Ordinary, at first sight, marketing activity of car dealers may entail unpleasant tax consequences. Judicial practice today is formed by a number of key cases, in particular the cases of LLC "Dynamika Syktyvkar", LLC "Saranskmotors+", JSC "Kavkaz-Lada".

Factual circumstances

• Dealers bought cars from manufacturers and then sold them at retail to end buyers. The automakers paid the dealers bonuses to ensure that the dealers sold cars at a discount, which was stipulated in the dealership agreement. In this way, automakers sought to increase dealer purchases of their goods.
  
• The amount of premiums depended directly on the amount of discounts given to the final customer.
  
• The dealers paid VAT on the actual price of the car sold, which did not include the premium received from the automaker.
  

Claims of the Tax Authorities.

• The premiums should qualify as compensation to the dealer for his under-received income due to the discounts. Consequently, on the basis of paragraphs. 2 para 1 of Article 162 of the Tax Code from bonuses should be paid VAT.
  

Conclusions of the courts

• Bonuses are connected with the payment for the cars sold by dealers and are necessary to compensate for shortfalls in income.
  
• The fact that bonuses do not formally reduce the cost of cars already delivered to dealers does not refute the compensatory nature of bonuses.
  
• Consequently, it is necessary to pay VAT on bonuses by virtue of subparagraph 2 of paragraph 1 of Article 162 of the Tax Code.
  

Further development of the issue

A recent letter of the Federal Tax Service of Russia of 25.04.2022 № SD-4-3/5016@ reflects the official position of the tax authorities on this issue, which had previously been expressed by the Ministry of Finance of Russia (Letter of 13.10.2020 № 03-07-15/89774). According to the proposed approach, VAT is payable on bonuses if it follows from the contract that the bonuses are related to payment for cars sold by the dealer. VAT is not payable on bonuses aimed at maintaining the dealer's economic interest in increasing the purchase of new cars, even when the amount of the bonus depends on the discount provided to the end buyer. This dependence can only speak to the way in which the economic interest of the dealer to increase the purchase of cars is assessed.

An interpretation of Clause 2.1 of Article 154 of the TCRF, which does not provide for increasing a buyer's (a dealer's) VAT base by the amount of premiums received, has been added to the list of arguments in favor of this position.

Conclusions of Tax Compliance

Our experience shows that the tax authorities are increasingly revealing violations concerning the taxation of bonuses and bonuses, which entails negative tax consequences for taxpayers.

The more favorable position of the FTS of Russia for business in comparison with the actual court practice is a great gift. However, it should be used wisely not only at the stage of negotiating terms in the contract, but also in pre-trial settlement of tax disputes. If the wrong approach is taken, a premium connected, at first glance, with "maintaining the dealer's economic interest in increasing the purchase" may be qualified as "payment for cars sold by the dealer".