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Transferring Property Into Charter Capital Not Subject To VAT


The Ministry of Finance has stated its position on levying VAT on property transfers to a branch company’s charter capital and similar transactions. The Ministry outlines its position in Letter #03-07-07/42, dated 06.28.2010.

These transfers are considered investment-related and not considered a sale of goods as defined by Russia’s Tax Code.

In addition, in the event that property rights are transferred to the charter capital of parent companies, the amount of VAT deducted by the taxpayer on the property rights is recoverable. These amounts are not included in the initial cost of the property rights and are subject to a tax deduction from the receiving company according to the procedure established by Chapter 21 of the Tax Code.

Following this, property transfers to the charter capital to a branch company are not subject to VAT.

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