In order to toughen the liability for business for 'fraud' with taxes and formation of the evidentiary basis of the taxpayer's intent of tax underpayment, a Letter of the Federal Tax Service of Russia (hereinafter - the 'FTS') No. ED-4-2/ 13650 dated 13 July 2017 was developed. In the letter, the Federal Tax Service provided for guidelines for tax and investigative authorities to identify criminal intent in the taxpayers actions. Tax authority officers were offered to conduct on-site tax audits with direct participation of the officers of internal affairs and investigative authorities.
We recall that any tax offence entails tax liability as a fine of 40% of unpaid amounts as stipulated by Article 122.3 of the Tax Code.
Earlier, this provision was practically not applied; a fine of 20% was collected with reference to Article 122.1 of the Tax Code as an unintentional failure to pay taxes.
Now, according to the FTS guidelines, special attention is paid to the identification of a person's guilt. The guidelines provide for examples directly indicating that the persons were aware of the unlawful nature of their actions (omission), wished or knowingly allowed the occurrence of harmful consequences, as well as sample algorithms used to evade taxes.
According to the FTS and IC (Investigation Committee) of Russia, the intent can be evidenced, in particular, by:
· coordinated actions of a group of persons aimed at minimising tax liabilities and cashing in of money, proven fictitious nature of specific business operations of the company;
· proven facts of control over a fly-by-night company, facts of imitation by taxpayers of economic ties with fly-by-night companies;
· complex, confusing, extensive and repetitive taxpayer's actions within the tax algorithm, where such actions cannot be performed in the ordinary course of business or through negligence;
· direct evidence of unlawful activities: for example, 'black bookkeeping', seals and documents of fly-by-night companies in the territory (premises) of the audited taxpayer, etc.
Among other algorithms outlined in the guidelines, there is use of fictitious transactions to increase the cost of the purchased goods (services), fragmentation of business for unreasonable use of special regimes, unreasonable application of tax incentives, preferential rates, and substitution of civil law relations to get tax benefits.
Thus, the intentional failure to pay or underpayment of taxes revealed in the course of tax audits not only entails a fine increase according to Article 122.3 of the Tax Code, but also improves the criminal-legal perspective of files that are sent to the investigative authorities when deciding on the initiation of criminal proceedings, as provided for in Article 32.3 of the Tax Code.
Finally, there is a list of recommended questions developed for the FTS officers to ask heads and employees of companies being audited.
Thus, we believe that all taxpayers shall review the discussed document and assess the probability of being fined in their particular situation.
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