05.07.10

In the past few years, the tax authorities have started to make a practice of summoning company officials to commissions on explaining financial losses, payroll, and various other company issues. Tax officials justify these commissions by citing the right to summon taxpayers to give explanations regarding payments as well as any other instances related to compliance with tax legislation.

A Right or a Duty?

Analyzing the terms of Articles 23 and 31 in the Tax Code, there is the following discrepancy: the tax authorities are given the right to summon taxpayers to give explanations, but at the same time, the legislation does not directly obligate the taxpayer to appear before the tax authorities.

However, Russia’s Ministry of Finance concluded that this duty is stipulated by Article 23, Point1, Subpoint 7 in the Tax Code. Failure to appear can be regarded as hindering the tax authorities’ work, insofar as it prevents them from fulfilling their official duties.

However, when examining a specific request received from the tax authorities, it nevertheless needs to be clarified whether or not they have overstepped their authority.  It indeed turns out that inspectors are imposing an obligation on taxpayers that is not specifically provided for in the tax legislation.

The word of one authority will not always be enough. It will sometimes be necessary for the duty to be clearly prescribed in a legislative act (Article 23, Point1, Sub-point 9 of the Tax Code).

Liability for Failure to Appear

If the summons to appear with an explanation is issued to the taxpayer in the approved form (as established by Russia’s Federal Tax Service in Order #MM-3-06/338 from 05-31-2007) and is recognized as a legitimate demand, then attendance would be considered a legal responsibility.

According to Article 23, Point 5 of the Tax Code, failure to fulfill this duty carries legal consequences.

If the company commits any unlawful acts (by either its actions or failure to act), this will be considered a violation of tax law, the liability for which is outlined in Article 106 in the Tax Code.  However, in Chapter 16 of the Code, “Types of Offenses and Penalties for Violation,” failure to appear before the tax authorities on the basis of a written notice is not specified as one of these offenses. Consequently, a corresponding penalty for this is not provided either. Therefore, if the manager of a business is called to the tax inspectorate but does not appear, this will not be considered a violation of tax law.

Yet other similar legal responsibilities should not be overlooked. Article 19.4 of the Administrative Offenses Code specifies legal consequences for insubordinatation to the authorities that perform state supervisory functions.

According to points in Article 1 of Federal Law #943-1 from 03-21-1991, “On Tax Authorities of the Russian Federation,” the tax authorities clearly belong to the group of authorities who perform state supervisory functions. Therefore, being noncompliant with their instructions is considered an administrative legal violation.

For this reason, failure to appear at the tax inspectorate may incur a warning or an administrative fine. According to Article 19.4, Point 1 of the Administrative Offenses Code, the fine is between 1,000 – 2,000 rubles.

Translated by Alinga Consulting Group.

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Source: www.klerk.ru