Experts of Korelskiy, Ischuk, Astafiev & Partners Form the Tax Practice for the Distance-Selling Market
In Federal Arbitration Court (FAC) of Moscow District it was proven that the commercial catalogues OTTO, WITT, BON PRIX should be considered offers from the legal point of view (in fact, as texts of public contracts), rather than advertising. And, therefore, no restrictions (such as limitations in amount of up to 1% of revenue) can apply to the production and distribution costs for the catalogues.
Such decision of FAC can be regarded as revolutionary – Ministry of Finance and the Federal Tax Office of Russia have for a long time held the opposite view and even expanded it. For example, even for the “regular” retail trade, tax authorities attributed to the advertising a vast majority of marketing costs, including design costs for the shop interiors and windows.
It is a second precedent set by the experts of the Law Firm for the catalog sales companies. In fact, one can talk about the formation of statutory court practice on this category of disputes.
In addition to dispute on catalogues, the issue of marketing gifts’ taxation was also addressed. Experts of the Law Firm succeeded to prove that the rules of taxation of gratuitous transfers cannot be applied for the gifts given to customers for making purchases, while VAT on their costs is paid in full as part of the “core” products costs.
This precedent will also allow all the trading companies (not only distance-selling) to take into account the costs of purchasing gifts in full for the purposes of income tax calculation and VAT deduction.
The Otto Group is the second world’s largest catalogue sales corporation, whose 123 major companies and 50,000 employees in 19 countries in three continents do business in a worldwide network.