Section VIII. Federal Taxes

Chapter 21. Value-Added Tax

Article 143. Taxpayers

The following shall be recognised as taxpayers for the purposes of value added tax (hereinafter referred to as "taxpayers"):

organizations;

individual entrepreneurs;

persons recognized as taxpayers of the value added tax (further in the present Chapter - tax) in connection with the movement of goods across the customs border of the Russian Federation defined according to the Customs Code of the Russian Federation.

Article 144. Registration as a Taxpayer

1. Taxpayers are subject to a compulsory registration with the tax body in compliance with Articles 83, 84 of the present Code and with due regard to the peculiarities stipulated by the present chapter.

2. Foreign organisations are entitled to be registered with the tax bodies as taxpayers at the location of their permanent establishments in the Russian Federation. Registration as a taxpayer shall be effected by a tax body on a written application of a foreign organisation.

Article 145. Release from the Taxpayer Obligations

1. Organizations and individual businessmen have the right to relief from performing a taxpayer's duties relating to tax accrual and payment thereof (hereinafter referred to as relief), if the sum of proceeds from the sale of goods (works, services) of such organizations or individual businessmen less the tax and the sales tax has not exceeded as aggregate 1,000,000 roubles for the three preceding calendar months in a row.

2. The provision of this article shall not extend to the organizations and individual businessmen selling excisable goods and (or) excisable mineral raw materials within three preceding calendar months.

3. The relief in compliance with Item 1 of this Article shall not apply insomuch as it concerns the duties arising in connection with the importation to the customs territory of the Russian Federation of goods taxable under Subitem 4 of Item 1 of Article 146 of this Code.

Persons contending for being relieved from a taxpayer's duties shall file a relevant application in writing and the documents, indicated in Item 6 of this Article, which support their right to such a relief, with the tax body at the place where they are registered.

Said application and documents shall be filed on the 20th day of the month at latest beginning from which these persons contend for being relieved from a taxpayer's duties.

The form of an application for relief from a taxpayer's duties shall be subject to endorsement by the Ministry of Taxation of the Russian Federation.

4. The organizations and individual businessmen which have filed with the tax body an application for relief from a taxpayer's duties (or for extending the term of relief) may not reject this relief prior to the expiry of 12 calendar months in a row, safe for the cases when they forfeit the right to relief under Item 5 of this Article.

Upon the expiration of 12 calendar months and on the 20th day of the next following month at latest the organizations and individual businessmen, which have been relieved from a taxpayer's duties, shall file with the tax bodies the following:

the documents confirming that within said term of relief the sum of proceeds from the sale of goods (works, services), calculated in compliance with Item 1 of this Article, less the tax and the sales tax, did not exceed 1,000,000 roubles as an aggregate for each three calendar months in a row;

an application for enjoying the right to extend the term of relief to the next 12 calendar months or for the refusal to enjoy such right.

5. If within the period, in which organizations and individual businessmen were relieved from a taxpayer's duties, proceeds from the sale of goods (works, services) less the tax and the sales tax for each three calendar month in a row exceeds one million roubles or if a taxpayer have sold excisable goods and (or) excisable mineral raw materials, the taxpayers, as of the first day of the month when such excess took place or the excisable goods and (or) excisable raw materials were sold, and to the end of the relief term, shall cease to enjoy the right to the relief .

The sum of the tax for the month in which said limit was exceeded or excisable goods and (or) excisable raw materials were sold shall be recovered and paid to the budget in the established manner.

Should a taxpayer fail to submit the documents specified in Item 4 of this Article (or should the taxpayer submit documents containing unreliable information), as well as should the tax bodies find that the taxpayer has not observed the limitations established by this Item and Items 1 and 4 of this Article, the sum of tax shall be recovered and paid to the budget in the established manner, with a relevant tax sanction and penalty being collected from the taxpayer.

6. The documents confirming in compliance with Items 3 and 4 of this Article the right to relief (to extension of the relief term) shall be as follows:

an extract from the balance sheet (to be submitted by organizations);

an extract from the sales book;

an extract from the book of receipts and expenditures and of economic operations (to be submitted by individual businessmen);

a copy of the register of received and issued invoices.

7. In the cases provided for by Items 3 and 4 of this Article a taxpayer shall be entitled to send to the tax body the application and the documents by registered mail. In such case the six day, as of the date of sending the registered letter, shall be regarded as the date of their submission.

8. The amounts of the tax to be deducted by taxpayers in compliance with Articles 171 and 172 of this Code prior to their enjoying the right to relief under this Article with regard to goods (works, services), including fixed assets and intangible assets acquired for the purpose of making operations which are regarded as units of taxation in compliance with this Article but have not been used for said operations, after sending by the taxpayers an application for enjoying the right of relief shall be recovered in the last tax period prior to sending an application for enjoying the right to relief by way of reducing tax deductions.

The amounts of the tax paid in respect of the goods (works, services) acquired by taxpayers, who have lost the right to relief in compliance with this Article, prior to the loss of said right and used by the taxpayers after their loss of this right in operations regarded as units of taxation in compliance with this Article, shall be deducted in the procedure established by Articles 171 and 172 of this Code.".

Article 146. The Item of Taxation

1. The following operations shall be defined as items of taxation:

1) sale of goods (works, services) on the territory of the Russian Federation, including the sale of subjects of a pledge and transfer of goods (results of performed works, rendered services) under a compensation agreement or a novation, as well as the transfer of property rights.

For the purposes of the present Chapter, the transfer of title to goods, results of performed works, rendered services on gratuitous basis shall be redefined as sale of goods (works, services);

2) the transfer of goods (performance of works, provision of services) on the territory of the Russian Federation for own purposes in respect of which expenses are not accepted for offset (in particular, as depreciation deductions) when the tax on the profit of organisations is being calculated;

3) performance of construction and erection works for own consumption;

4) importation of goods to the customs territory of the Russian Federation.

2. For the purposes of the present Chapter, the following shall not be recognized as a unit of taxation:

1) operations listed in Item 3 of Article 39 of the present Code;

2) transfer on a gratuitous basis of apartment houses, nursery schools, clubs, sanatoriums and other facilities of social and cultural housing purposes and also roads, electrical grids, substations, gas networks, water intake facilities and other similar objects to public authorities and bodies of local self-government (or by decision of said bodies to specialized organizations operating the aforesaid facilities as per their purpose);

3) transfer of property of the state and municipal enterprises redeemed by way of privatization;

4) performance of works (rendering of services) to bodies which are included in the system of public authorities and bodies of local self-government within the framework of execution of exceptional authority in a specific area of activities assigned to them, if the mandatory nature of executing said works (rendering of services) is stipulated by legislation of the Russian Federation, legislation of subjects of the Russian Federation, or laws of bodies of local self-government;

5) transfer on a gratuitous basis of fixed assets to public authorities and government agencies and bodies of local self-government, and also to budgetary establishments, state and municipal unitary enterprises.

Article 147. The Place of Sale of Goods

For the purposes of the present Chapter, the territory of the Russian Federation shall be recognized as the place of sale of goods if one or several of the below circumstances exist:

the goods are located on the territory of the Russian Federation and are not shipped, and are not transported;

the goods at the time of beginning of the shipment or transportation are located on the territory of the Russian Federation;

Article 148. The Place of Sale of Works (Services)

1. For the purposes of the present Chapter the territory of the Russian Federation shall be recognized as the place of sale of works (services) performed if:

1) works (services) are connected directly to real estate (except for aircraft, sea ships and internal navigation ships and also spacecraft) located on the territory of the Russian Federation. Such works (services), in particular, shall include civil engineering, assembly, construction and erection, repair, restoration works, the planting of trees and shrubs;

2) works (services) connected to personal property located on the territory of the Russian Federation;

3) services actually performed on the territory of the Russian Federation in the area of culture, arts, education, physical culture, tourism, recreation and sports;

4) a buyer of works (services) operates on the territory of the Russian Federation.

The place of activity of the buyer shall be considered the territory of the Russian Federation if the buyer of works (services) specified in the present Subitems is actually located on the territory of the Russian Federation on the basis of state registration of an organization or individual entrepreneur, and if such is not available - on the basis of the place indicated in constituent instruments of the organization, the place of management of the organization, seat of its permanent executive board, location of its permanent representation (if the services are rendered through this permanent representation), place of residence of the natural person. The provision of the present Subitem shall apply to:

the transfer to property or assignment of patents, licenses, trademarks, copyrights or other performance of works (provision of services) rights;

rendering consulting, legal, accounting, engineering, advertising, education services, services in the processing of information, and also in the performance of research and development works. Engineering services shall include engineering and consulting services in the development of a production process and sale of products (works, services), preparation of civil engineering and operation of facilities in industry, infrastructure, agricultural and other objects, predesign and design services (drafting of feasibility studies, the design engineering and other similar services). Services in the processing of information shall include services in the collection, generalization and systematization of information files and furnishing the user with results of this information processing;

leasing of personnel if the personnel works at the place of business activity of the buyer;

letting out movable property, except for ground motor vehicles;

rendering services of an agent who on behalf of the principal participant of the contract would hire a person (organization or natural person) to render services stipulated by the present Subitem;

rendering services directly at Russian airports and in the airspace of the Russian Federation on board service aircraft, including aeronavigation service;

performing works (rendering services including repair ones) in respect of sea ships and internal navigation vessels during mooring periods (all kinds of harbor dues, services of ships of port fleet), as well as those performed during pilotage

5) activity of organizations or individual entrepreneurs that perform works (render services) shall be performed on the territory of the Russian Federation (as regards the performance of works (rendering of services) not stipulated by Subitems 1 - 4 of Item 1 of the present Article).

2. The territory of the Russian Federation shall be considered the place of activity of an organization or individual entrepreneur performing works (rendering services) not stipulated by Subitems 1 - 4 of Item 1 of the present Article if this organization or individual entrepreneur is actually present on the territory of the Russian Federation on the basis of state registration, and if such is not available - on the basis of the place stated in constituent documents of the organization, place of management of the organization, seat of the organization's permanent executive board, location of its permanent representation in the Russian Federation (if the works were performed (the services were rendered) through this permanent representation) or place of residence of the natural person.

For the purposes of the present Chapter, as the place of activity performed by the organization or individual entrepreneur who renders services in letting out aircraft, sea ships or internal navigation vessels" shall be replaced by the words "let use aircraft, sea ships or internal navigation vessels under lease contracts (time chartering) with a crew, and also services in carriage, shall not be recognized the territory of the Russian Federation where the carriage is effected between ports situated outside the territory of the Russian Federation.

3. If the sale of works (services) is of an auxiliary nature as regards the sale of principal works (services), the place of sale of the principal works (services) shall be recognized as the place of such an auxiliary sale.

4. Documents confirming the place of performance of works (of rendering of services) are:

1) a contract with foreign or Russian persons;

2) documents confirming the fact of performance of works (of rendering of services).