03.08.06

A decree on “Amending of the First and Second Parts of the Tax Code of the Russian Federation and Other Legislative Acts of the Russian Federation in Connection with the Rationalization of the Tax Administration Authorities” was signed by the President and published in 'Rossiskaya Gazeta' on 29th of June.

This law provides details for all tax audit procedures.

On-site tax audits may not be conducted more than twice a year, and should not last for longer than 2 -3 months. Although tax inspectors retain the right to extend the tax audit period to up to six months, and also to suspend it for a period of six months, in each case there must be grounds for taking such steps. Additionally, as Sergei Shatalov, the deputy finance minister recently clarified, the Federal Taxation Service is, with the aid of businesses, developing procedures which will stipulate the rules under which the period of on-site tax audits can be extended.

Repeat tax audits. The law clearly determines the procedure for instituting a repeat audit. Now, even if a repeat audit shows that violations have been committed, the tax payer cannot be fined for violations which were not identified in the course of the initial audit. The single exception to this rule is evidence of collusion between the tax payer and employees of the Taxation Service. Given that, the Taxation Service can only deduct additional taxes as the result of a repeat audit.

Another innovation is a detailed procedure for the extrajudicial resolution of disputes between a tax payer and the tax authorities. Now, if a tax payer is unhappy with the decision of the tax authorities, he has the extrajudicial right to appeal to a higher tax authority in an attempt to resolve the issues. In such cases, if the tax payer has a guarantee which states that funds can be withdrawn from his/ her account without dispute then no claim on property will be made. It should, however, be noted that this regulation is currently merely a recommendation. Mandatory procedures will be implemented only in 2009.

According to the new law, any ruling of the tax authorities making the tax payer accountable do not come into force when the ruling is announced, decisions will come only after 10 days. During this period the tax payer will have the right to appeal the decision in court. One more regulation worthy of attention will come into force on 01.01.2008. This stipulates a shift from tax being deducted and paid on a monthly basis to a half yearly basis. Given this, the amount of documentation submitted will be decreased and tax will be paid less often, making it possible for entrepreneurs to use the sum owing as floating assets.