A VAT refund is one of the most valuable and most mishandled areas for a foreign-owned company. The claim itself triggers a desk audit and heavy scrutiny — so whether the refund you're owed actually comes through depends on how the position is built.
Recoverable input VAT you're genuinely owed — often significant, especially on imports and capital spend.
A refund position triggers a desk audit, and a counterparty problem or weak documentation can sink the whole claim.
Input VAT recovery is one of the most practically significant — and most frequently mishandled — areas of Russian tax compliance for foreign-owned companies. When input VAT exceeds output VAT in a quarter, the Russian LLC has a refund entitlement from the Federal Tax Service (FTS). The refund process is more complex than in most EU jurisdictions and triggers automatic FTS scrutiny. This guide covers when a refund arises, how to claim it, and how to navigate the FTS review.
A VAT refund position (НДС к возмещению) arises when input VAT (VAT paid on purchases and imports) exceeds output VAT (VAT charged on sales) in a quarter. The most common situations for foreign-owned Russian companies:
Export-oriented operations: Russian companies that export goods apply the 0% VAT rate on exports but recover 22% input VAT on their Russian purchases. This creates a structural refund position in every quarter.
Start-up phase: a newly registered Russian LLC making significant capital expenditure (equipment, fit-out, IT) before generating significant revenue. Large input VAT, little output VAT.
Seasonal businesses: capital-intensive periods (purchasing, construction) precede revenue periods.
VAT rate change: input VAT at 22% on imported goods or services, where output VAT on pre-2026 contracts is still at 20% (transitional period).
After filing a VAT return showing a refund, the FTS conducts a desk audit (камеральная проверка) of the return. The desk audit takes up to 2 months (reduced from 3 months for refund claims). During this period, the FTS may request primary documents supporting the input VAT claims. After a positive audit completion, the FTS issues a decision to refund and the amount is credited to the company's tax account within 12 business days.
Pick your situation — we'll tell you where you stand:
Available to certain categories of taxpayer, the accelerated refund procedure allows the company to receive the refund before the desk audit is complete — subject to a bank guarantee or surety from a Russian bank. The guarantee must cover the full refund amount plus potential interest. The FTS refunds within 5 business days of accepting the application.
Eligible for accelerated refund: taxpayers who paid more than RUB 2bn in taxes in the preceding 3 years; companies operating in special economic zones; companies with a bank guarantee from an approved bank. For most foreign-owned companies, the standard route is more practical.
Every VAT refund claim triggers enhanced FTS scrutiny. The FTS is specifically looking for:
"Fly-by-night" counterparties (фирмы-однодневки): if the company's suppliers have signs of being shell companies — no real employees, no assets, no actual business — the FTS will deny the input VAT from those suppliers. The buyer is responsible for counterparty due diligence.
Document defects: VAT invoices (счета-фактуры) that are missing required details, have incorrect VAT numbers, or are signed by unauthorised persons are rejected. Primary documents must be complete and correctly formatted.
Import VAT: VAT paid on customs declarations must be confirmed against FTS import data. Discrepancies trigger additional review.
Related-party transactions: input VAT from related parties is scrutinised for commercial substance — is there a genuine supply of goods or services?
The FTS rejects a significant proportion of VAT refund claims — either partially (rejecting input VAT from specific suppliers) or in full (where the FTS believes the refund is fraudulent or unjustified). A rejection does not mean the company has to repay — it means the refund is deferred pending further evidence. The company can contest the rejection through objections and pre-trial appeal. Engaging a tax adviser during the desk audit significantly improves refund outcomes.
During the desk audit of a VAT refund claim, the FTS typically requests:
All VAT invoices (счета-фактуры) for the quarter — purchase and sales
Primary documents for major purchase transactions: contracts, delivery notes (товарные накладные), acts of services completed (акты выполненных работ)
Bank statements confirming payment for purchased goods/services
Customs declarations for imported goods
Documentation confirming export (for 0% rate claims)
Counterparty due diligence documents
Russian tax law (Article 54.1 Tax Code) places responsibility on the buyer for selecting bona fide suppliers. If a supplier fails to pay its output VAT to the FTS, the FTS may deny the buyer's input VAT deduction — even if the transaction was genuine. Proactive counterparty due diligence protects the company's input VAT position:
EGRUL extract confirming the supplier is a registered Russian legal entity
Evidence of actual business activity — employees, assets, operational history
Because a refund means the FTS pays out, so a desk audit checks the claim closely — the documentation, the counterparties and the underlying transactions. Preparing the position to that standard before filing is what makes the refund hold up.
Yes — if a supplier in the chain hasn't met its own VAT obligations, the FTS can challenge your input recovery. Checking the counterparty position is part of building a refund claim that survives, not just filing it and hoping.
An accelerated-refund mechanism exists in some cases, getting the money back before the full audit concludes, against a guarantee. Whether it fits depends on your position — worth assessing when cash timing matters.
This covers input-VAT recovery — one of the most valuable and most mishandled areas for foreign-owned companies. Your question is whether the refund you're owed will actually come through, because a refund position triggers a desk audit and heavy FTS scrutiny, and counterparty problems can sink it.
Sitting on a VAT refund? The claim triggers an audit — worth preparing the position before you file, not after a query.
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