Analysis of tax risks associated with the application of a reduced VAT rate on the sale of certain goods
Mikhail Begunov, Nikita Zharov
The client purchases certain goods from suppliers, on the sale of which the suppliers apply a reduced rate of VAT. The client subsequently sells these goods as part of its own business activities, subjecting them to a VAT rate of 20%.
The client was interested in analysing the possibility of applying a reduced VAT rate when selling the said goods, as well as the mandatory legal requirements that the client needs to comply with in order to achieve the said objective.
As a result of the project, the Tax Compliance team managed to assess tax risks associated with the application of the reduced VAT rate for the Client and to suggest ways to minimize them.
In particular, in the course of the project Tax Compliance specialists: (1) analyzed documentation relating to the products sold by the client; (2) developed proposals on changing the document flow in order to apply the reduced VAT rate.
Mikhail Begunov, Nikita Zharov
A client provides IT services for a parent company. The company believed that the IT services provided to the parent organisation may not comply with the provisions of the Russian Tax Code for the application of tax exemptions. The company contacted Tax Compliance in order to assess the possibility to apply tax exemptions.
The Tax Compliance team as a result of the project: (1) analysed the client's intercompany agreements to determine the validity of tax exemptions for IT companies; (2) developed proposals to adjust agreements and primary documentation to ensure their compliance with tax legislation.
The reality of subcontractors' activities was proved and the claims of the tax authority were withdrawn.
December 2018 - April 2019
Alexander Dmitriev, Yulia Pavlova
With the help of additional tax control measures, the reality of subcontractors' activities was proved. The absence of intent in the client's actions was proved. The tax authority calculated tax liabilities without primary documents.
Claims of the tax authority on the field inspection report were appealed and withdrawn. A positive pre-trial appeal against the acts of the tax authorities in favor of the taxpayers under 54.1 of the Tax Code was formed.
Represented a major supplier of shut-off and control valves in a criminal case brought under Article 199 of the Russian Criminal Code before the tax authorities' decision on the field audit.
Mikhail Begunov, Alexander Dmitriev, Yulia Pavlova
At the stage of pre-trial appeal of the tax authorities' decision, the law enforcement officers included in the audit, without waiting for the completion of the tax audit, forwarded the collected materials to the investigating authorities for initiation of a criminal case under part 2 article 199 of the Criminal Code. The criminal case was brought against the CEO and an unidentified group of people from the company's management. The amount of damage, according to the tax and investigative authorities amounted to more than 500 million rubles.
In accordance with the correctly built strategy of defense in the investigation of the criminal case and as a result of additional measures of tax control, lawyers and employees of Tax Compliance provided documents on "tax reconstruction", disclosed the real tax liabilities, as well as conducted an examination of the costs of transporting goods, which allowed to reduce the damages to 80 million rubles and termination of the criminal case on the fact of absence of corpus delicti in connection with the payment of arrears.
Support of the client at the stage of advising on payment of taxes from CFC profits, as well as assistance in preparing a tax amnesty declaration
At the time of drawing up and submission of notifications to the tax authorities the statute of limitations under p. 1 of Article 129.6 of the Tax Code had not expired, i.e. the client still had the risk of tax liability for untimely disclosure of information about the CFC. In order to exclude tax liability for failure to submit CFC notifications for previous tax periods, the client was provided with services to prepare a special tax declaration allowing to apply the tax amnesty under the Federal Law of May 29, 2019 № 110-FZ within the voluntary declaration of their assets. Also within the framework of the project we assessed the grounds for the absence of an individual's obligations to withhold personal income tax from the profit of a CFC.
As a result of legal defense, tax liability and penalties for late submission of CFC notifications due to the application of tax amnesty provisions were avoided