02.05.07

The Federal Tax Service has outlined 36 signs that should indicate to tax authorities the unreliability of exporters. Such exporters would be denied Value Added Tax reimbursements.

Those characteristics are listed in a March 2nd order, signed by the head of the Tax Service, concerning regulations on the comprehensive informational program about VAT.

The signs of “false exporters”, in the opinion of the Service, include:

• The company is registered at the same address where numerous others are registered;
• The company was created shortly prior to an export delivery or was based on a passport reported lost;
• The company has previously engaged in illegal schemes;
• Export volume of the company has suddenly risen drastically;
• Settlement within 1-3 days could hint at the illegality of reimbursement;
• The accounts of both the exporter and the other contracting party are at the same bank;
• The majority of the company’s deals are paid for by barter or with borrowed funds;
• The prices of the company’s products exceed market prices;
• The deals concluded by the company are barely profitable;
• The purchaser is an off-shore company;
• The supplier deducts 95% of VAT;
• It will be considered suspicious if the company’s goods turn out to be such things as scrap, used equipment, intellectual property, power station turbine blocks, electrical parts;
• And others.

In the past year the Tax Service has issued numerous instructional manuals for catching companies trying to illegally minimize taxes and has repeatedly summoned local inspectors to analyze the reasons for unacceptably high levels of VAT deductions.

Recently a list of 109 signs of unreliability appeared which was previously mentioned on the ACG website. Companies with those characteristics will be subject to inspection before others.

Some experts think that such measures pose a threat only to small companies that don’t produce goods. Nevertheless 36 signs are too many. A company could suffer due to a bad faith supplier, says an accountant from another firm.

The Superior Commercial Court has ruled that in order for the tax authorities to deny VAT deductions, they must prove that the deal was fictitious or did not have a commercial purpose, and this can be shown by those signs included in the Service’s guidelines mentioned above. However, often the tax officers discover several suspicious signs, and then deny the VAT deductions without verifying the reality of the deliveries or a business purpose. In such cases, the tax authorities generally lose in court.

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