TNK BP Wins Russian Tax Rebate

by Tatiana Smolenskaya, Tax-News.com, Moscow

09 May 2008

TNK-BP, the joint Russo-British oil exploration firm, gained a welcome court victory against the tax authorities this week when it won the right to a tax refund worth RUB9.7bn (USD406mn).

Upholding a ruling by a lower court, the Moscow arbitration court decided on Tuesday that TNK-BP was entitled to the refund because it overpaid value-added tax in the year 2006.

Under Russian tax law, export businesses are exempt from the 18% VAT, but, while refund claims should be a relatively simple procedure, they are often contested by the tax authorities in the courts.

However, according to Reuters, TNK-BP has noted that the VAT refund system has become more accurate since last year.

"Refund refusals for large oil companies have become insignificant and amount to just RUB10-20mn a month," a spokesman was quoted as observing by the news service.

The UK's Independent newspaper also reported that the company is examining "quite a few" other tax rebates.

The outcome of the case is particularly sweet for TNK-BP, the third-largest oil exploration firm operating in Russia, which has been the subject of previous claims for unpaid taxes by the Russian tax service.

In November 2006, the company agreed to pay USD1.44bn in back taxes to the Russian government to settle a tax dispute relating to the 2002/3 tax year.

Recommended