Article 74. Guarantee

1. If time are changed for the fulfilment of obligations to pay taxes and charges, the obligation to pay taxes and charges may be secured by a guarantee.

2. If a taxpayer fails to pay in due time the amount of tax or fee due and penalty, the guarantor is obligated before the tax authority to fully fulfil the taxpayer's tax obligation.

An agreement is effected in accordance with civil law between the tax authority and the guarantor to formalize the guarantee.

3. If the taxpayer fails to meet his/her guaranteed tax obligations, the guarantor and the taxpayer bear joint and several liability. The forced exaction of the tax and due penalties from the warrantor shall be effected by a tax body through legal proceedings.

4. Having fulfilled the obligations under the agreement, the guarantor is entitled to recover from the taxpayer the paid amounts, interest on these amounts and the losses incurred because of the guarantor's having fulfilled the taxpayer's obligations.

5. A legal entity or individual may act as a guarantor. One tax obligation may be guaranteed by several guarantors.

6. Legal relationships arising out of a guarantee as a method of enforcement of a tax obligation are subject to provisions of the civil law of the Russian Federation unless otherwise prescribed by the legislation on taxes and fees.

7. The rules of this Article shall also apply to guarantee/security with regard to payment of fees.

Article 75. Penalty Interest

1. A penalty as established by this Article is an amount of money which a payer of tax or fee, a tax agent shall pay in case of an overdue payment of the amounts of taxes or dues, including taxes or dues to be paid in connection with the transfer of goods across the customs border of the Russian Federation in the later period of payments in compare with established by legislation on taxes and fee.

2. The amount of penalty interest is paid over and above the amounts of tax or charge due and introspectively of the application of other methods to enforce the obligation to pay a tax or charge and liability for the violation of the tax or fee legislation.

3. A penalty interest is calculated for each calendar day of delay in fulfillment of obligation of pay a tax or a fee, beginning on the day following the statutory deadline for the payment of a tax or charge.

No penalties shall be charged to the amount of arrears which the taxpayer could not repay because by decision of a tax body or a court of law the taxpayer's transactions in bank had been suspended and his property had been under arrest. The filing of an application for granting a delay or an instalment plan, a tax credit or an investment tax credit shall not stay the addition of penalties to the amount of the tax subject to payment.

4. A penalty interest for each day of delay is calculated in percentage points of the outstanding amount of tax or charge due.

The penalty interest rate is equal to 1/300 of the effective refinancing rate of the Central Bank of the Russian Federation.

5. A penalty interest may be paid simultaneously with the payment of a tax or charge or following full payment of such tax or charge.

6. Collection of a penalty interest may be enforced from the taxpayer's cash in bank or from the taxpayer's other property in a manner prescribed by Articles 46-48 of this Code.

Enforced collection of penalty interest from a legal entity is effectuated without recourse to court, and from an individual, through court action.

Article 76. The Suspension of Transactions on the Accounts of a Taxpaying Organization, an Organization Acting as a Tax Agent, an Organization Paying the Due or a Taxpaying Individual Entrepreneur

1. Suspension of operations through bank accounts is used for the purpose of enforcement of a decision to recover a tax or charge unless otherwise stipulated by Item 2 of this Article. Suspension of operations through bank accounts means that the bank suspends all debit operations on an account unless otherwise prescribed by this article.

This restriction does not apply to the payments that under civil law shall precede the fulfilment of the obligation to pay taxes and fees.

2. A decision on the suspension of transactions of a taxpaying organisation on its accounts with a bank shall be taken by the chief (or his deputy) of the tax body who has sent the demand for tax payment in case of the taxpaying organisation's default on the duty of tax payment within the fixed period of time. In this case a decision on the suspension of the taxpaying organisation's transactions on its bank accounts may be taken only simultaneously with the adoption of a decision on the exaction of the tax.

A decision on the suspension of transactions of a taxpaying organisation and taxpaying individual entrepreneur on their bank accounts may also be taken by the chief (or his deputy) of a tax body in case these taxpayers failed to submit tax declarations to the tax body during two weeks upon the expiry of the fixed term of filing such declarations, and also in case of the refusal of a taxpaying organisation or a taxpaying individual entrepreneur to file their tax declarations. In this case the suspension of transactions on accounts may be repealed by decision of a tax body within one transaction day that follows the day of submitting tax declarations by these taxpayers.

3. The tax authority notifies both the bank and the taxpaying organisation simultaneously that it has been decided to suspend operations through the bank accounts of the taxpaying organisation; the fact and date of receipt of notification shall be acknowledged by the receiving party in writing.

4. A bank shall in any case fulfil the tax authority's decision to suspend operations through the bank accounts of the taxpaying organisation.

5. The suspension of operations through the bank accounts of the taxpaying organisation shall be effective as from the time of receipt by the bank of the tax authority's decision to suspend such operations pending the repeal of such demand.

6. The suspension of operations through the bank accounts of the taxpaying organisation shall be repealed by the tax authority's decision not later than one business day following the submission to the tax authority of documents in confirmation of the fulfilment by the above mentioned person of the decision to collect the tax.

7. The bank is not liable for the losses caused to a taxpaying organisation by the suspension of such persons' bank operations by decision of the tax authority.

8. The rules of this Article shall also apply to suspension of bank operations for organisation acting as a tax agent and organisation paying the due.

9. In the presence of a decision on the suspension of transactions on the organisation's accounts, the bank shall have no right to open new accounts for this organisation.

Article 77. Attachment of Property

1. Attachment of property as a method of enforcement of a decision to collect a tax is an action by a tax or customs authority to restrict the taxpaying organisation's or another obligated person's ownership rights relating to his property; such action requires the consent of a prosecutor.

Property is attached if taxpaying organisation fails to fulfil in due time a demand to pay a tax or if the tax or customs authorities have sufficient reason to believe that the indicated person is likely to take measures aimed at disappearing him/herself or concealing his/her property.

2. Attachment of property may be full or partial.

A full attachment of property is a restriction of rights of a taxpaying organisation with respect to such its attached property, and the possession and use of such property is performed only under the supervision or with permission of the tax or customs authority that executes the attachment.

A partial attachment is a restriction of rights of a taxpaying organisation with respect to such its attached property, and the possession, use and disposal of such property is performed only under the supervision or with permission of the tax or customs authority that executes the attachment.

3. An attachment may be used only to ensure the collection of a tax at the expense of a taxpaying organisation in accordance with Article 47 of this Code.

4. A taxpaying organisation may have all its property attached.

5. Only that property may be attached that is necessary and sufficient for the fulfilment of the demand to pay tax.

6. A decision to attach a taxpaying organisation's property shall be made by the chief officer (deputy chief officer) of the tax or customs authority ; such decision takes the form of a resolution.

7. Attachment of a taxpaying organisation's property requires the presence of witnesses. The authority that conducts the seizure shall not be able to deny the right to taxpaying organisation to attend to the attachment procedure.

Their rights and obligations shall be explained to the persons who participate in the attachment procedure as witnesses,experts, and also to the taxpaying organisation (its representative).

8. An attachment may not be made at night-time except for cases that brook no delay.

9. Prior to an attachment the officers to make the attachment shall show to the taxpaying organisation (its representative) the decision to make the attachment, a document stating the prosecutor's approval and documents confirming their authority.

10. An attachment is put on record. The attachment record or a list attached to the record shall contain the list and description of the property to be attached is listed and described ; the record shall make an accurate description of the attached assets, their quantity and individual characteristics, and if feasible, their value.

All assets to be attached shall be demonstrated to the witnesses and to the taxpaying organisation (its representative).

11. The chief officer (deputy chief officer) of the tax or customs authority that orders the attachment of property determines where the attached assets shall be kept.

12. Attached property may not be alienated (with the exception of alienation supervised or permitted by the customs or tax authority that makes the attachment), embezzled or concealed. Failure to observe the established procedures for possession, use and disposal of the attached property may result in liability of guilty persons in accordance with Article 125 of this Code and/or other federal laws.

13. A decision to attach property shall be repealed by a duly authorized officer of the tax or customs authority as the obligation to pay tax terminates A decision to attach property shall be effective from the time when the attachment is made until the repeal of attachment decision by a duly authorized officer of the tax or customs authority that takes the decision to make the attachment or until a higher-level tax or customs authority or a court of law overrules such decision.

14. The rules of this Article shall also apply to attachment procedures in relation to organisation acting as a tax agent and organisation paying the due.