Alexey Stanchin, Senior Tax Consultant at Tax Compliance, commented in the Financial Director magazine on the first results of the ETS for the past year.

Changes in the sequence of writing off taxes, penalties and fines from the Unified Tax System

From 29.05.2023, the ownership of the amounts of money transferred and (or) recognized as UTI shall be determined by the tax authority in a new procedure in accordance with the following sequence:

1. Unpaid personal income tax arrears - starting from the earliest moment of their occurrence;
2. personal income tax - from the moment an obligation to remit it arises on the part of a tax agent;
3. Underpayment of other taxes, levies and insurance contributions - starting from the earliest moment of its occurrence;
4. Other taxes, advance payments, fees, insurance premiums - from the moment the obligation to pay (transfer) them arises;
5. Penalties;
6. Percentages;
7. Penalties.

These changes are of a positive nature. Since before their introduction, due to the previous order of repayment, there was a situation in which the taxes of a taxpayer's employees, which were transferred to the Unified Tax System as personal income tax withheld from wages, were taken into account as repayment of the employer's tax debts. This was especially critical in situations where the taxpayer was subject to a STP and the amounts of arrears were substantial and could not be repaid in one lump sum. This resulted in technical impossibility to fulfill the obligation of a tax agent.

Risk of large overpayment under the Unified Tax Code

The risk of a large overpayment on a unified tax account is that the tax authorities must additionally check such amounts. The Federal Tax Service has obliged regional inspectorates to analyze the operations and balances of companies which have overpayments of between 100,000 and 1 million roubles in their unified account (letter from the Federal Tax Service dated 24.08.2023 No. KCH-4-8/10861).

The tax authorities check whether there are no reversed amounts on the Unified Tax System, whether the amounts have been correctly reserved on notifications and written off on reports. As practice shows, if a large overpayment is identified on the Unified Tax System, the tax authorities may:

1. Call the inspectorate for an interview to determine how the overpayment came about;
2. Send the data for reconciliation or call the inspectorate to reconcile together;
3. Ask to submit an update if they suspect errors, inconsistencies or incorrectly allocated amounts in the initial report.

If taxpayers identify a large overpayment on the ENS, it is recommended to independently reconcile with the inspectors for the required period.

Calculation of penalties including EPT

Even before the introduction of the Unified Tax System, when taxpayers and tax authorities worked with the IRS, determining the legitimacy of additional penalties was a rather complicated procedure. The situation has not improved since the introduction of the Unified Tax System. Currently, offsetting for penalties is performed in respect of the earliest underpayment and only then for penalties. Thus, it is still problematic to calculate how correctly the tax authority calculated penalties. In practice, we encounter situations where a taxpayer has paid a penalty on income tax, but it was offset against personal income tax. In such situations we recommend taxpayers to apply to the territorial inspectorate with a request to explain why the offset was made in this way. At the same time, the taxpayer is advised to notify the tax authority that if no action is taken by the territorial inspectorate, such inaction will be appealed to a higher authority.

In our practice there was a case where, following an on-site audit, the tax authorities made a decision to hold a company liable. In the operative part of the decision, the amount of arrears was specified without taking into account penalties and the state of the UNS balance. Later the taxpayer received a demand for payment of arrears, which already included penalties. Based on the results of our analysis of the demand, we concluded that it was actually issued in execution of the decision, since the amount of corporate income tax, the amount of VAT and the amount of penalty specified in the decision were duplicated in the demand itself. In addition, it also included penalties payable. As a result, the client was able to appeal the demand and transfer the amount of the arrears.

Mistakes in the use of the Unified Tax System

Initially, almost all errors made by taxpayers were of a technical nature. For example, a very common mistake was the indication of the period. Based on our practice, over the past year taxpayers have understood the technical part of the work of the STS and rarely make such inaccuracies.

It should be noted that mistakes were often made in submitting a revised notification. For example, it was submitted for the difference rather than the full amount of tax, which led to proceedings with the tax authority.

However, there are still complaints from taxpayers about the work of the Unified Tax Service. Questions and difficulties arise both in the normal conduct of accounting and tax accounting, and during audits. In any case, it remains for us to see how the work with the Unified Tax Service will develop further and what changes will be made to this system.