In the magazine «Company Lawyer» TC expert Ivan Tsvetkov analyzed in what situations the slowness of the inspection will help the company, and when the courts will ignore the fact of violation of the terms of the audit.

Violation by the tax authority of the terms of conducting an audit and registration of its results

When conducting a tax audit and formalizing its results, the inspectors must comply with the requirements established by tax legislation, violation of which may be grounds for canceling the decision on the audit.

As a general rule, the decision on a tax audit shall be canceled in the presence of the following significant violations of the conditions of the procedure for consideration of audit materials [1]:

• ensuring the possibility of the taxpayer to participate in the process of consideration of tax audit materials personally and (or) through his representative;
• ensuring the possibility of the taxpayer to provide explanations.

Other violations may also be grounds for the annulment of a decision of a tax authority, if they led to the adoption of an unlawful decision.

Thus, the presence of procedural violations committed by auditors in the course of tax control measures may serve as a basis for the annulment of a decision on an audit.

However, according to the position of the Federal Tax Service of Russia [2] and the established court practice [3], violation of procedural deadlines in the course of an audit is not a significant violation that can lead to the annulment of the final decision. 

In this regard, businesses should not expect the decision on the audit to be canceled in the case, in particular, of delaying the audit [4], delivery of the audit report later than the established deadline [5], untimely issuance of the decision on the audit [6], extension of the term for consideration of materials of field tax audit [7].

At the same time, there is a positive practice for taxpayers, when procedural violations of inspectors were recognized by the courts as sufficient and substantial grounds to cancel the decision on the audit. 

This is about the issuance of two or more decisions within one audit, if the conclusions contained in them are significantly different [8]. However, if the texts of the decisions do not contain any significant changes and differ only in the technical part (different fonts, backwards text, etc.), then this circumstance will not serve as a basis for reversal of the decision on the audit [9].

Thus, the violation by the tax authorities of procedural deadlines in conducting tax audits and formalizing their results is not a sufficient reason to cancel the final decisions.

Violation by a tax authority of the deadline for taking measures to collect tax debts

The entry into force of the decision on the audit is always accompanied by sending the taxpayer a demand for payment of the resulting debt, indicating the presence of the audited entity negative balance of the Unified Tax Code.

If the person does not voluntarily repay the formed debt, the tax authority decides to collect it at the expense of funds in the accounts of the taxpayer [10], or at the expense of its property [11]. If it is impossible to collect the debt in an indisputable manner, the tax authority has the right to appeal to the court.

However, the failure of the tax authority to comply with the relevant procedural terms, although does not deprive the inspectorate of the right to collect the debt, but limits this possibility to two years [12].

The issue of the impact of the tax authority's violation of procedural deadlines in conducting an audit and formalizing its results on the possibility of collecting tax debts has been repeatedly analyzed by the Supreme Court of the Russian Federation.

For the first time the Supreme Court of the Russian Federation drew attention to this problem in the case of LLC “Neringa” [13], in which it concluded that the mere violation of the duration of the tax audit does not indicate the illegality of the tax authority's actions at the stage of debt collection, since the relevant procedural violations may be due to objective (e.g., non-receipt of responses to claims sent to third parties) and subjective reasons (the need to familiarize the taxpayer with the materials of the tax audit, etc.).

However, a long period of time for conducting an audit may be recognized as inadmissible if it leads to excessive or unlimited in duration application of tax control measures in respect of the audited person.

The RF Supreme Court revisited this issue in 2024, in fact repeating the position it had voiced in 2021 in the case of Neringa LLC.

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If we summarize all of the above, we can identify two grounds for disputes on the issue of violation of terms related to tax audits: (1) violation of terms for tax authorities to conduct audits and formalize its results, (2) violation of terms for taking measures to collect tax debts.

In this case, the probability that the taxpayer's argument about the violation of time limits by the inspectorate will work in the first case is extremely unlikely, except in specific situations, for example, the issuance of two decisions on the results of one audit.

At the same time, in the second case, the courts may side with the taxpayer in cases where the cause of delay or violation of procedural deadlines was not the taxpayer himself, as well as when there were no objective and subjective reasons for violation of these deadlines.

You can read more about the consequences of the tax authorities' violation of audit deadlines and analyze the decisions of the Supreme Court of the Russian Federation in the material by Ivan Tsvetkov in the publication «Company Lawyer».

[1] Paragraph 14 of Article 101 of the Tax Code of the Russian Federation.

[2] Letter of the Federal Tax Service of Russia of 25.01.2021 No. SD-4-2/778@.

[3] Definition of the Constitutional Court of the Russian Federation of 20.04.2017 No. 790-O, Definition of the Supreme Court of the Russian Federation of 21.08.2019 No. 309-ES19-13355.

[4] Ruling of the Arbitration Court of the Moscow District of 12.12.2023 in case No. A40-296921/2022. 

[5] Resolution of the Moscow District Arbitration Court of 22.05.2024 in case No. A40-126449/2023.

[6] Resolution of the Arbitration Court of the Central District of 20.05.2024 in case No. A62-9227/2022.

[7] Resolution of the Arbitration Court of the Central District of 24.08.2023 in case No. А54-9974/2021.

[8] Resolution of the Arbitration Court of the Volga District of 16.02.2024 in case No. A57-32186/2022.

[9] Resolution of the Arbitration Court of the Central District of 20.05.2024 in case No. A09-9113/2022.

[10] Art. 46 of the Tax Code of the Russian Federation.

[11] Art. 47 of the Tax Code of the Russian Federation.

[12] P. 31 of the Resolution of the Plenum of the HAC RF from 30.07.2013 № 57 «On some issues arising in the application by arbitration courts of the first part of the Tax Code of the Russian Federation», Definitions of the Constitutional Court of the Russian Federation from 24.12. 2013 № 1988-O, from 20.04.2017 № 790-O, paragraph 12 of the Review of judicial practice on issues related to the participation of authorized bodies in bankruptcy cases and bankruptcy procedures applied in these cases (approved by the Presidium of the Supreme Court of the Russian Federation 29.12.2016).

[13] Decision of the Supreme Court of the Russian Federation of 05.07.2021 No. 307-ES21-2135.