Background
On 24 January 2023, Terra Group LLC (“Company”) entered into a contract with a counterparty from Kazakhstan for the supply of agricultural machinery. The tractors were imported on 30 June 2023, following which, on 6 July, the Company submitted a calculation of the recycling levy. However, on 1 July 2023, the Resolution entered into force, increasing the coefficients used to calculate the recycling levy by more than four times.The Company calculated the recycling levy at the rate in force on the date of import of the machinery, amounting to RUB4,3 mln. Nevertheless, the Central Excise Customs Office concluded that the new coefficients should be applied and demanded payment of RUB17,5 mln.
In this connection, the Company requested the Constitutional Court of the Russian Federation review the constitutionality of:
- paragraph 2 of the Resolution, which states that the increased coefficients enter into force less than a month after the official publication of the Resolution;
- sub-paragraph “b” of paragraph 114 of the Rules on the collection, calculation, payment and recovery of the recycling levy in respect of self-propelled vehicles and/or their trailers, as well as the refund and set-off of amounts of this levy that have been overpaid or over-recovered, as approved by the Resolution establishing the procedure for calculating the recycling levy in respect of self-propelled vehicles not subject to customs declaration.
Court position
In considering the constitutionality of the procedure for the entry into force of the increased recycling levy rates, the Constitutional Court noted that, despite the recycling levy being formally classified as non-tax budget revenue, it possesses, by its legal nature, the characteristics of a mandatory public fiscal payment.In view of the foregoing, the court concluded that, when the recycling levy is increased, payers must be given sufficient time to adapt to the new fiscal burden when planning their business activities.
In the opinion of the Constitutional Court, the introduction of an increased fiscal burden before the expiry of a reasonable period following the official publication of the relevant regulatory legal act violates the principles of legal certainty, equality, fairness and stability of economic turnover.
In view of the foregoing, the Constitutional Court ruled that paragraph 2 of Resolution No. 938 of the Government of the Russian Federation was inconsistent with the Constitution of the Russian Federation to the extent that it provided for the entry into force of the increased recycling levy coefficients less than one month after the official publication of the Resolution.
Nevertheless, the Constitutional Court held that sub-paragraph “b” of paragraph 114 of the Rules was consistent with the Constitution of the Russian Federation. The Court noted that the calculation procedure provided for therein falls within the discretionary powers of the Government of the Russian Federation, ensures a sufficient degree of legal certainty in the calculation of the recycling levy, and does not restrict bona fide participants in foreign economic activity in their choice of the most convenient time to submit their calculation of the recycling levy.
Significance of the case
The resolution under consideration is of considerable interest in terms of the extension of constitutional guarantees to mandatory public payments which, although not formally classified as taxes or levies within the meaning of the Tax Code of the Russian Federation, are, by their legal nature, distinctly fiscal.The practical significance of the resolution extends far beyond the issue of the payment of the recycling levy. The Constitutional Court’s legal position could potentially be relevant to other mandatory non-tax payments, an increase in the amount of which leads to a significant rise in the fiscal burden on business.
The Constitutional Court has stated that, pending the adoption of specific regulations, the time limits for the entry into force set out in Article 5 of the Tax Code of the Russian Federation for legislative acts on taxes and levies shall apply to such acts — no earlier than one month after the date of the official publication of the relevant regulatory legal act.
The resolution in question therefore serves as an important guide for the further development of law enforcement practice, based on the principles of legal certainty, regulatory predictability and the protection of the legitimate expectations of economic operators.
