Tomorrow your counterparty will go bankrupt. How to determine that
Tomorrow your counterparty will go bankrupt. How to determine that

Tomorrow your counterparty will go bankrupt. How to determine that


In March 2021 the Federal Tax Service clarified the application of Article 54.1 of the Tax Code (the limits of the rights to calculate the tax base and (or) the amount of tax, fees, insurance premiums). The tax authorities described the algorithm of their actions during the inspection and the signs to which the inspectors pay attention when assessing additional taxes.

In judicial practice the number of cases related to the interaction of business with counterparties is rapidly growing. In particular the fight against illegal VAT deductions and refunds is gaining momentum. Viktor Batsiev, deputy head of the Federal Tax Service, told RBC at the end of 2020 that the court decided in favor of the tax authorities in 85% of cases concerning the reality of economic relations between organizations and counterparties. The auditors manage to convince the courts that the counterparties of the taxpayer - technical, that is, do not conduct real business, do not have assets and staff, do not pay taxes and sometimes even under the control of the organizer of the tax scheme.

Entrepreneurs have a legitimate question: how can they do their due diligence since publicly available information can be insufficient to prove the bona fides of their business partners?


What the IRS is looking at


To begin with, let's understand the criteria by which inspectors prove a counterparty is unreliable and receives a tax benefit from working with it:

1. Coincidence of the executives/founders of the company and its counterparty.

Thus, the Federal Tax Service charged Ventprom-Region with value added tax in the amount of 2.5 million rubles. (case N A53-32405/2018). The tax authorities concluded that the company had received an unjustified benefit by applying tax deductions for transactions with counterparties OOO "Vensbyt" and OOO "Ventkomplekt". The proof was that the counterparties had the same manager and the same employees.

2. Submitting reports or logging into banking services from the same IP address.

An example is the case of the company "Fortuna", which the court ordered to pay 4.5 million rubles of additional tax charges for understating the leased space (case N A60-13255/2018). "Fortuna" rented premises together with a counterparty. The tax authorities found out during the audit that the companies are interdependent - they have the same IP-address, and the statements are sent by the same accountant from the same computer.

3. finding partners at the same address.

The tax authority has doubts when a company and its counterparty are located at the same legal address. The tax authorities may assume that the counterparty does not actually supply the company with any goods / does not provide any services, and all the paperwork is created to justify the withdrawal of funds (case N A76-11398/2018).

4. discovery of the counterparty's seals or documents drawn up on its behalf in the office and on the computers of the taxpayer being audited.

The Federal Tax Service assessed additional 27 million rubles in taxes on Energy Technologies for its interaction with contractors ProfEnergocom and Energostroy. The courts of all instances agreed with the conclusions that the documents submitted by the company do not confirm the reality of the disputed business transactions of the applicant with these counterparties and are aimed at creating a fictitious document turnover for the sake of obtaining an unjustified tax benefit (case N A40-254321/2018). The company provided site supervision services using its own resources, and filled out documents on behalf of counterparties.

5. Transit movement of money from the company to individual entrepreneurs for the purpose of cashing out, withdrawal of funds to low-tax jurisdictions, or issuance of loans without expectation of repayment.

For example, the Arbitration Court of Moscow rejected the complaint of Brigadier Technologies about additional tax charges (case N A40-314065/2018). The tax authority considered that when interacting with a counterparty, the company overstated the cost of work to formally justify the flow of funds in transit. There was no evidence that the company had performed the work. The Supreme Court agreed with the Arbitration Court.

6. Signs of affiliation of the taxpayer with its counterparties and subsequent links in the supply chain.

Article 20 and Article 105.3 of the Tax Code define the basic criteria of the affiliation. Among them the tax authority lists the following: relationship of kinship, subordination in the office, participation in the capital of the company. Despite this, the list of grounds is not closed: the court is free to establish interdependence and on other grounds (case N A55-31640/2017).

7. The results of handwriting examinations confirming that the counterparty's employees and management did not sign the primary documents.

The expertise of signature is popular with tax authorities, as it is the signature that gives the document legal meaning. Handwriting expert can find out concrete author of signature and conditions under which the documents were signed. For example, the expert can establish the imitation of the signature, the physical condition of the signer and more. If your counterparty has signs of doubtfulness and you have not exercised commercial due diligence before dealing with it, negative tax consequences are highly likely to occur for you as well.


Signs of unstable counterparties


Although the Federal Tax Service and the Ministry of Finance have been issuing official letters explaining the measures of diligence when choosing a counterparty since 2010, many entrepreneurs still have difficulty proving both their own good faith and the trustworthiness of their counterparty. A superficial choice of a counterparty and lack of regular monitoring can lead to the fact that your business will be involved in litigation and incur significant financial losses.

When interacting with a business partner, you should be alert to the following signs:

- Inaccurate information about the registration of the legal entity;

- lack of information on the payment of taxes to the budget;

- the presence of "mass" executives and founders at the time of the contract or execution

- of contractual obligations (participation and management in companies of more than 7-10 legal entities);

- absence of full-time employees according to the 2-NDFL certificates;

- absence of business reputation or registration of the counterparty shortly before entering into a contract with the taxpayer under analysis;

- low tax burden with high turnover at the same time.


How to secure your company


To reduce the risk of a tax surcharge, do the following:

- Regularly assess the credentials of the counterparty's principal. Request documents from the supplier certifying the identity of the director, check the scope of his authority according to the constituent and registration documents.

- Ask the counterparty to provide you with information about taxes paid, tax audits conducted and their results.

- Ask the counterparty for information that demonstrates that it can meet its contractual obligations. For example, find out how many employees he has on staff, whether he has an office, warehouses and vehicles. It's worth noting that the amount of staff and assets needed to minimize the risk of challenging transactions with a counterparty are individual to each industry, counterparty and business transaction. Therefore, research this issue with respect to your counterparty's industry and line of business before the inspection. If the inspectorate or a court decides that the supplier could not supply goods or perform work due to the lack of employees or special equipment, you could be charged with obtaining an unjustified tax benefit.

- Check the validity of information about the activities of organizations. This can be done online using software products such as SPARK, Kontur.

- Check whether the counterparty is involved in arbitration disputes. This may indicate that the counterparty is actually doing business and is interested in protecting its interests. Use the Arbitration Case Files to find all of the arbitration cases in which your counterparty has been a party to a dispute. Pay attention to the existence of cases against your counterparty, as well as their nature. Before the inspection you will be able to find out about the criteria that cause the tax authority to doubt the counterparty's good faith, and to request information that can keep you safe. In addition, if the court rules in favor of your partner, you can use this to protect yourself.

- For added security, include a "tax clause" in the standard form of contracts - a guarantee that the counterparty has fulfilled all his obligations to the budget, as well as his obligation to compensate you for tax assessments if a claim arises.

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You can read the full article at RBC Pro.


Mikhail Begunov Mikhail Begunov

Mikhail Begunov

Major specialisations

Manufacturing companies, FMCG, Information technology, Pharmaceuticals

Member of the Chamber of Tax Consultants, Lawyer at the Moscow Chamber of Advocates

Biography