The rights of businesses were recognized to tax reconstruction when disclosing the meaning of dubious transactions

On March 11, the head of the Federal Tax Service, announced the release of a letter dated 10.03.2021 No. BV-4-7/3060@ “On the practice of applying Article 54.1 of the Tax Code of the Russian Federation”.

This letter answers an important question that arose in practice after the appearance of Article 54.1 in the Tax Code of the Russian Federation in August 2017: is the tax inspectorate obliged, having identified a violation, simply to add tax, as if the taxpayer did not have expenses for questionable transactions, or is it obliged to calculate the arrears taking into account the actual costs incurred (that is, to recognize the tax reconstruction)? Immediately after the introduction of the Federal Tax Service and the Ministry of Finance of the Russian Federation stated that now the reconstruction is not carried out.

Now the Federal Tax Service has again softened its position: tax reconstruction will be possible. Article 54.1 of the Tax Code of the Russian Federation stipulates the right of a business to receive a tax benefit not only by the requirement that the transaction be real, but also by the fact that it must be executed by the person specified in the documents. Based on this, the Federal Tax Service formulates the following rule: if the tax authorities have identified questionable transactions of the taxpayer being audited, for example, with a “technical” company, then it must disclose the details of these transactions, including their real performers. Only in this case, it is possible to apply tax reconstruction, according to the Federal Tax Service.

In the letter, the Federal Tax Service expressed its position as follows: “The taxpayer does not have the right to apply tax deductions and account for expenses incurred on disputed transactions, since the obligation is not fulfilled by the proper person, and the taxpayer has not disclosed information and documents confirming them about the actual supplier (contractor, contractor) and the parameters of the transactions performed with it”

At the same time, the service directs inspections to the inadmissibility of submitting formal claims to business in situations where the obligations under the contract were fulfilled by a person not specified in the documents. According to the Federal Tax Service, inspections need to establish circumstances that indicate that the taxpayer himself pursued the goal of illegally reducing the tax liability or knew or should have known that his counterparty is a “technical” company, and the tax violations of the counterparty themselves are not grounds for filing tax claims.

“The conclusion about such knowledge may follow from the taxpayer’s knowledge of the person who actually performed the performance, for example, by virtue of the fact of negotiations and agreement on the terms of the obligation, ensuring its performance, guarantees in the event of improper performance directly between the taxpayer and such a person,” the letter says.