Constitutional Court deems automatic contract price adjustment due to VAT increase unacceptable

The resolution by the CC will bring legal certainty in anticipation of upcoming changes in the VAT rate and its expanded taxpayer base, said Vadim Zaripov, partner at MEPh Legal, representing VTB’s interests in this case. This is timely because the recently enacted law on tax changes traditionally did not address the distribution of costs, he added. The resolution will cause a ‘considerable mess’ in legal practice and provoke numerous disputes, according to Dmitry Kostalygin, partner at Taxadvisor. Small businesses, obliged to pay VAT starting next year, will face difficulties: if only half of all VAT costs can be deducted, the question arises of whether the remaining amount can be considered as losses (and deducted from the tax base), he noted.