On September 27, 2010 the ALROSA Market Conjuncture Panel resolved that, effective from January 1, 2011, value added tax (VAT) charged on domestic rough diamond sales in the Russian Federation should be payable by customers up-front.
From January 1, 2008, exercising the right granted to it as a taxpayer under Par. 5, Article 149 of the RF Tax Code, ALROSA has elected to waive exemption on VAT with regard to operations relating to sales of rough diamonds to diamond manufacturers in the territory of the Russian Federation.
Nevertheless, to support the Russian diamond manufacturing industry during the global diamond market downturn, since the beginning of 2009 the company has been granting deferrals to its customers on VAT charged on rough diamond purchases. However, ALROSA notified its customers that it was a temporary privilege granted to them with a view to provide time to negotiate the VAT refund procedure with the tax authorities.
According to the available data, for the first eight months of 2010 some 16% of the domestic buyers have used the currently available VAT deferral option.
Recently the global diamond market has been demonstrating clear signs of growth, which renders additional measures to support domestic cutting and polishing companies unnecessary.
At the same time, ALROSA is giving priority to implementing its program for construction of underground mines that is essential for replenishing the mineral reserves of the Russian diamond industry, and, also, reducing its debt burden.