When the Tax Office Takes Interest in Your Return: 5 Warning Signs and How to Respond

Tax control in Russia is becoming increasingly targeted and technology-driven. Thanks to the ASK VAT-3 system and automated reporting analysis, the Federal Tax Service (FTS) can detect suspicious transactions even before a desk audit. Below, we examine not only obvious “red flags” but also lesser-known nuances that may attract the tax authorities’ attention.

1. A Sharp Increase in Expenses Requires Special Attention

In addition to a general rise in costs, inspectors may be alerted by:

• Purchases from a single supplier without a corresponding increase in production volume
• A sudden change in the expense structure (e.g., an increase in service costs while sales remain unchanged)
• Frequent adjustments to declarations to increase expenses

2. Large VAT Deductions: Hidden Risks

Critical indicators include:

• Deductions exceeding 89% of the accrued tax
• A chain of counterparties with a short lifespan (less than 1 year)
• Simultaneous deductions for multiple “problematic” invoices

3. Losses: When Do They Raise Suspicion?

The FTS pays particular attention to:

• Alternating profitable and loss-making periods
• Losses despite significant borrowing
• Losses combined with payments to founders

4. Special Tax Regimes: Non-Obvious Restrictions

In addition to basic limits, the following are monitored:

• The ratio of employee headcount to revenue
• Procurement geography for the Unified Agricultural Tax (UAT)
• Income sources for the Patent System (PSN)

5. Zero Reporting: New Risk Criteria

Inspectors check not only for transactions but also:

• Account balances at the end of the period
• The presence of property despite zero property tax
• Consistency of zero indicators with data from other regulatory bodies

Proactive Protection: 7 Steps for Businesses

1. Compare your performance with industry benchmarks quarterly.
2. Maintain an internal register of non-standard transactions with prepared explanations.
3. Conduct tax due diligence before major transactions.
4. Implement a preliminary document flow control system.
5. Develop a protocol for responding to FTS inquiries.
6. Use professional software to vet counterparties.
7. Organize regular audits of tax reporting.

Important: Since 2024, the FTS has been actively using neural network algorithms to detect tax optimization schemes. This means that “gray” strategies that previously went unnoticed are now flagged automatically.

If you receive a request from the tax office, don’t settle for a formal response. Attach as many supporting documents as possible—contracts, certificates, payment orders, and delivery notes. The more comprehensive your reply, the lower the chance of an in-depth audit.