Russian govt agrees to lower VAT on sale of seeds for sowing

MOSCOW. Dec 5 (Interfax) - The Russian government has submitted a Tax Code amendment to the State Duma that would reduce the value-added tax to 10% on sales of treated sunflower and corn seeds, a proposal that was previously put forward by lawmakers.

The amendment was proposed in bill No. 452648-8, the text of which for the second reading was published in parliament's electronic database. The measure will be retroactive, applying to sales of treated sunflower and corn seeds since January 1, 2020, and be in effect until December 31, 2029.

A group of MPs led by the chairman of the Duma's committee for agriculture, Vladimir Kashin, submitted a similar bill (No. 451742-8) in October.

An explanatory memo recalled that, under Article 164 of the Tax Code, a 10% VAT rate is applied to, among other things, sales of food products. In June 2022, the Supreme Court ruled that sunflower and corn seeds treated with chemical or biological substances should be subject to a 20% VAT because they are not intended for direct production of food products and not intended for food or feed purposes.

"However, treated seeds of agricultural crops are intended for sowing and cultivation and subsequent production of products intended for food and feed purposes," the authors of the bill said. Before the Supreme Court ruling, treated seeds were subject to a 10% VAT rate.

"A VAT rate of 20% on seeds of agricultural crops will lead to slower development of the seed industry and increase the tax burden directly on agricultural commodity producers, which amid significant growth of prices for energy resources, fuel, lubricants and farm machinery could lead to a decrease in production and growth of food prices," the memo said.

The lawmakers proposed to apply the 10% VAT to legal relations since October 1, 2019.

The Duma is expected to consider the government version of the amendment in the second reading on December 7.