The State Duma approved amendments to the Big Four customs-union

Saturday, June 25, 2022

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The State Duma approved amendments to the Big Four customs-union and common economic-infrastructure agreement between Russia, Belarus, Kazakhstan and Ukraine. All in all, 226 votes were needed to pass these amendments; however, 414 deputies voted in favor of this bill; no one voted against; and there were no abstentions. From now on, all crude oil (including stable gas condensate) and natural gas being exported to CIS countries shall be taxed in line with the country-of-designation principle. The decision to collect indirect taxes in accordance with the country-of-designation principle will reduce the Russian federal budget's revenues by 35.8 billion rubles (more than one million euros) next year, Russia's Deputy Minister Sergei Shatalov, who serves as the Russian President's special representative for tackling this issue, noted. At the same time, it is intended to compensate federal-budget losses (to the tune of 26.8 billion rubles) by charging higher severance-tax duties on oil-and-gas producers, Shatalov added. The State Duma also ratified the protocol on amending the agreement between the Government of Russia and the Government of Kazakhstan on the principles of charging indirect taxes during mutual-trade operations. Besides, the protocol aims to settle issues pertaining to the switch-over to the generally accepted country-of-designation indirect-taxation principle with regard to crude oil and natural gas. The protocol states expressly that no indirect tax shall be charged on specific products, including natural gas and crude oil (stable gas condensate included), that are covered by the customs export regime, and which are exported from the territory of one country to the territory of another country in line with the relevant procedure being stipulated by the legislation of both countries. According to current legislation, 18% value-added tax (VAT) shall be charged on all natural gas and crude oil being sold in Kazakhstan. At the same time, no VAT is charged on all natural gas and crude oil being imported into the Russian Federation.

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