On 25 November 2025, the Constitutional Court of the Russian Federation issued a landmark ruling No. 41-P, which may affect thousands of long-term contracts across the country. The dispute between VTB Bank and Sitronics IT concerned the question of who should bear VAT when legislation changes during the term of a contract. The Court ruled that the current provisions of the Civil and Tax Codes contain gaps and do not comply with the Constitution, as they fail to protect the interests of the parties in such situations.
In 2019, Sitronics IT (then Envision Group) and VTB Bank signed a licensing agreement for the use of Microsoft software. The three-year contract (2020–2022) exceeded 2 billion RUB. A key clause stated that the transfer of rights to foreign software was VAT-exempt at the time of signing.
The situation changed on 1 January 2021, when Federal Law No. 265-FZ came into force, abolishing the VAT exemption for foreign software not included in the Russian software registry. Since Microsoft products are not included in this registry, Sitronics IT, acting as a tax agent, was required to pay VAT. The supplier issued an additional invoice to VTB for 141 million RUB — the VAT due for 2021. VTB refused to pay, referring to the original contract terms.
The Moscow Arbitration Court initially sided with VTB, but the appellate court reversed the decision and upheld Sitronics IT’s claim. The Court for Intellectual Property Rights supported VTB at the cassation stage, restoring the original ruling. However, the Supreme Court annulled both rulings and upheld the appellate decision. VTB then appealed to the Constitutional Court, challenging the legislation itself.
VTB argued that the contested provisions violate constitutional principles, including freedom of enterprise, property rights, and equality before the law. According to the applicant, allowing the supplier to unilaterally increase the contract price due to a new tax — especially when the buyer cannot deduct VAT — is unjust and distorts the balance of interests.
The Court stated that contractual freedom is not absolute and can be limited within constitutional boundaries. While parties accept economic risks when signing long-term agreements, radical changes in tax legislation require special legal mechanisms for adaptation.
Currently, such mechanisms do not exist. The Tax Code and transitional provisions of Law No. 265-FZ do not regulate the consequences of new tax obligations arising within ongoing contracts, creating a legal gap that enables unfair redistribution of obligations.
Automatic charging of full VAT to the buyer, especially when it cannot be deducted, may lead to unjust enrichment of the supplier. Therefore, the disputed norms were deemed unconstitutional.
The Court ordered lawmakers to eliminate the identified gap and develop clear rules for adjusting long-term contracts when tax legislation changes.
Until such amendments are introduced, courts must follow this guidance:
The VTB case is now subject to reconsideration. The decision sets a precedent and will impact many companies operating under long-term contracts in a changing tax environment.
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