Review of judicial arbitration practice of disputes under 54.1. Tax Code of the Russian Federation on tax abuses

VAT arbitration practice, as an analysis of court decisions for 2015 shows, reflects previously emerging trends associated with taxpayers challenging decisions of tax authorities in court. Thus, the courts continue to take the side of taxpayers in cases in which tax authorities were unable to provide evidence to support their conclusions. Also, the courts stand guard over compliance with all norms prescribed in the Tax Code, despite their free interpretation by inspectors.

Inadmissibility of facsimiles

The court sided with the inspectors in their decision to refuse the exporter a VAT refund. To confirm the validity of applying the zero rate when shipping goods for export, companies must submit the information specified in paragraph 1 of Art. 165 Tax Code documents. But if you look carefully at the list, we are talking about copies of documents.

The resolution of January 19, 2015 No. F03-5752/2014 of the Federal Antimonopoly Service of the Far Eastern District states that, in accordance with Art. 11 of the Tax Code, all concepts and terms used in the field of tax legislation must have the same meaning as in other areas of legislation. In the state standard of the Russian Federation GOST R 51141-98 “Office work and archiving. Terms and Definitions” dated February 27, 1998 No. 28 states that a copy is considered a document that fully reproduces the contents of the original and all its features. In this case, a copy of the document is considered certified, which contains all the details that give the document legal force.

In accordance with the resolution of the State Standard “GOST R 6.30-2003. Requirements for the preparation of documents" dated 03.03.2003 No. 65-st, when certifying documents, the following details should be provided:

• inscriptions: “True”;
• indication of the position of the person who certified the copy;
• his personal signature and transcript of the signature;
• dates of certification;
• seal of the organization.

The exporter submitted to the tax office for inspection, which is carried out under the general procedure for VAT refunds, copies of documents certified by facsimile and not by the original signature. The inspectors (and then the courts of three instances) considered that the taxpayer submitted documents that did not meet the requirements stated in Art. 165 of the Tax Code, which means that the Federal Tax Service did not reasonably accept them as proper copies.

The inadmissibility of using facsimiles when signing invoices is strongly confirmed by the ruling of the Supreme Court of the Russian Federation dated 03.08.2015 No. 303-KG15-8444 and the resolution of the Supreme Court of the North-Western District dated 29.09.2015 No. A21-9443/2014.

Review of judicial practice on tax disputes for the second quarter of 2021

Often, accountants and managers are faced with controversial, ambiguous situations regarding taxation issues. In such cases, the Russian Ministry of Finance recommends turning to arbitration practice. In the article by Oksana Smolanova, read about the most significant decisions of the Supreme Arbitration Court and the Constitutional Court of the Russian Federation on tax disputes for the second quarter of 2021.

The Federal Tax Service, by Letter dated July 28, 2020 No. BV-4-7/12120[1], sent for use in the work a review of the legal positions reflected in the judicial acts of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation, adopted in the second quarter of 2021 on issues taxation.

In this article we will talk about some of them.

The Supreme Court of the Russian Federation confirmed the taxpayer’s right to deduct input VAT

The most significant and discussed in professional circles is the decision of the Supreme Court on the issue of the legality of using the right to deduction (Definition[2] of the Supreme Court of the Russian Federation of May 14, 2020 No. 307-ES19-27597 in case No. A42-7695/2017).

The Judicial Collegium for Economic Disputes of the Supreme Court considered the dispute regarding the refusal of the buyer to deduct input VAT. As a result, the judicial panel canceled the additional assessments and sent the case for a new trial, while formulating important conclusions that will be relevant for many taxpayers.

The Federal Tax Service's arguments justifying the refusal to deduct the tax were as follows:

— the documents submitted by the taxpayer do not confirm the reality of the supply of goods by this counterparty;

— low average number of employees of the counterparty-seller (one person);

— the selling organization paid minimal taxes (in particular, income tax and VAT);

— primary documents and invoices were signed not by the general director of this counterparty, but by another person.

According to the inspectorate, these conditions indicate that the person did not exercise due diligence when choosing a counterparty, since he did not request documents and evidence of the supplier’s actual activities.

The courts of three instances agreed with the arguments of the tax authorities. However, the judicial panel for economic disputes of the Supreme Court outlined the following conclusions:

1) if the counterparty-seller does not properly fulfill his obligations to pay VAT, then this fact is not a basis for refusing to deduct tax to buyers;

2) even if the counterparty did not pay VAT, but the buyer did not collude with him, the deduction should not be denied;

3) the reliability of the tax reporting submitted by the supplier cannot be refuted only by the insignificance of the final amount of VAT calculated for payment to the budget or a significant share of tax deductions declared by the supplier;

4) assessment of the taxpayer’s exercise of due diligence is not limited to identifying flaws in the rationality of his business decisions;

5) if the reality of the execution of the contract is proven, the presence of doubts about the signing of invoices by authorized persons has no legal significance.

The conclusions formulated by the judicial panel on economic disputes will help taxpayers more successfully defend their right to deduction.

The decision to collect funds can be challenged without a pre-trial dispute resolution procedure

The Supreme Court of the Russian Federation issued Ruling[3] dated June 16, 2020 No. 307-ES19-23989, in which it indicated that neither the Tax Code of the Russian Federation nor any other law establishes special requirements for a mandatory pre-trial procedure for resolving disputes regarding taxpayers’ claims for the return of amounts taxes. Funds debited from the taxpayer's bank account in pursuance of decisions of the tax authority are recovered. However, by virtue of subparagraph 5 of paragraph 1 of Article 21[4] of the Tax Code of the Russian Federation, in the event of excessive collection, the taxpayer has the right to demand the return of the corresponding amounts from the budget.

In contrast to excessive payment of tax payments, which is usually allowed due to erroneous actions of the payer himself, or illegal decisions on the part of the tax authority, the rights of the taxpayer are violated by the very fact of collection, which is the basis for going to court to restore the violated right.

The court noted that challenging non-normative legal acts of tax authorities and claiming excessively collected taxes are independent methods of protecting rights, unless otherwise follows from the legislation.

Thus, the taxpayer’s right to file a claim in court does not depend on whether the pre-trial procedure for contacting the tax authority regarding the return of collected amounts was followed.

The Constitutional Court confirmed the legality of applying a 0% VAT rate within a separate stage of the international transportation of goods

By Resolution[5] of June 30, 2020 No. 31-P, the Constitutional Court assessed the constitutionality of the provisions of subparagraph 12 of paragraph 1[6] and paragraph 3 of Article 164[7], as well as paragraph 14 of Article 165[8] of the Tax Code of the Russian Federation. The subject of consideration was the specified interrelated provisions, on the basis of which the issue of the tax rate for VAT is decided in relation to the operation of selling services for the provision of sea vessels for use.

The challenged provisions were recognized as not contradicting the Constitution[9] of the Russian Federation.

The court noted that for the purposes of applying the 0% VAT tax rate to services related to exports, the determining legal significance is the connection of business transactions with exports, that is, their economic essence. For the purpose of documentary confirmation of the right to apply a 0% VAT rate, the taxpayer can submit any documents indicating the export nature of the transaction.

To charge interest for late VAT refund, an application is required.

The Constitutional Court of the Russian Federation received a complaint from a taxpayer to whom the inspectorate returned VAT without interest. Initially, the taxpayer challenged the inspectorate’s refusal to refund VAT in an arbitration court. He won the dispute, but the inspectors returned the tax without interest, since they referred to the fact that the organization filed an application for a refund only after the court decision came into force.

The court saw no grounds for considering the complaint.

Refusing to accept the taxpayer's complaint for consideration, the Constitutional Court of the Russian Federation indicated that the presence of an application for offset (refund) of tax at the time of making a decision on the refund of the tax amount is a prerequisite for the accrual of the provisions provided for in paragraph 10 of Article 176[10] of the Tax Code of the Russian Federation. Federation of Interest. In turn, the absence of a corresponding application at the time of making the decision is the basis for exemption from the accrual of interest and transition to the general procedure for payment or refund of the amount of overpaid tax (Article 78[11] of the Tax Code of the Russian Federation). It was on this basis that the taxpayer's request for interest was denied.

Such conclusions are contained in the Determination[12] of the Constitutional Court of the Russian Federation dated March 26, 2020 No. 543-O.

Thus, in order to receive a refund of the amount of interest due in the event of a delay in VAT refund, it is necessary to have an application for offset (refund) of the tax at the time of acceptance of the tax refund after a desk audit. These clarifications will help taxpayers prepare the entire necessary set of documents for reimbursement of all amounts from the budget.

The Supreme Court confirmed: when selling fixed assets using the simplified tax system, you can take into account the residual value

According to the Supreme Court of the Russian Federation, expressed in Determination[13] dated May 18, 2020 No. 304-ES20-1243, Chapter 26.2 of the Tax Code of the Russian Federation[14] does not contain provisions that would limit the taxpayer’s ability to take into account the costs of acquiring fixed assets sold before the expiration of the term beneficial use. If a taxpayer uses the simplified tax system to sell an asset that he purchased and used under a different taxation regime, then he can still take into account the costs of acquiring the fixed assets within the simplified tax system. But this can not be done in full, but in the amount of the residual value - the difference between the purchase price of the object and depreciation for the period of application of a different taxation regime (general or UTII). Consequently, significant amounts of fixed assets will not be lost when calculating the simplified tax system, which is beneficial for the taxpayer.

The review also mentions other disputes, in particular:

- the tax authority, if the taxpayer did not prove the fact of destruction of excisable goods declared by him, reasonably qualified the destruction of products as a shortage indicating its sale, and accrued an excise tax arrears to the taxpayer (Resolution of the Constitutional Court of the Russian Federation dated April 29, 2020 No. 22-P[15]). Conclusion: to confirm that you are right, you must firmly prove the fact of destruction of the goods in order to avoid additional taxes;

— entering into a relationship with an economic entity that has economic resources sufficient to execute a transaction independently or with the involvement of third parties, the presentation by such entity of accounting and tax reporting reflecting the availability of these resources gives a reasonably acting taxpayer-buyer reason to expect that the transaction by this counterparty will be executed properly, and taxes upon its completion were paid to the budget. In such a situation, it is assumed that the choice of the counterparty met the conditions of business transactions, until otherwise is proven by the tax authority (Decision of the Supreme Court of the Russian Federation dated May 28, 2020 No. 305-ES19-16064 in case No. A40-23565/2018[16]). Based on these criteria, taxpayers will be able to select counterparties with due diligence and avoid unnecessary questions from the tax authorities.

Thus, we reviewed the most significant decisions of the Supreme Arbitration Court and the Constitutional Court of the Russian Federation on tax disputes for the second quarter of 2020. We remind you that if controversial or ambiguous situations arise, specialists from the Russian Ministry of Finance recommend that tax authorities be guided by established arbitration practice. This approach is reflected in Letter No. 03-01-13/01/47571 dated November 7, 2013[17]. Therefore, it is important for taxpayers to monitor decisions of higher courts in order to be aware of the current legal position.

[1] Letter of the Federal Tax Service of Russia dated July 28, 2020 No. BV-4-7/12120 “On the direction of the review of legal positions reflected in judicial acts of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation, adopted in the second quarter of 2021 on taxation issues” { Consultant Plus}.

[2] Determination of the Judicial Collegium for Economic Disputes of the Supreme Court of the Russian Federation dated May 14, 2020 No. 307-ES19-27597 in case No. A42-7695/2017 {ConsultantPlus}.

[3] Determination of the Judicial Collegium for Economic Disputes of the Supreme Court of the Russian Federation dated June 16, 2020 No. 307-ES19-23989 in case No. A56-60671/2019 {ConsultantPlus}.

[4] Art. 21 of the Tax Code of the Russian Federation (part one) dated July 31, 1998 No. 146-FZ (as amended on July 20, 2020) {ConsultantPlus}.

[5] Resolution of the Constitutional Court of the Russian Federation dated June 30, 2020 No. 31-P “In the case of verifying the constitutionality of the provisions of subparagraph 12 of paragraph 1 and paragraph 3 of Article 164, as well as paragraph 14 of Article 165 of the Tax Code of the Russian Federation in connection with the complaint of the company Gazprom Neft Trading GmbH" {ConsultantPlus}.

[6] Art. 164 of the Tax Code of the Russian Federation (part two) dated 08/05/2000 No. 117-FZ (as amended on 07/31/2020) {ConsultantPlus}.

[7] Art. 164 of the Tax Code of the Russian Federation (part two) dated 08/05/2000 No. 117-FZ (as amended on 07/31/2020) {ConsultantPlus}.

[8] Art. 165 of the Tax Code of the Russian Federation (part two) dated 08/05/2000 No. 117-FZ (as amended on 07/31/2020) {ConsultantPlus}.

[9] Constitution of the Russian Federation (adopted by popular vote on 12/12/1993 with amendments approved during the all-Russian vote on 07/01/2020) {ConsultantPlus}.

[10] Art. 176 of the Tax Code of the Russian Federation (part two) dated 08/05/2000 No. 117-FZ (as amended on 07/31/2020) {ConsultantPlus}.

[11] Ch. 12 of the Tax Code of the Russian Federation (part one) dated July 31, 1998 No. 146-FZ (as amended on July 20, 2020) {ConsultantPlus}.

[12] Determination of the Constitutional Court of the Russian Federation dated March 26, 2020 No. 543-O {ConsultantPlus}.

[13] Determination of the Judicial Collegium for Economic Disputes of the Supreme Court of the Russian Federation dated May 18, 2020 No. 304-ES20-1243 in case No. A70-829/2019 {ConsultantPlus}.

[14] Ch. 26.2 of the Tax Code of the Russian Federation (part two) dated 08/05/2000 No. 117-FZ (as amended on 07/31/2020) {ConsultantPlus}.

[15] Resolution of the Constitutional Court of the Russian Federation dated April 29, 2020 No. 22-P “In the case of verifying the constitutionality of paragraph 1 of Article 193 and paragraph 4 of Article 195 of the Tax Code of the Russian Federation, as well as paragraph 5 of Article 20 of the Federal Law “On State Regulation of Production and Turnover” ethyl alcohol, alcoholic and alcohol-containing products and on limiting the consumption (drinking) of alcoholic products" in connection with a complaint from the limited liability company "Center-Product" {ConsultantPlus}.

[16] Determination of the Judicial Collegium for Economic Disputes of the Supreme Court of the Russian Federation dated May 28, 2020 No. 305-ES19-16064 in case No. A40-23565/2018 {ConsultantPlus}.

[17] Letter of the Federal Tax Service of Russia dated November 26, 2013 No. GD-4-3/21097 “On sending a letter to the Ministry of Finance of Russia” (together with Letter of the Ministry of Finance of Russia dated November 7, 2013 No. 03-01-13/01/47571 “On the formation of a unified law enforcement practices") {ConsultantPlus}.

Interest from 12th day

The Federal Antimonopoly Service of the North-Western District, in its resolution dated January 16, 2015 No. A66-5686/2014, agreed with the taxpayer’s claims to collect interest for late VAT refund starting from the 12th day inclusive after the end of the desk audit. The Federal Tax Service, for its part, did not agree with these requirements, believing that interest should be calculated only from the date of entry into force of the court decision, which overturned the decision to refuse VAT refund.

The courts of three instances, when considering the case on the collection of interest, referred to the explanations contained in the resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated May 30, 2014 No. 33. In particular, paragraph 29 of this resolution states that even in the case when the decision on VAT refund is not made in the allotted period (3 months from the beginning of the desk audit), the accrual of interest still begins from the day specified in clause 10 of Art. 176 of the Tax Code.

Thus, the act based on the results of the desk audit was drawn up in July 2012, and the court decision to cancel the tax authorities’ decision to refuse compensation, adopted based on the results of the said audit, came into force at the beginning of 2014. It turns out that the tax office illegally decided not to calculate or pay interest for almost a year and a half. The Federal Antimonopoly Service of the North-Western District dotted all the i's, and the tax office had to pay the interest in full

What can you do to protect yourself before criminal proceedings are initiated?

A special feature of VAT refund cases is the opportunity to organize a defense even before the initiation of a criminal case. It must be taken into account that all materials that will be collected during the tax audit

, in case of signs of illegal compensation will be transferred to law enforcement agencies, and will subsequently
become the basis of a criminal case
.
Therefore, at the inspection stage, you must be prepared that the directors of the entire chain of legal entities will be called to the tax office for clarification.
persons whose testimony will be significant for the case. It is necessary to analyze the questions that were voiced during interrogations to determine the “weak points” in the taxpayer’s position, and take measures to strengthen it by providing additional documents or explanations.

As already indicated, a decision to refuse a VAT refund and to bring the company to tax liability may serve as the basis for initiating a criminal case. However, criminal cases in the presence of a decision of the arbitration court to cancel the decision to refuse VAT refund have no criminal-judicial prospects

. A judicial act that has entered into force is binding on all organizations and government bodies, including law enforcement. Accordingly, if you challenge the refusal to refund VAT in arbitration court and win this case, then you will have concrete evidence that VAT is refunded legally.

Before applying to arbitration, it is mandatory to go through the pre-trial dispute resolution procedures provided for by the Tax Code - submit reasoned objections to the tax audit report, appeal the decision to refuse a VAT refund. These actions themselves sometimes bring the desired result.

, and may exclude grounds for initiating criminal proceedings.

The involvement of professional lawyers when drawing up an act and challenging a decision is naturally mandatory.

Tax on bonuses and penalties

Resolution of the 13th Arbitration Court of Appeal dated January 23, 2015 No. 13AP-27869/2014 refuted the arguments of the inspectors that value added tax should be charged on bonuses provided by the supplier. Based on the results of the on-site audit, additional VAT was assessed to the taxpayer, and penalties and a fine were collected from him for late and incomplete payment of the additional tax. According to fiscal officials, bonuses provided to an enterprise under a dealer agreement are equivalent to a trade discount.

In accordance with the findings of the inspectors, the company unlawfully used deductions from the amount of bonuses, while it should have restored the amount of VAT and paid tax to the budget. The taxpayer did not agree with these conclusions and went to court.

The appellate court supported the conclusions of the Arbitration Court of St. Petersburg and the Leningrad Region that bonuses are not a trade discount on the price of goods. Bonuses are a kind of marketing expense for the supplier.

Once again, the court confirmed the illegality of charging VAT on the amount of the penalty accrued for improper fulfillment of obligations (Resolution of the Volga District Court of April 3, 2015 No. F06-22340/2013).

Disputes with tax authorities in court, verification of the counterparty

30.08.2018

The tax authority established the fact that the LLC was carrying out activities with a high tax risk and understating the tax base by claiming tax deductions for VAT. How to protect yourself?

One of the common problems of VAT payer organizations continues to be proving the validity of the calculation of tax deductions for VAT and the absence of facts of understatement of the tax base.

What measures need to be taken to ensure that an organization can easily receive VAT tax deductions from relationships with counterparties?

On this issue, the Federal Tax Service of the Russian Federation has developed a concept for a planning system for on-site tax audits, approved by Order No. MM-3-06/333 dated May 3, 2007. The concept contains theses directly related to the planning system for on-site tax audits. A comprehensive analysis of the concept, taking into account the provisions of the Tax Code of the Russian Federation, allows taxpayers to develop and implement an internal tax risk management system.

Thus, when assessing tax risks that may be associated with the nature of relationships with certain counterparties, the taxpayer is recommended to examine the following signs:

• lack of personal contacts between the management (authorized officials) of the supplier company and the management (authorized officials) of the buyer company when discussing the terms of delivery, as well as when signing contracts;
• lack of documentary evidence of the authority of the manager and/or his representative of the counterparty company, copies of his identity document;
• lack of information about the actual location of the counterparty, as well as the location of warehouse and/or production and/or retail space;
• lack of information about the method of obtaining information about the counterparty (no advertising in the media, no recommendations from partners or other persons, no website of the counterparty, etc.). Moreover, the negativity of this attribute is aggravated by the presence of available information (for example, in the media, outdoor advertising, Internet sites, etc.) about other market participants (including manufacturers) of identical (similar) goods (works, services), including number of those offering their goods (works, services) at lower prices;
• lack of information about the state registration of the counterparty in the Unified State Register of Legal Entities (public access, official website of the Federal Tax Service of Russia www.nalog.ru).

The presence of such signs indicates a high degree of risk of classifying such a counterparty by the tax authorities as problematic (or “fly-by-night”), and transactions made with such a counterparty are questionable.

The simultaneous presence of the following circumstances further increases such risks:

• a counterparty having the above characteristics acts as an intermediary;
• the presence in contracts of conditions that differ from the existing rules (customs) of business transactions (for example, long deferred payments, delivery of large quantities of goods without advance payment or guarantee of payment, incommensurable with the consequences of violation of contracts by the parties with penalties, settlements through third parties, settlements with bills, etc.); P.);
• absence of obvious evidence (for example, copies of documents confirming that the counterparty has production facilities, necessary licenses, qualified personnel, property, etc.) of the possibility of the counterparty actually fulfilling the terms of the agreement, as well as the existence of reasonable doubts about the possibility of the counterparty actually fulfilling the terms of the agreement, taking into account the time required for delivery or production of goods, performance of work or provision of services;
• acquisition through intermediaries of goods, the production and procurement of which are traditionally carried out by individuals who are not entrepreneurs (agricultural products, secondary raw materials (including scrap metal), craft products, etc.);
• absence of real actions by the payer (or his counterparty) to collect the debt. An increase in the debt of the payer (or its counterparty) against the backdrop of continued delivery of large quantities of goods or significant volumes of work (services) to the debtor;
• issuance, purchase/sale by counterparties of bills of exchange, the liquidity of which is not obvious or has not been investigated, as well as issuance/receipt of loans without collateral. At the same time, the negativity of this attribute is aggravated by the absence of conditions on interest on debt obligations of any type, as well as the repayment terms of these debt obligations for more than three years;
• a significant share of the costs of a transaction with “problem” counterparties in the total amount of expenses of the taxpayer, while there is no economic justification for the feasibility of such a transaction and at the same time there is no positive economic effect from its implementation, etc.

Often, it is not possible to thoroughly check the counterparty due to its territorial remoteness. In some cases, one of the parties to the transaction, the one most interested in its completion, deliberately ignores checking the above criteria, or conducts the check superficially, which inevitably leads to dire consequences and proceedings with the tax authorities. That is why the correct formulation of the procedure for assessing the counterparty is a key factor in ensuring that there are no questions from the tax authorities in the future.

It is worth noting that judicial practice in such situations, in the vast majority of cases, is not in favor of the taxpayer. An analysis of judicial practice also allows us to conclude that the above-mentioned signs of activities with a high tax risk are not equal in importance, and each time the court evaluates precisely the totality of factors in their interrelation. Therefore, a correctly prepared legal position of the taxpayer is crucial.

The lawyers of Aval Group of Companies will help you in a controversial situation with the tax authorities in court, and will also help you identify potential risks in transactions with new counterparties.

Check the relevance of the information with the specialists of AVAL Group by phone (343) 222-10-20

Absence of primary documents with expired storage period

The AS of the North-Western District, by its resolution dated 06/04/2015 No. F07-9006/2014, confirmed the correctness of the tax service’s conclusions that VAT cannot be deducted on transactions that are not confirmed by primary documents.

In accordance with paragraph 1 of Art. 172 of the Tax Code, to confirm the right to a tax deduction, the taxpayer must submit primary documents confirming the costs incurred. The enterprise, challenging the act, referred to the fact that the amounts requested for 2003–2004. the documents were destroyed due to the expiration of the storage period.

Despite the fact that the audit covered only 2 years - 2010 and 2011, the inspectors required such old documents. And all because the object of taxation was long-term construction. The commissioning and registration of the property took place in 2011, although the construction itself began in 2004. Five-year storage period for documents for 2003–2004. the taxpayer's tax credits have expired by the time the right to use tax deductions becomes available. However, the court considered that it was in the interests of the taxpayer to preserve all the necessary documents, since in order to confirm his right to a deduction, he must comply with the requirements contained in Art. 172 NK.

Three years after the goods are accepted for accounting, VAT deduction will not be given

Delay in VAT deduction is one of the most common causes of litigation. Note that it will not be possible to win a court case with an inspection if a delay is established.

In this case, the company overstated deductions in the third quarter of 2015 on invoices issued by the seller in September and October 2011.

The inspectorate removed them and assessed additional taxes. The company went to court, citing the fact that it received the results of the work only during the disputed period.

However, the courts of three instances refused her request. The right to deduction, limited to three years, expired in September and October 2014. At the time of filing the VAT return for the third quarter of 2015, the company no longer had this right. The moment of presentation of VAT for deduction occurs during the period of transactions for the acquisition of works.

But what about the acceptance of the results of the work?

The judges indicated that if the facility was not completed in 2011, the company could apply deductions during its construction, as acceptance certificates were signed and invoices were received. So the delay in deduction was due to an omission by the company.

The Supreme Court of the Russian Federation agreed (Determination of February 25, 2021 No. 307-ES19-28236).

Absence of seized primary documents

In another situation, the court sided with the taxpayer, canceling the tax authority’s decision to charge additional VAT due to failure to submit primary documents. The Federal Antimonopoly Service of the North-Western District, in its decision dated December 22, 2014 in case No. A56-59616/2013, considered the taxpayer’s arguments to be correct.

According to the judges, the taxpayer was unable to timely submit documents confirming his right to a tax deduction due to circumstances beyond his control. These, in particular, include the seizure by law enforcement agencies of primary accounting documents during the investigation of a criminal case against the head of an enterprise.

Expiration of the 3-year period for claiming deductions

Based on the results of a desk audit after filing an updated tax return, which indicated the amount of VAT to be refunded, the taxpayer was denied a refund. The reason for the refusal was the expiration of the 3-year period during which the taxpayer had the right to take advantage of deductions.

The Thirteenth Arbitration Court of Appeal, in its decision dated December 16, 2014 No. 13AP-24523/2014, overturned the decision of the trial court and sided with the tax authorities. The decision of the court of appeal was supported by the cassation court (resolution of the Arbitration Court of the North-Western District dated April 24, 2015 No. F07-1171/2015). The opinion of the judges agreed with the opinion of the fiscal authorities that the enterprise had missed the deadline for the right to deductions based on the amounts issued in 2006–2009. invoices.

And even more: according to the judges and the tax office, the enterprise never had the right to deductions due to the fact that payments to suppliers and contractors for the operations under study were made entirely from budgetary allocations. The taxpayer’s arguments regarding the fact that the registration of an increase in the authorized capital by an amount equal to the previously received budgetary allocations should be considered the start date for the right to deduction were rejected.

Confirmation of the correctness of the court of appeal is also contained in the ruling of the Supreme Arbitration Court of the Russian Federation dated May 28, 2014 No. VAS-3014/14, which states that in Ch. 21 of the Tax Code there is no such rule that would give an enterprise that is a recipient of budget investments the right to deduct, after state registration, changes in the charter in connection with an increase in the capital.

In another situation, the court was on the side of the taxpayer, supporting his right to deduct VAT in installments on one invoice related to the supply of real estate, within a 3-year period from the date of acceptance of the property for registration (Resolution of the Volga Region Autonomous District Court dated June 10, 2015 No. A12 -38088/2014).

Judicial practice on the application of tax deductions for VAT

Judicial practice on the issue of applying tax deductions for value added tax, as well as calculating income tax The Company applied to the Arbitration Court with an application to invalidate the decision of the tax authority in terms of bringing to liability provided for in paragraph 1 of Article 122 of the Tax Code of the Russian Federation (hereinafter - Code), in the form of a fine, the accrual of value added tax (hereinafter referred to as VAT) and income tax, as well as penalties for late payment of taxes.

The contested decision was made based on the results of an on-site tax audit, during which facts were established of unfounded claims for reimbursement from the budget of VAT amounts paid to suppliers.

The tax authority believes that the company did not have the right to deduct VAT, since the documents received by the tax authority as a result of control activities indicate the fictitiousness of transactions concluded between the taxpayer and organizations, the focus of their actions on obtaining tax benefits and the creation of a situation of formal existence of the right to reimbursement from the VAT budget.