After one and a half years since the introduction of the law governing VAT payments on scrap in Russia, once again the majority of Russian scrap processors have urged their government to completely abolish VAT on ferrous scrap.
Representatives of the Recycling Materials Association, which consists of 28 Russian scrap processors, stated that a complete removal of VAT on ferrous metal scrap would encourage more investment in the industry, whereas the continuation of the law on VAT payments on scrap would only encourage corruption in the sector. The association emphasized in its release that the government gives $1.15 billion in VAT rebates to ferrous scrap processors every year. However, it receives only $235 million in VAT payments, leaving the balance unaccounted for.
A new governmental decree approved in May abolishes all VAT obligations on non-ferrous metal scrap from January 1, 2008; however, it leaves the law governing VAT payments on ferrous metal scrap unchanged.
As previously reported by SteelOrbis, the Russian government had exempted scrap collectors/processors from VAT payments as of January 1, 2006. However, the measure is not compulsory. The scrap collectors are able to choose whether or not to pay VAT and therefore be eligible for the VAT rebate. In order to pay VAT, an interested party has to apply for a special license from a local government prior to the beginning of a financial term.