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Taxes and Taxation
Reference:
Bondarev M.A., Stankovskii M.V.
VAT exemption: from theory to practice.
// Taxes and Taxation.
2022. ¹ 1.
P. 28-37.
DOI: 10.7256/2454-065X.2022.1.37374 URL: https://en.nbpublish.com/library_read_article.php?id=37374
VAT exemption: from theory to practice.
DOI: 10.7256/2454-065X.2022.1.37374Received: 22-01-2022Published: 15-03-2022Abstract: The problem of inaccurate interpretation of the norms of Article 149 of the Tax Code of the Russian Federation allowed us to determine the purpose of the article – the analysis of judicial practice in order to form an objective position on the legality of the application of tax legislation. Achieving this goal required solving a set of tasks: to form an understanding of the key features of exemption from value added tax and, based on judicial practice, to identify the main patterns of tax disputes. The object of the study is the process of regulating tax legal relations by legislative authorities. The subject of the study is a set of socio-economic relations arising in the process of applying tax legislation. This article uses traditional research methods: system analysis, deduction, induction, situational analysis, analogy and dialectics.  The novelty of the study consists in identifying problematic aspects of the functioning of the current tax legislation, as well as the proposed solutions to them. The relevance of the topic under consideration is beyond doubt, since the norms of tax law have a significant impact on the development of the Russian economy. This article is of scientific interest to a wide range of specialists, analysts, as well as official news agencies. In addition, the information presented in the paper can serve as a scientific basis for modeling and forecasting priority areas of tax policy development. Based on the analysis of Article 149 of the Tax Code of the Russian Federation, it can be concluded that many sub-paragraphs do not disclose a clear list of services, the sale of which is exempt from VAT taxation. As a result, there is a need to improve and detail the current tax legislation as a priority direction of the regulatory and legal policy of the state. Keywords: tax benefits, VAT exemption, booms fences, funeral services, transportation services, exclusive rights, tax disputes, tax base, the object of taxation, improving the tax mechanismThis article is automatically translated. In judicial practice, disputes between taxpayers and tax authorities are increasingly arising, and the reason is often a different understanding of the norms of tax legislation. It is impossible not to notice that a large proportion of disputes are connected with the value added tax. The reasons are clear, the above tax is one of the fundamental ones in the formation of the state budget. Thus, for 2019 and 2020, VAT revenues amounted to 3 986.4 billion rubles and 4 279.3 billion rubles, respectively, which is 19.96% and 21.17% of the revenues of the federal budget of the Russian Federation [1]. The aggregate volume of disputes arising is influenced by many factors, among which the key is the reasonable application of tax benefits established in Article 149 of the Tax Code of the Russian Federation. Disputes related to the exemption of certain transactions from VAT are caused by the inaccuracy of the wording of the provisions of the article, which, in our opinion, allow participants in the tax process to arbitrarily interpret them. On the other hand, these same inaccuracies in some cases contribute to the emergence of situations in which unscrupulous taxpayers evade paying taxes, which negatively affects the formation of the state budget. Thus, the lack of accuracy in the provisions of certain provisions of the Tax Code has a negative impact on both sides of tax disputes. This problem has repeatedly appeared as an object of research in the works of economists. For example, Zhuravleva I. A. reviewed the practical application of the provisions of the Tax Code on the use of benefits for business entities in terms of VAT [2]; Garmaeva M. A. raises the problems of the correlation of tax deductions with various tax mechanisms [3]; Titov A. S. analyzed the legal aspects of the application of tax benefits when concluding mixed contracts [4]. In the context of this study, the authors analyzed a number of provisions of Article 149 of the Tax Code of the Russian Federation, the application of which in practice leads to tax disputes. Marine vessel maintenance services. Based on the content of subparagraph 23 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation on the territory of the Russian Federation, the performance of work on the maintenance of sea vessels, as well as vessels of inland and mixed navigation during the period of parking in ports is not subject to value added tax [5]. The Tax Code of the Russian Federation does not provide a list of works that fall under this description, so, for example, it becomes unclear whether it is possible to exempt from taxation the installation of booms of ships, which is designed to prevent oil and petroleum products spills during draining operations [6]. To begin with, it is important to note that the services of tugboats for installing booms are provided only when loading/unloading fuels and lubricants (petroleum products), after completion of such they are no longer directly related to the maintenance of the vessels themselves, but are aimed at protecting the environment. In addition, this statement is confirmed by the provisions of the All-Russian classifier of economic activities [7], according to which the supply service of ships, including during their stay in ports, includes their agency, as well as survey, that is, survey, ship maintenance (Code 52.22.16). This fact means that the bonification of ships does not fall under the exemption from value added tax according to paragraph 23, paragraph 2 of Article 149. For a more detailed analysis of the problem, let us turn to judicial practice. On November 28, 2017, a decision was made on a complaint received from JSC "Fleet of Novorossiysk Commercial Sea Port" about compliance with the Constitution of the Russian Federation with the provisions of paragraph 8 of Article 75, paragraph 3 of paragraph 1 of Article 111 and paragraph 23 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation. This legal entity, when asked about the possibility of applying an exemption for the type of activity discussed above, in 2013 received recommendations from the Ministry of Finance of the Russian Federation to seek clarification from the Ministry of Transport of the Russian Federation, where it received an answer that such services could be attributed to auxiliary activities of water transport, and, accordingly, to ship maintenance services during their standing in the port. Based on this explanation, JSC "Fleet of Novorossiysk Commercial Sea Port" has enjoyed the benefit since 2004. However, for the period from 01.01.2012 to 31.12.2013 The interdistrict Federal Tax Service for the largest taxpayers in the Krasnodar Territory issued a decision on additional VAT in the amount of 5,575,186 rubles, as well as the application of penalties to the taxpayer in the form of penalties of 1,400,507 rubles and a fine in the amount of 778,703 rubles. The tax authority motivated its decision by the fact that the All-Russian Classifier of types of economic Activity (dated November 6, 2001, N 454–st - now expired) [8] defined a closed list of services that relate to the maintenance of ships during their stay in port, and among them there are no services for the installation of booms. Thus, JSC "Fleet of Novorossiysk Seaport" was found guilty of non-payment of VAT. In addition, the courts pointed out that the provisions of paragraph 8 of Article 75 of the Tax Code of the Russian Federation [5] on not accruing penalties on the amount of arrears in the case when he fulfilled written explanations of the authorized state authority do not apply, due to the fact that the Ministry of Transport of the Russian Federation is not authorized to explain the legislation [9]. It is worth noting that due to the lack of clarifications in the content of paragraph 23, paragraph 2 of Article 149 on the types of activities related to the maintenance of ships in ports, disputes arise not infrequently, for example, a similar decision was made against JSC Tamanneftegaz [10]. Thus, in our opinion, due to the absence of a strict list of transactions that are not subject to value added tax under clause 2 of Clause 23 of Article 149 of the Tax Code of the Russian Federation, a large number of court proceedings arise. We assume the implementation of services for the installation of a boom fence to exempt from VAT. This conclusion is based on the key objectives of providing tax benefits: the development of socially significant business areas and stimulating investment in the economy. The boom fence is used to prevent an environmental catastrophe, therefore, the development of this area of business will contribute to increasing the country's authority as a state with a "green" economy, which will certainly attract additional investments in various spheres of economic life. Funeral services. According to subparagraph 8 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, the provision of services and the execution of works on the design of graves and the manufacture of tombstones, as well as the sale of funeral accessories on the basis of the list established by the Government of the Russian Federation is not subject to taxation [5]. Thus, the sale of coffins (including zinc ones), crosses, burial urns, stencils is fully exempt from VAT [11]. Nevertheless, in practice, many questions arise concerning the interpretation and application of this provision of tax legislation. We will pay special attention to the most important aspects of this problem. The main problem of the correct application of the legislation is that Article 149 of the Tax Code of the Russian Federation designates only the category of funeral services, which does not disclose a clear list of operations exempt from VAT [12]. As part of the analysis, it is advisable to give a reasonable answer to the question that arises for organizations and individual entrepreneurs engaged in cremation ? whether the services provided by crematoriums are subject to VAT. To begin with, let's turn to the regulatory legal acts. In accordance with Article 24 of the Federal Law "On Burial and Funeral Business" [13], crematoriums are one of the institutions providing funeral services. In addition, to solve this issue, it is necessary to consider the data presented in the All-Russian classifier of products by types of economic activity (OKPD 2) [14]. This classifier contains an exhaustive list of funeral services that, in accordance with the Tax Code of the Russian Federation, are not subject to VAT. Thus, burial and cremation services (code 96.03.11) contain the following clarifying codes, presented in Table 1: Table1 – Burial and cremation services.
Thus, based on the information provided, it can be established that the services of crematoriums are part of funeral services and are subject to exemption from value added tax. The next important aspect in relation to the application of the norms of the Tax Code of the Russian Federation is the activity of funeral homes. The services provided by these organizations are also included in the funeral services. In accordance with OKVD 2, funeral home services (code 96.03.12) include the following operations: burial and exhumation; transportation of corpses; services for pets, embalming, cosmetic treatment of the deceased. It should be noted that this list is open, as a result of which the activities of funeral homes for the provision of funeral services are also not subject to VAT. So, on the basis of the Resolution of the FAS ZSO of 12.03.2007 N F04-1129/2007(32147-A45-14) [15], a situation was considered in which, during an on-site inspection, the tax authorities illegally added VAT amounts, referring to the fact that the services for the sanitary treatment of bodies are not included in the section "Funeral services" OKUN (expired on 01.01.2017). During the trial on this issue, a court decision was made in favor of the taxpayer due to the fact that the list of funeral services for OKUN (OKVD 2 currently operates) is open. In our opinion, as a solution to the complex of problems under consideration, we can propose the introduction of a closed list of funeral services that are subject to VAT exemption in Clause 8, clause 2, Article 149. This measure will help to avoid incorrect application of tax legislation and reduce the number of court proceedings. Exclusive rights for computers. Subparagraph 26 of paragraph 2 of Article 149 assumes a benefit in the form of exemption from value added tax for taxpayers who transfer "... exclusive rights to programs for electronic computers and databases included in the unified register ..." [5]. There are almost no disputes about whether this or that transfer of computer rights can be attributed to this benefit, since a strict list of such is established. However, modern technologies do not stand still and the ways of transferring rights to the above programs change over time [16]. So, for example, at present, the question often arises whether the transfer of rights to various kinds of programs through the SaaS service (abbreviation – software as a service) falls under this privilege [17]. According to the letter of the Federal Tax Service dated January 30, 2018 No. SD-4-4/1642 [18], the application of Clause 26 of clause 2 of Article 149 is lawful if the transfer of rights has the form of an agreement that meets the concept of a license agreement. However, such clarification only increases the number of questions. And if the transfer has the form of providing access via the Internet? The Russian Ministry of Finance gives an exhaustive answer to this question: thus, services for providing access to computer software via the Internet are subject to VAT in a general manner [19]. In our opinion, the ambiguity of this explanation is that it is necessary to understand the transfer of exclusive rights. Thus, according to the Letter of the Ministry of Finance dated 27.11.2018 No. 03-07-07/85571, the transfer of non-exclusive rights, including mixed rights (that is, those that include elements of license agreements), are subject to VAT as a general rule. According to the Civil Code of the Russian Federation, the concept of "exclusive rights" should be understood as such rights that provide the opportunity to use the owned means at their discretion in any way that does not contradict the law, while other persons cannot use the corresponding result of intellectual activity [20]. Under this category of transfer of rights, the above-mentioned transfer through SaaS services can also be summed up. According to the Resolution of the AC of the Moscow District of 12.10.2015 [21] "... when forming a mixed contract, which the applicant presents as a license agreement, the taxpayer performs substitution of business operations ...". That is, in this case, when concluding such contracts, payment is made not for the use of computer programs, but for the organization of the corresponding type of activity, which requires certain resources. Therefore, regardless of what name such an agreement will bear, it is mixed: on the one hand, the exclusive rights to use the results of intellectual activity are transferred (that is, the benefits of Clause 26, clause 2, Article 149 of the Tax Code of the Russian Federation are legitimately applied), and on the other hand, economic operations are carried out on a reimbursable basis (subject to VAT). Thus, the differentiation of services subject to VAT and the transfer of exclusive rights that are not taxed according to Article 149 of the Tax Code of the Russian Federation is a very complex process that requires attention. In addition, the opinion of the Ministry of Finance and the Federal Tax Service of Russia that exemption from value added tax can be made only if the following conditions are met: first, the conclusion of a license agreement, then the transfer of the software, only confirms the conclusion that the boundaries between the provision of services and the transfer of rights to use the software are conditional. In our opinion, a solution can still be found. To exclude disputes on this issue, it is necessary to fix at the legislative level (in the Tax Code) a clear definition of two operations: the provision of services and the transfer of rights to use computers. Such an addition to the legislation will allow objectively dividing transactions into taxable and non-taxable value added tax under Article 149 of the Tax Code of the Russian Federation. Regarding the conclusion of mixed contracts, it is worth noting that within the framework of such agreements, in addition to the transfer of exclusive rights, business transactions subject to VAT are carried out. Due to the fact that such operations, in fact, are indivisible, they should be fully subject to VAT on the basis that they cannot be fully recognized as the transfer of exclusive rights to a computer. Passenger transportation services. As part of the identification of problems arising on the basis of the correct interpretation and application of the provisions of Article 149 of the Tax Code of the Russian Federation, it is necessary to refer to the norm presented in subparagraph 7 of paragraph 2. On the basis of this provision, passenger transportation services carried out by public urban passenger transport, with the exception of taxis, are exempt from taxation by value added tax. In addition, the second paragraph of this subparagraph says that services provided by rail, river, sea transport are also subject to VAT exemption, subject to the conditions of uniform fares and the preservation of all benefits. In this case, it is necessary to consider the issue related to the taxation of a number of services of railway stations that are directly related to the provision of transport services. Based on the norms of legislation and explanations of the Ministry of Finance of the Russian Federation, the services of railway stations that organize the movement of buses along routes, scheduling and ticket sales are subject to taxation. The benefit provided for in Clause 7, clause 2, Article 149 of the Tax Code of the Russian Federation can be applied only if the stations are directly engaged in the transportation of passengers, that is, they provide transport services. As part of the consideration of this problem, we will pay attention to organizations that provide a range of transport services. For example, the transportation of passengers by bus and the transportation of schoolchildren in the district. Based on the provisions provided for in Article 149 of the Tax Code of the Russian Federation, it is difficult to attribute the transportation of schoolchildren to transportation by public transport. Therefore, such services must be subject to VAT. Nevertheless, in practice there are cases when these services are exempt from taxation. So, in the Resolution of the Federal Antimonopoly Service of 04.02.2010 N F09-216/10-C35, a situation is noted when the taxpayer is the only organization providing a range of transport services on the territory of the municipality. In this case, this organization has the right to apply the benefit to the entire volume of services provided. As a result, the transportation of various goods for municipal authorities and the population, the transportation of passengers and the transportation of schoolchildren on the territory of the municipality is subject to VAT exemption, subject to the application of a single tariff established by municipal authorities. This judicial precedent can serve as a source of law in the framework of resolving tax disputes arising between the Federal Tax Service and multidisciplinary transport organizations [22]. Thus, an objective solution to the issues presented may be the introduction of additional conditions regarding the exemption of the provision of transport services from VAT. For example, in clause 7 of Clause 2 of Article 149 of the Tax Code of the Russian Federation, a wording should be introduced relating to the exemption of a complex of transport services in the case of a taxpayer's monopoly activity.
Conclusion Within the framework of this study, the authors have identified a number of problems related to the practical application of the norms of Article 149 of the Tax Code of the Russian Federation, which exempts from taxation a number of services provided by companies in various fields of activity. The purpose dictated initially by the introduction of this article – the release of a number of socially and economically significant services – in practice often leads to significant problems for business. Based on the analysis of Article 149 of the Tax Code of the Russian Federation, it can be concluded that many sub-paragraphs do not disclose a clear list of services, the sale of which is exempt from VAT taxation. As a result, there is a need to improve and detail the current tax legislation as a priority direction of the regulatory and legal policy of the state. The proposals formed in the article to finalize the norms of Article 149 of the Tax Code of the Russian Federation are aimed at eliminating these problems and leveling negative effects: 1. Within the framework of the application of subparagraph 8 and subparagraph 23 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, the introduction of closed lists relating, on the one hand, to the definition of exempt operations in the field of funeral services, and, on the other hand, to the field of services related to the maintenance of ships during the period of parking in ports, will be an appropriate solution to the identified problems. 2. With regard to the application of subparagraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation, it is necessary to determine two basic concepts: the provision of services and the transfer of rights to use computers. In addition, in our opinion, it is necessary to legislate the fact that the transfer of property rights through the conclusion of a mixed contract acts as an object of VAT taxation and the specifics of such contracts do not allow the provisions of Article 149 of the Tax Code of the Russian Federation to apply to it. References
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