Tax Service Defines 16 Typical Tax-Evasion Schemes
The Federal Tax Service (FNS) has sent instructional guidelines to its offices describing 16 typical schemes for evading taxes. Judging by this document, inspectors are most concerned with evasion of value-added tax (VAT) and profit tax. Five of them are listed below.
For example, the FNS encourages denial of export VAT reimbursement if there is a firm in the chain of suppliers that has transferred money from the buyer to its foreign partner without having paid VAT into the budget.
Another "suspicious" export operation involves using too many middlemen, thus increasing the price of a product, and along with it the amount of VAT to be reimbursed.
Deduction of "internal" VAT on operations between interdependent companies is also grounds for suspicion. In the scheme described, a company paid its suppliers with money received from the parent company as a contribution to its charter capital. However, the parent company itself had received the money from its founders, who turned out to be those very suppliers. In the opinion of the FNS, the company paid the suppliers with their own money and VAT reimbursement should be denied.
It is also dangerous to pay with borrowed resources. The instructions describe a case where a logging company acquired equipment on credit obtained from an off-shore firm. Having gathered information from the Internet, the logging company decided the value of the transaction was six times greater than the market value of the equipment. Moreover, the loan was not repaid. In the opinion of the FNS, VAT cannot be reimbursed in such cases.
The tax authorities continue to be suspicious of leasing operations. In one of the schemes described, a company took a combine on lease, listing the advance to the lessor. The lessor was affiliated with the client and the advance payment was not provided for in the agreement.
Experts are sure that if inspectors begin denying reimbursement of VAT or reduction of tax due on profits using these instructions, a company would face numerous court battles and additional tax assessments, since almost all of the schemes described are actually legal and are used in day-to-day business in Russia.
Specialists also believe that the FNS is urging automatic penalizing of companies for certain operations, even if the tax ultimately gets paid into the budget. For example, companies periodically purchase products from their founders using resources received from them, but the founders themselves pay tax on the money they received. Denying reimbursement of VAT on purchases paid for with borrowed resources is allowed only if the tax authorities can prove that the company had no intention to repay the loan, which is a decision to be made by the Constitutional Court.
True, the letter did not contain evidence of the guilt of the taxpayers, and proving their criminal intent would be problematic. The FNS only refers to circumstances which, in the opinion of the Supreme Arbitration Court, cannot in and of themselves attest to a company's receipt of ungrounded tax benefits leading to sanctions for the company.
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