30.12.2013 Karina Starikova, junior associate at Maxima Legal

Recycling tax: equal conditions for domestic manufacturers and importers of motor vehicles

It is worth reminding that as a result of active negotiations as part of bringing the Russian Federation legal framework in line with the requirements of the World Trade Organization (WTO) with respect to import duties on cars in Russia, Russia reduced the above duties. However, a new Article 24.1 was added to the Federal law No. 89-FZ of 24.06.1998 that regulates industrial and consumer waste (hereinafter, the Law), which entered into force on 1 September 2012 and introduced the so-called recycling tax in the Russian Federation at the legislative level.

According to the Law, each wheeled vehicle imported to the Russian Federation or manufactured (made) in Russia, is subject to the recycling tax in order to ensure environmental safety.

However, paragraph 6, Article 24.1 of the Law provides for exceptions to the rules, under which the tax initially did not apply to vehicles made or manufactured by organizations that undertook (in a manner and on the terms determined by the Government of the Russian Federation) to ensure further safe waste disposal after a vehicle has become unusable.

This provision has been a stumbling block to progress in negotiations between Russia and the European Union. The EU declared that European manufacturers were discriminated in Russia and considered the recycling tax as protectionist measure in favour of domestic car manufacturer, which is illegal in the WTO framework. According to the European Commission, the recycling tax actually represents customs duties on foreign cars, which were cancelled as a result of negotiations on Russia's accession to the WTO.

In order to resolve the dispute and bring Russian laws in line with the WTO requirements, a new version of Federal Law No. 278-FZ of 21.10.2013 that introduced amendments to Article 24.1 of the Law that regulates industrial and consumer waste was adopted. According to Article 24.1 of the Law as amended, starting from 1 January 2014, no exemption is applied, and all vehicles are now subject to the recycling tax.

Thus, starting from 1 January 2014, legal regulation will be the same for domestic car manufacturers and foreign companies, which have had to pay the recycling tax for cars imported to Russia as part of customs clearance since 1 September 2012. Thanks to this amendment, the Russian Federation will now perform its obligations as a WTO member; however, domestic cars will eventually become more expensive, because the recycling tax will be added to the price.