How to check a counterparty

How to check a counterparty

Article 54.1 of the Russian Tax Code makes the taxpayer liable for an unscrupulous counterparty. If for some reason taxes cannot be recovered from the counterparty, they can be recovered from its customers.

The best way not to miss a potential threat can be considered the development of the company provision on the verification procedure, the use of which would be mandatory before signing any documents. For the basis of this provision can be taken the recommendations contained in the explanatory letters of the Federal Tax Service № ED-4-1/20922@ from 11.10.2019, № ED-4-9/22123@ from 31.10.2017 and № ED-5-9/547@ from 23.03.2017.

It is not about finding flaws in a partner at all costs, but about a guaranteed opportunity to prove their reliability to the FTS and regulatory authorities.

Among other things, this provision should list all the documents that need to be requested from the counterparty, as well as describe a standard algorithm for using the digital information services now available. With their help, you can collect a lot of valuable data that will help in making the right decision. And to ensure that the points of the provision were strictly followed, the order of the company should appoint an employee responsible for this.

The inspection provision should include a list of certified documents that the counterparty must provide:

  • Certificate of registration as a legal entity (individual entrepreneur)
  • Certificate of tax registration
  • The Charter
  • Information letter from the State Statistics Committee with statistical codes
  • The documents, confirming the authority of the representative of the counterparty: the decision of the founders of the appointment to the post, power of attorney to act, the passport of the representative
  • Extract from the Uniform State Register of Legal Entities (IE), Uniform State Register of Legal Entities (USRLE)
  • The balance sheet (form 1, form 2).

Depending on the nature of the counterparty and the nature of future business relations, this list may also include:

  • Certificates of conformity for products
  • Licenses
  • Accreditation certificates and certificates
  • Certificates of self-regulatory organization members
  • Certificates of admission for respective types of works
  • Certificates of workers or equipment certification

If it's a contract for the purchase of goods or services that include VAT, you'll need more:

  • VAT return for the last reporting period with the stamp of the tax inspectorate on its acceptance
  • A document confirming that the supplier has paid VAT for the last reporting period. This can be a reconciliation act, a printout of the personal account certified by the tax office or certificate of the FTAI about the absence of debts
  • Documents on the appointment of a chief accountant

With all these documents in hand, in case of any undesirable situations, it will be much easier for you to prove that your company has exercised due diligence in choosing a partner. To further enhance the reliability of the check, it makes sense to use publicly available Internet services of the appropriate orientation. 

Register of legal entities and sole proprietors

The register of legal entities and individual entrepreneurs, which is searchable on the site of the Federal Tax Service of Russia, is the first stage of verification. To make a request, it is necessary to specify the founding data (TIN, OGRN or OGRNIP) or simply the full name, if it is an individual entrepreneur. The search itself takes a few seconds and, depending on the settings, can produce both exact matches and records close to the search.

The result of the query is information on TIN, OGRN and OGRNIP, the date of the OGRN assignment, the legal address and the name of the CEO. If the company has officially ceased its activities, this will also be mentioned with the date. Here you can also download the corresponding extract in PDF format with an electronic signature of the Federal Tax Service.

Service "Transparent business".

One more state service, available on the site of the Russian Federal Tax Service. Its possibilities are wider than the previous one. Here, among other things, you can check the participation of specific founders in the activities of several legal entities, the imposition of restrictions on their participation in the legal entity, and a number of other important features, including a set of submitted documents. Checking a specific address (in the format of region, district, locality name, street name and house number) for mass registration of various companies in it is worth mentioning separately. Note that among them can be quite responsible, but at the same time, this is an indirect sign of "fly-by-night", and therefore requires a closer examination of the counterparty's reputation. Also, it can be used to assess the officials of the counterparty involved by the criterion of "mass", which indirectly may indicate the nominality of the possible nominee of the counterparty's officials.

Checking Tax Debts

Tax debt itself is not a verdict for your potential business partner. This circumstance may arise for various reasons, but it would be short-sighted to ignore it altogether. If we are talking about serious amounts of money, it may be that their repayment will be beyond the means of the company or IE. This will lead to the inability to fulfil its obligations, or even bankruptcy. Your reputation may also suffer, if it is suspected that your company has been involved in "gray" schemes.

To understand what the company's current relationship with the tax authorities is another service of the Federal Tax Service. By indicating only the taxpayer's taxpayer ID you will learn in a few seconds whether the company has debts over 1000 rubles or has not submitted reporting for more than a year. If an injunction to collect the required amount was sent to the bailiff, there will also be an appropriate warning.

A useful source of information on unreliable potential partners can be the Enforcement Proceedings Data Bank. The search of counterparty by territory, full name, date of birth, company name, legal address, IP number etc. is available there. Filters are set up so that you can receive an unloading only for IE or only for the legal entity.

Knowing what amounts your counterparty owes the state is extremely useful, because in the case of an unfavorable development of events, the company must pay off with the federal structures in the first place, and only then, if something remains - with their business partners. In addition, if there are a lot of enforcement proceedings, there are many reasons to think whether you need such a partner.

Arbitration case file

Valuable data on the counterparty can be extracted from the official files of arbitration cases. It contains information on plaintiffs, defendants, third parties, dates of proceedings, names of judges, court names and case numbers. The service on the eJustice website can be searched using any of these parameters.

Over the years, even the most responsible company may become involved in one or two lawsuits - this is normal practice. Many such cases should be a cause for concern. This indicates either that the counterparty pays insufficient attention to its reputation or that it is
normal practice, perhaps as part of the business model. You should of course stay away from such cases.

Paid verification services

Other sources of information can also be useful, such as information regarding bankruptcy, participation in self-regulatory organizations (SROs), the availability of licenses required for certain types of activities, and companies' bank ratings. There are dozens of such databases. In order not to get lost in all this diversity and to be able to conduct inspections in a reasonable amount of time, you can use paid services, which themselves, automatically or semi-automatically collect all the necessary statements and provide them in the form of ready-made reports.

There are a lot of such due diligence tools now. They differ mainly in the number of sources and depth of analysis. Of the best known on the Russian market are Kontur Focus from SKB "Kontur", "Spark"SBIS from the company "Tensor", Rusprofile and others. The presence of a report of one of these services may also be interpreted by the tax authorities as a confirmation of your cautious approach in choosing partners.

The key to a good relationship

Requesting a large package of documents from the potential counterparty and their subsequent verification is not a manifestation of mistrust towards him. And the management "on the other side" should understand that. After all, it is mainly not about the fact that at all costs to find a partner's flaws, but about a guaranteed opportunity to prove their reliability to the FTS and the regulatory authorities.

Thus, in order that the tax authorities do not doubt that the transaction is not fictitious, a company should make sure that its counterparty is trustworthy. And be guided by the criteria that are used to assess tax risks by the Federal Tax Service itself. 

  • First, it is necessary to check the registration data of the legal entity or individual entrepreneur and verify the authority of the person who signs documents on their behalf. The presence of a person in the lists of "mass" managers may be cause for concern.
  • Secondly, it is worth the right to carry out certain activities contractor should confirm the documents: to present licenses, certificates from self-regulatory organizations on the possibility of performing construction works, to show the availability of qualified personnel, etc.
  • The next step is to check the counterparty's reputation with the help of information resources. It will be necessary to find out whether the counterparty has a website, where the company is actually located, whether its address is fictitious or "mass", what other companies it cooperates with.
  • Then it is time to check compliance with tax payment obligations and submission of tax returns. This can be done with the help of publicly available resources. They are used to check information on whether the tax authorities have suspended operations on the counterparty's bank accounts.
  • If you are going to conclude a contract for the supply of goods with a counterparty, then agree with it the submission of copies of shipping documents from the carrier. They will be required to confirm the reality of the execution of the service for the supply of goods.
  • Evaluation of financial and economic according to the above criteria will allow reducing the risk of concluding a deal with unfair counterparties and the emergence of claims from the tax authorities.

The norms of tax legislation under Article 54.1 of the Tax Code and the practice of tax audits indicate the need to confirm the reality of the execution of services by the counterparty, or another person, whose obligations were transferred under the terms of the contract.