An SME achieved the calculation of insurance premiums at reduced rates

An SME achieved the calculation of insurance premiums at reduced rates

Senior tax consultant of TC Alexey Stanchin in the material analyzed the decision of the Supreme Court of the Russian Federation on a landmark case of an agricultural enterprise.

What happened?

Previously, the Tax Compliance team analyzed in the Telegram channel the case of LLC Agricultural Enterprise Ponizovye MDC, in which the Supreme Court considered the issue of the exclusion from the base for insurance contributions of amounts of compensation paid to employees for the use of personal property and pointed out to the tax authorities the need to calculate insurance contributions at the appropriate rates.

What conclusions did the Supreme Court draw?

In general, the court confirmed the general approach that had previously been applied when taxpayers used benefits, but now in relation to insurance contributions:

  • Payment of insurance contributions by SMEs at reduced rates is an imperatively established obligation, not a benefit (preference) of a declaratory nature.
  • The tax authority should be guided by the principle of determining the actual amount of tax liabilities, which does not allow using a formal approach and levying taxes in excess of what is required by law.
  • The tax authority is not authorized to choose the applicable tariffs for insurance contributions at its discretion. If it is determined that a taxpayer has not utilized a benefit, the tax authority must notify the taxpayer of the possibility of such utilization. By doing so, the taxpayer will be given the right to a less onerous option for determining the amount of underpayment.

Trends in court practice on benefits

The conclusions drawn by the Supreme Court of the Russian Federation are not new. There has been similar judicial practice before, in particular when applying VAT exemption under Article 145 of the Tax Code.

Similar approaches can be traced in the ruling of the Twelfth Arbitration Court of Appeal of 14.11.2018 N 12AP-13831/2018 in the case N A57-25507/2016, the decision of the Presidium of the Supreme Arbitration Court of the Russian Federation of September 24, 2013 N 3365/13, paragraph 31 of the «Review of judicial practice of the Supreme Court of the Russian Federation N 2 (2018)» (approved by the Presidium of the Supreme Court of the Russian Federation on 04.07.2018) and others.

Here are the main conclusions that were made by the courts:

  • Failure to fulfill the obligation to submit the notification or violation of the deadline for its submission does not entail the loss of the right to exemption, as this would be a disproportionate consequence in terms of the purpose of establishing this institution.
  • The taxpayer only informs the tax authority of his intention to use the right to exemption, and persons who actually used in the relevant tax periods the exemption from taxpayer's obligations related to the calculation and payment of tax may not be denied the right to such exemption solely on the grounds of failure to submit the notification and documents within the prescribed period.
  • If a person becomes aware of the need to pay VAT as a result of tax control measures, in particular in the event of a change in the qualification of the taxpayer's activities, the law does not provide for the procedure for exercising the right to exemption from tax.

The Tax Compliance team has experience in dealing with claims of the tax authorities in terms of confirming the validity of application of privileges and reduced tax rates for businesses.