Tax and customs status of imported fish products manufactured in the Exclusive Economic Zone of Russia and the World Ocean

Sidorova Elena Yur'nevna Doctor of Economics Professor, Department of Taxes and Tax Administration, Financial University under the Government of the Russian Federation, RUDN University 410054, Russia, Moscow, Novokosinskaya str., 34, sq. 154 EJSidorova@yandex.ru

Artem'ev Aleksei Aleksandrovich ORCID: 0000-0002-4320-317X PhD in Economics Associate Professor of Tax and Tax Administration Department, Financial University under the Government of the Russian Federation 125167, Russia, Moscow region, Moscow, Leningradsky Prospekt, 49/2 AArtemjev@fa.ru

Introduction

In the framework of scientific and methodological development of the above-mentioned areas, in our opinion, the following issues need to be considered: the status of goods for customs purposes, the consequences associated with the accrual and payment of customs duties [Zander K., 2022, p. 2; Mangi S.C., 2016, p.261]. In addition, we believe that in relation to the analyzed problem, there are other problems, such as certification, registration of various documents for the introduction of such goods into full-fledged commodity circulation, and so on, which will not be considered in the framework of the article [Anne van de Heetkamp, 2011, p. 145; Baldwin R., 2012, p.232].

Before considering the essential issues, it is necessary to determine the legislative framework on which this work will be based:

1. The Customs Code of the EAEU (Appendix No. 1 to the Treaty on the Customs Code of the EAEU).

2. The Tax Code of the Russian Federation (parts one and two) dated 07/31/1998 No. 146-FZ.

3. Question: About VAT on the import by Russian fishing organizations to the Russian Federation of frozen fish made from raw fish caught by other organizations // Letter of the Ministry of Finance of the Russian Federation dated 10/20/2020 No. 03-07-07/93321.

4. The Treaty on the EAEU" (Signed in Astana on 05/29/2014).

5. The ruling of the Constitutional Court of the Russian Federation dated 06/28/2018 No. 1642-O "On refusal to accept for consideration the complaint of Yuzhmorrybflot Joint Stock Company for violation of constitutional rights and freedoms by subparagraph 37 of paragraph 1 of Article 4 of the Customs Code of the Customs Union and subparagraph 47 of paragraph 1 of Article 2 of the Customs Code of the EAEU".

6. Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 11/08/2013 No. 79 (ed. dated 05/12/2016) "On some issues of the application of customs legislation".

7. Order of the Federal Customs Service of Russia dated 01/15/2013 No. 40 "On the Procedure for Customs Operations when Importing into the Russian Federation into the Customs Territory of the Customs Union for the purpose of State Control of Marine Products Extracted (caught) and/or Produced outside the Territorial Sea of the Russian Federation during Industrial fishing, as well as when exporting such products from the Russian Federation from the customs territory territories of the CU" (Registered with the Ministry of Justice of the Russian Federation on 05/29/2013 No. 28570).

8. Decision of the Customs Union Commission No. 728 dated 07/15/2011 (as amended on 03/17/2022) "On the procedure for applying exemption from customs duties when importing certain categories of goods into the Single Customs Territory of the Customs Union".

9. Decision of the Customs Union Commission No. 130 dated 11/27/2009 (as amended on 03/17/2022) "On the Unified Customs and Tariff Regulation of the EAEU".

10. Decision of the EAEU Council dated 07/13/2018 No. 49 (as amended on 07/10/2020) "On approval of the Rules for Determining the Origin of Goods imported into the Customs Territory of the EAEU (Non-preferential rules for determining the origin of goods)".

11. Federal Law No. 191-FZ dated 12/17/1998 (as amended on 12/30/2021) "On the Exclusive Economic Zone of the Russian Federation".

12. Federal Law No. 155-FZ dated 07/31/1998 (as amended on 03/14/2022) "On Internal Sea Waters, the Territorial Sea and the Adjacent Zone of the Russian Federation".

Given the complexity of the issue under study, it is necessary to clearly understand the classification of the above-mentioned legislative framework. So they can be conditionally divided into three groups: 1. Basic legislative acts (the Tax Code of the Russian Federation, the EAEU Customs Code, the EAEU Treaty), 2. Specific (paragraph 6-12), Clarifying (Letters from the Ministry of Finance and the Federal Customs Service of the Russian Federation).

Objects and methods of research

Let's start by considering fish and fish products obtained and mined in the exclusive economic zone. Let's start by considering the concept of an "exclusive economic zone", while it should be noted that this is not the territory of the Russian Federation (Letter of the Ministry of Finance of the Russian Federation dated 08/22/2008 No. 03-07-08/204). Federal Law No. 191-FZ dated 12/17/1998 (as amended on 12/30/2021) "On the Exclusive Economic Zone of the Russian Federation" interprets the exclusive economic zone of the Russian Federation (hereinafter referred to as the EEZ) as a marine area located outside the territorial sea of the Russian Federation and adjacent to it, with a special legal regime established by Federal Law No. 191-FZ, international treaties of the Russian Federation and norms of international law. The islands of the Russian Federation also belong to the EEZ, with the exception of rocks that are not suitable for life and economic activity. The legislation provides for the internal and external boundaries of the EEZ (Figure 1 and Table 1).

Figure 1 - Boundaries of the EEZ (Compiled by the author personally)

Table 1

Letters from the Ministry of Finance of the Russian Federation on the category of ECO

Letters of the Ministry of Finance of the Russian Federation on the IES category

Compiled by the author personally.

There is also a Letter from the Ministry of Finance of the Russian Federation, which regulates the issue of VAT tax consequences for the sale of fish products caught in the exclusive economic zone of the Russian Federation to foreign buyers from a warehouse in a foreign country (Letter of the Ministry of Finance of the Russian Federation dated 05/17/2021 No. 03-07-08/37242). In table 1, basically all letters concerned a Russian person, only the Letter of the Ministry of Finance of the Russian Federation dated 10/24/2019 No. 03-07-03/81914 also concerned a foreign person. The letter of the Ministry of Finance of the Russian Federation dated 05/17/2021 No. 03-07-08/37242 confirms that the EEZ of the Russian Federation is the territory of the Russian Federation, as well as the application of the customs procedure for export allows you to apply 0 VAT rate and obliges you to confirm it within 180 days.

The next issue that needs to be considered is the status of the goods, namely the goods of the Union and the foreign goods. Goods of the Union - goods located in the customs territory of the Union that are fully produced (extracted, received, grown) in the customs territory of the Union are fish and fish products obtained and extracted in the EEZ of the Russian Federation.

Foreign goods - goods that are not Union goods, including those that have lost the status of Union goods in accordance with the EAEU Customs Code, as well as goods that have acquired the status of foreign goods in accordance with the EAEU Customs Code - these are fish and fish products obtained and mined in the oceans.

Also, in the letters of the Ministry of Finance of the Russian Federation, reference is made to Federal Law No. 155-FZ dated 07/31/1998 (ed. dated 03/14/2022) "On Internal Sea Waters, the Territorial Sea and the adjacent zone of the Russian Federation", identically in 6 of 7 it says that the territorial sea is understood to be adjacent to the land territory or to the internal sea The waters of the sea are 12 nautical miles wide. From this it can be concluded that if fish and fish products obtained and extracted in marine waters that are located in a 12-mile zone, then this is a Union product, if not, then this is a foreign product [Inama S., 2015, p. 249; Samiee, S., 2021, c.951]. This is of course a primitive approach, but it allows you to accurately determine the status of the product using a formal approach.

Next, we will consider approaches to determining the status of goods (fish and fish products) manufactured and received in the EEZ of the Russian Federation. There are two opinions, the first claim that this is a Union product, the second that it is a foreign product. Proponents of the first approach say that based on Federal Law No. 191-FZ of 12/17/1998, it follows that despite the fact that the EEZ of the Russian Federation is not a territory of the Russian Federation on the basis of letters from the Ministry of Finance, this place of sale of fish products is not recognized as an object of VAT taxation, i.e. it is a commodity of the Union. At the same time, in accordance with Articles 12.1- 12.2 of Federal Law No. 191-FZ dated 12/17/1998, industrial fishing is allowed in the EEZ of the Russian Federation for both Russian and foreign enterprises.

Proponents of the second approach say that this is a foreign product and cite as the main argument that the EEZ is not the territory of the Russian Federation, this is emphasized in all letters of table 1.

A legitimate question arises: What follows from the current regulation? Based on the letters of the Ministry of Finance of the Russian Federation (see Table 1), in all the described cases, in terms of fish and fish products obtained and extracted in the EEZ of the Russian Federation, there is no obligation to pay VAT, which allows us to conclude that this is a commodity of the Union.

But these are indirect conclusions, since none of the letters indicate the status of this product. This was probably done deliberately, because this issue is not regulated by current legislation.

To study the trajectory of the evolution of this issue in customs legislation, a comparative analysis of the Customs Code of the Customs Union and the Customs Code of the EAEU was carried out (Table 2).

Table 2

Comparative analysis of the TC of the CU and the TC of the EAEU

Comparative analysis of the TC TC and the EAEU TC

Compiled by the author personally.

Thus, the problem of determining the status of fish and fish products obtained and mined in the EEZ of the Russian Federation, the World Ocean was not considered in the wording of the TC CU, in the wording of the TC of the EAEU, a wording was added regarding the goods of the Union, which says that the goods of the Union are recognized as "fully produced (extracted, obtained, grown) in the customs territory of the Union [Suter, M.B., 2021, p.416].

The question arises: why is this topic so important? The answer to this question is related to the fact of the occurrence of tax obligations on customs payments. In terms of WTO membership, tariff regulation is applied pointwise, but the issue of filling the budget is still very acute, but the tools for replenishing the budget should be different than increasing the rates of import and export customs duties, most likely we are talking about "manipulation" of the customs value, the status of the goods and the country of origin of the goods [Haleem, F., 2021, p.4; Moriuchi, E., 2021, p. 516]. Therefore, the issue of determining the status of fish and fish products obtained and mined in the EEZ of the Russian Federation or the World Ocean is important, as it allows you to receive additional charges to the budget by, for example, recognizing fish and fish products obtained and mined in the World Ocean as foreign products entails the payment of customs duties of the goods [Pegan, G., , 2020, p.178; Pegan, G., 2020, p. 187]. Let's consider a practical case based on the above-mentioned legislative acts.

Results and discussion

Case No. 1.

Initial data: The Russian organization carries out activities for the extraction of fish and the production of fish products:

1. In the territorial sea of the Russian Federation;

2. EEZ OF THE Russian Federation;

3. Outside the EEZ of the Russian Federation.

In order to conduct the above-mentioned activities, the organization has carried out the following operations.

I. Tax and customs consequences when importing fish (catches) caught in the EEZ of the Russian Federation.

The above-mentioned Russian organization carried out the extraction (catch) of fish (common tuna) in the EEZ of the Russian Federation, which was then delivered to the port of St. Petersburg. The weight of the consignment is 20 tons.

The Russian organization has information that the customs value of goods determined by the transaction value of similar goods (country of origin – Lithuania) sold at the same commercial level and in essentially the same quantity as imported goods is 10 million rubles.

Let's start by considering the issue of general customs consequences. So the product code in accordance with the Customs Code of the EAEU corresponds to 0302351900 (Blue or common tuna (THUNNUS THYNNUS), fresh or chilled, other). The status of the goods for customs purposes is determined on the basis of paragraph 15 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 08.11.2013. No. 79, and this product is a Product of the Union. Also on the basis of Federal Law No. 191-FZ dated 12/17/1998 and the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 11/18/2013. No. 79 the territory of the EEZ of the Russian Federation is not the territory of the Russian Federation (Federal Law No. 191–FZ), but according to paragraph 15 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 08.11.2013. No. 79 these goods are recognized as goods of the Union.

If, on the basis of Federal Law No. 191-FZ of 12/17/1998, the EEZ of the Russian Federation is not the territory of the Russian Federation, then products are actually imported into the territory of the Russian Federation (Order of the Federal Customs Service of Russia No. 40 of 01/15/2013, paragraph 1), however, it is not necessary to declare these goods (Order of the Federal Customs Service of Russia No. 40 of 01/15/2013, paragraph 3), as well as placement under the customs procedure.

Next, we will determine the customs value of the goods (fish). Is it possible to determine the customs value of goods (fish) using method 1? Not in this case, as there is no transaction value. Is it possible to determine the customs value of goods using other methods (method 2 and method 3). There is no method 2, since there is no data on identical goods, it is also impossible to determine the customs value according to method 3, since it is unnecessary to carry out customs operations (the goods were produced on the territory of the Union – FCS Order No. 40 dated 01/15/13).

Next, let's look at the structure of customs payments. Customs fees for customs operations are not payable, since fees are collected when performing customs operations, as noted above, import operations will not be performed. There is also no obligation to pay customs duties (Note by the authors: the goods were produced on the territory of the Russian Federation and are considered goods of the Union, the basis is Commission Decision No. 728, paragraph 6).

Based on the previously defined HS code, the customs duty rate is 6%. There is no possibility of obtaining tariff preferences depending on the country of origin of goods.

It follows that VAT paid as part of customs duties when importing goods into the customs territory of the EAEU is not payable.

II. Addition to the initial data of the case: Other transactions that were carried out within the framework of the I-th VAT tax period (tax period 1). During the tax period 1, in addition to the operations discussed in the previous sections, the following operations were carried out: 10 tons of fish (tuna) were sold. The revenue from sales amounted to 600 rubles per kg. The fish was sold to a fish cannery located on the territory of St. Petersburg. Transportation services were ordered for the delivery of the sold fish, the cost of which amounted to 20 thousand rubles. Transportation services have actually been provided. An invoice has been received from the transport company.

Based on additional data, we will determine the amount of VAT payable at the end of the tax period 1. At the same time, it should be taken into account that VAT on import is accounted for in the "tax deduction" category and I do not form tax liabilities. Thus, the amount to be paid (reimbursed) at the end of the tax period 1: is equal to 35,809,000 rubles, including 35,805,000 (VAT per vessel (release for domestic consumption)); - 4000 for delivery to St. Petersburg;

Consider the following case No. 2. "Tax and customs consequences when importing fish products manufactured in the EEZ of the Russian Federation, as well as in the World Ocean."

During the II VAT tax period (hereinafter referred to as tax period 2), the Russian organization 1 carried out the following operations. Purchased from another Russian fishing organization (organization 2) 5 tons of fresh fish (herring, product code in accordance with HS Code 0302 41000 0). The purchase costs amounted to 80 rubles / kg. The specified product was obtained by the seller in the EEZ of the Russian Federation. The fish was transshipped in the EEZ of the Russian Federation on board a vessel belonging to a Russian organization.

Assumption: organization 2 has no requirement to deliver the catch to the port of the Russian Federation. On board the vessel of the organization 1, fish products were produced from the purchased herring: frozen fish (frozen herring 030351 000 0). Fish products have been delivered to the port of St. Petersburg.

The Russian organization 1 has information that the customs value of goods (fish products), determined by the transaction value of similar goods (country of origin – Estonia) sold at the same commercial level and in essentially the same quantity as imported goods, is 800,000 rubles.

Based on the above case, we will calculate the general customs consequences. Thus, the status of goods for customs purposes can be defined as goods of the Union (The basis for such a decision of the EAEU Customs Code, FZ dated 12/17/1998 No. 191-FZ, Decision of the EEC Council dated 07/13/2018 No. 49No., Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 11/18/2013 No. 79). At the same time, the placement of goods under the customs procedure is not required (Basis: Order of the Federal Customs Service of Russia dated 01/15/13 No. 40). Next, we will determine the customs value of the goods (fish products). So it is not necessary to determine the customs value using the 1-3 method, there is no value of the customs value.

In terms of customs payments: customs duty is not payable, there is no duty rate. There is no possibility of obtaining tariff preferences depending on the country of origin of goods, as well as other benefits for the payment of import customs duties. VAT is not paid as part of customs payments when goods are imported into the customs territory of the EAEU.

Consider the following case number 3.

In addition, during the tax period, 2 Russian organization 1 purchased 10 tons of fresh fish from a foreign fishing organization (organization 3, registered in Estonia and the vessel is registered and operated under the flag of Estonia) (herring, product code in accordance with HS Code 0302 41000 0). The purchase costs amounted to 1 euro/kg. The specified product was obtained by the seller – organization 3 at a fishing site in the World Ocean. The transshipment of fish was carried out in the World Ocean on board a vessel belonging to the Russian organization 1.

On board the vessel of the organization 1, fish products were produced from the purchased herring: frozen fish (frozen herring 030351 000 0).

Fish products have been delivered to the port of St. Petersburg.

The Russian organization 1 has information that the customs value of goods (fish products), determined by the transaction value of similar goods (country of origin – Latvia) sold at the same commercial level and in essentially the same quantity as imported goods, is 800,000 rubles.

Based on the case data, we will determine the general customs consequences, since the goods for customs purposes are defined as foreign goods because they are not completely produced on the territory of the Russian Federation. (paragraph 47 of Article 2 of the EAEU Customs Code, paragraph 3 of the rules for determining the origin of goods No. 49) According to the legislation of the Union, the World Ocean is not considered the territory of the Russian Federation. In this case, the goods must be placed under the customs procedure and declared (order of the Federal Customs Service of Russia No. 40, paragraph 3). Next, it is advisable to determine the method of calculating the customs value of goods (fish products). According to the first and second methods, it is impossible to determine the customs value of goods (fish products), it is advisable to determine it using method three. Let's determine the amount of customs payments. Thus, customs duties for customs operations are payable in the amount of 3,100 rubles, since the customs value of goods is 800 thousand rubles.

The customs duty is payable at the rate of 3% of the customs value. There is no possibility of obtaining tariff preferences depending on the country of origin of goods, since the country belongs to the developed one. At the same time, on the basis of the Decision of the CU Commission dated July 15, 2011 No. 728, paragraph 3, exemption from payment of import customs duties is possible.

VAT is not paid as part of customs duties when goods are imported into the customs territory of the EAEU on the basis of Article 150, paragraph 11 of the Tax Code of the Russian Federation.

Consider the following case number 4.

Other operations that were performed within the framework of tax period 2.During tax period 2, in addition to the operations discussed in case 3, the following operations were performed: All imported fish products were sold. The revenue from sales amounted to 120 rubles per kg. The sale of fish products was carried out by a trading network located on the territory of St. Petersburg and the Leningrad region.

For the delivery of the sold fish products, transportation services have been ordered from a transport organization using a simplified taxation system. The expenses of the organization 1 for transportation amounted to 10 thousand rubles. Transportation services have actually been rendered and are reflected in the accounting.

Based on the data from case No. 4, we will calculate the amount of VAT payable at the end of the tax period 2:

- obligations: 10,000 tons of imported fish (item V)* 120 = 1 200 000 * 0,1 = 120 000 rub .

- tax deductions will amount to 10,000 rubles. (for transportation)*0.2 (the carrier will present) = 2000 rubles, but the counterparty to the USN is not a payer of the USN, so there is no deduction. The amount to be paid (reimbursed) at the end of tax period 2 is 120,000 rubles and is payable.

Conclusions

The analysis of the law enforcement practice conducted by the authors of the study, which has developed over the past few years, allows us to pay attention to the methodological inconsistency of the complex of issues related to determining the status in customs relations of fish and fish products obtained (manufactured) by Russian vessels fishing (or producing fish products) (hereinafter referred to as Goods) outside the state territory of Russia [Manrai, A.K., 2020, p.4; 13]. The results of the study show that the current regulation (norms of the Customs Code of the EAEU) does not allow us to draw an unambiguous conclusion as to whether such goods should be considered in customs relations as "goods of the Union" or as "foreign goods" [Chaliapin G.P., 2017, p. 143].

At the same time, the solution of this issue directly affects the determination of tax and customs consequences in relation to:

- the possibility of importing Goods into the EAEU (Russia) without placing them under the customs procedure applicable to foreign goods (usually produced for domestic consumption) and, accordingly, without incurring the obligations established for the import of foreign goods;

- the ability not to pay export customs duties when selling Goods to foreign buyers;

- the possibility of using the "zero" VAT rate and the right to tax deductions when selling Goods to foreign buyers.

An analysis of the positions of experts representing, as the authors of the study see it, fishing (processing) companies allows us to note their evolution over the past few years. So 10 years ago, Goods were usually "positioned" as foreign. At the same time, since about 2016, the business community has been defending the point of view that Goods are "goods of the Union".

According to the authors, this approach seems to be "opportunistic" and is largely due to the following:

- the abolition of export customs duties on most types of Goods;

- reorientation of fishing (processing) companies from export to import of Goods to Russia.

In connection with the above, it seems relevant to solve the problem related to the development of methodological approaches to determining the status of Goods. As the results of the preliminary analysis show, it is advisable to solve this problem in the following areas:

- goods received (manufactured) in the exclusive economic zone of the Russian Federation (EEZ);

- goods received (manufactured) by Russian vessels in the "World Ocean", including from fish raw materials obtained:

- by Russian courts;

- by foreign courts.