28.09.08

The amount of adjusted tax declarations – and, as a consequence, the volume of bookkeeper’s work, - will not lessen in the near future. The Supreme Arbitration Court of the RF (SAC) recently issued a resolution affirming the need for companies to submit adjusted declarations. Correcting tax liabilities in the current fiscal period, even if it will not cost anything to the budget, is ruled illegal. Thus, large company financial departments’ load will not become any smaller, and tax authorities keep an extra reason to audit companies.

The Supreme Arbitration Court was presented with the following case: after an audit, tax authorities charged a joint stock company with almost 1 million RUR in profit tax from income received in 2004. Tax inspectors accused the company in lowering their taxable base by improperly including losses made in 2001-2003. The company argued that it was not able to take these losses into account during those years due to delays in getting the primary documents needed from contractors.

The company claimed that it is not obligated to present adjusted tax declarations during 2001-2003 because the amount of paid taxes was not lowered. Moscow's Arbitration Court and higher courts supported the company’s case. Then Interdistrict Inspectorate of the Federal Tax Service for Major Taxpayers #1 appealed to the SAC.

SAC decided that tax authorities’ demands are legitimate and the taxpayer must recalculate his tax liabilities for previous years and submitted adjusted tax declarations. The court referred to Article 272 of the Tax Code which states that company’s expenses may only be recognized as such in the fiscal period they were incurred, regardless of when the company received payment or primary documentation related to the transaction.

Specialists explain that many organizations face similar problems. Recalculating tax liabilities and submitting adjusted declarations is not difficult for small firms, but it will require a significant amount of time for accountants of large companies.

SAC’s decision in this case is based on a very fine reading of the law. Indeed, the Tax Code requires correcting mistakes in documents during the period in which they were made, but in this case no substantiating documents could be presented for making the deductions in the years the losses were incurred. Accounting practice allows these expenses to be recognized as a deductible loss made in a previous period and deducted in current records. Moreover, SAC did not take into account an important detail: because the expenses were not included in the previous declaration, it resulted in tax overpayment rather than underpayment.

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Source: Rbc