The Analytical Center has gathered together representatives of exporting companies to discuss the thorny issues related to application of the inward processing regime and possible solutions to such. The moderator was the Deputy Head of the Analytical Center Tatiana Radchenko.
“The crucial task is to increase the Russian non-resource export capacity,” declared the Director for Export Policy and Analysis at the Russian Export Center Mikhail Sneg. “One has got to begin with improving the business environment which is important for making the right economic and political solutions with regard to export. Today we will try to find out just how beneficial and convenient inward processing regime is for businessmen and entrepreneurs.”
Head of the Department for Foreign Economic Activity at the Analytical Center Ksenia Sukhorukova presented a study of how the regime in question is applied and what problems arise in this connection. For example, when obtaining permission to apply this regime, one needs to specify in advance the export rates for products after processing, which is not always possible; there were also complaints of the red tape (with the formalities sometimes taking up to 90 days) and of refusals based on technicalities.
Upon import of foreign goods for subsequent reprocessing tax authorities require mandatory securing for the obligation to pay customs duties and taxes. Experts believe that companies who own property and operational assets shall not be obliged to provide any securities. Insofar as the reprocessing procedure is concerned, there is excessive control on the part of customs authorities with regard to reassigning such permission to other persons.
Ksenia Sukhorukova noted that another problem here is the lack of possibilities to apply the 0% VAT rate on re-exports. “The absence of well-defined provisions on re-export in the Tax Code is the key problem here and the main obstacle to this instrument being used with the same efficiency in Russia as it is in the Western countries,” agrees the Head of the Center for Support of Foreign Trade and Regional Development Galina Balandina. “The philosophy behind applying the inward processing regime is to stimulate transfer of added value to the territory of this country.”
“Amendments to Article 164 of the Tax Code are now being drafted,” reported the Head of Customs Administration Project at the Russian Export Center Group Irina Kashirina. “These provide for application of the 0% VAT rate on goods exported after the inward processing procedure is applied in the re-export mode.”
Representatives of exporting companies have described actual problems they have encountered and talked about their own vision of what would be acceptable solutions to those aimed at supporting Russian non-resource export.