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. Last Updated: 07/27/2016

Tax Service Proposes Giving AvtoVAZ 4-Year Grace Period

Russia's State Tax Service will propose to the government that leading automobile producer AvtoVAZ be given a four-year extension on the deadline for paying tax arrears, a tax service official said.

"We will suggest that AvtoVAZ be given a four-year extension on its debts -- on the main part of its debt," Vladimir Popov, the head of the tax service's department in charge of forcible measures to collect tax arrears, said Wednesday.

AvtoVAZ reached an agreement with the Russian government last year that it would repay billions of rubles in tax arrears, plus additional fines and penalties, over 10 years while the state took a 50 percent plus one share stake as collateral.

Interfax reported Wednesday that AvtoVAZ owed 3.179 billion rubles ($505 million) in tax arrears as of July 1, 1998, plus an additional 2.076 billion rubles in fines and penalties.

Under the tax service's new plan, AvtoVAZ would continue to pay off fines and penalties over the remaining portion of the allotted 10 years, but would repay nothing of the actual sum owed in taxes for four years.

It would then pay it in a lump sum.

AvtoVAZ spokesman Vasily Titov had previously said the company, which produces over half of Russia's cars, had fulfilled all of its obligations under the deal and had started to transfer shares to the government.

AvtoVAZ, manufacturer of the ubiquitous Lada modeled after a decades-old Fiat make, said in June it would produce fewer 125,000 cars than the 748,500 originally planned for this year. It cited unstable market conditions.