On-site inspection of the “simplified”
The basis for conducting an on-site tax audit, as a rule, is the need to make sure that the taxpayer has the right to use the simplified tax system, that is, complies with all the requirements established for “simplified tax”, and also that he correctly calculates the simplified tax.
Potential auditees are those “simplified” who have been declaring unprofitable activities for many years, or those who are often transferred from one Federal Tax Service Inspectorate to another. Find out who can apply the simplified tax system from the publication.
On-site inspection on the basis of clause 8 of Art. 89 of the Tax Code begins from the day when the tax authority made a corresponding decision to conduct an audit. The inspection lasts up to 2 months, although in some cases this period can be extended to 4–6 months (Clause 6 of Article 89 of the Tax Code of the Russian Federation). All grounds for extending the inspection are mentioned in clause 4 of Appendix 2 to the Federal Tax Service order dated December 25, 2006 No. SAE3-06/ [email protected]
Read about the procedure for extending an audit in our article “How and when an on-site tax audit can be extended .
The audit may cover all activities of the taxpayer over the last 3 years. All documents available to him are checked, including accounting ones, because since 2013, “simplified” legal entities have an obligation to keep accounting records. If necessary, during the audit, an inventory, inspection, seizure of documents and other special tax control activities may be carried out.
Based on the results of the inspection, a certificate is issued, and after 2 months - a report (Clause 1 of Article 100 of the Tax Code of the Russian Federation).
ATTENTION! In connection with the coronavirus pandemic, Prime Minister M. Mishustin instructed to suspend all on-site tax audits until May 1, 2020 (instruction of the Government of the Russian Federation dated March 18, 2020).
Procedure for conducting a desk tax audit
For failure to submit documents within the specified period, the tax inspectorate may fine the organization in the amount of 200 rubles. for each unsubmitted document in accordance with clause 1 of Article 126 of the Tax Code of the Russian Federation, or bring to administrative responsibility in accordance with Art. 15.6 Code of Administrative Offenses of the Russian Federation.
Conducting a desk tax audit? This is an event aimed at tax control of an organization or individual entrepreneur. The main goal that a desk audit of an LLC or individual entrepreneur sets for itself is? find out whether the taxpayer complies with tax laws.
Desk check on the simplified tax system
Conducting a desk audit is regulated by Art. 88 Tax Code. The audit is carried out by tax inspectors without visiting the taxpayer. Sometimes the taxpayer may not even know about such an audit until the inspectors require explanations or documents explaining the unclear points identified in the declaration.
Find out what reports a simplified student must submit in 2021 here.
If, as a result of an audit, violations of tax legislation are revealed, the inspectors draw up a report within 10 days after its completion. This procedure is specified in paragraph 1 of Art. 100 Tax Code.
Desk and on-site audits can be combined in terms of time: during a desk audit, the reports submitted by the taxpayer for the current year are examined, and during an on-site audit, for a longer period, and there may be broader grounds for its appointment. The possibility of carrying out 2 types of inspection simultaneously is indicated in the letter of the Federal Tax Service dated March 13, 2014 No. ED-4-2/4529.
The criteria by which tax authorities check a declaration under the simplified tax system are discussed in detail in the expert opinion of ConsultantPlus. Get trial access to the system and start learning the material for free.
What documents may tax authorities require when checking a declaration under the simplified tax system?
— What documents can inspectors request when checking a declaration?
— There are two groups of papers that a taxpayer may be asked to submit. The first group is documents confirming certain information . Their list is strictly limited by the Tax Code of the Russian Federation. In particular, this includes papers justifying tax benefits (clause 6 of Article 88 of the Tax Code of the Russian Federation). As well as documents that must be attached to the declaration in accordance with the Tax Code of the Russian Federation, if they have not been submitted (clause 7 of Article 88 of the Tax Code of the Russian Federation and clause 2.1 of the Procedure for filling out a declaration under the simplified tax system, approved by order of the Ministry of Finance of Russia dated June 22, 2009 No. 58n). For example, if the declaration was signed by a representative of an organization or entrepreneur, then along with it you must submit to the inspection a copy of the power of attorney confirming the authority of this representative (paragraph 3, paragraph 5, article 80 of the Tax Code of the Russian Federation). As for the Book of Income and Expenses, bills of lading, invoices, acts and other primary documents, the Tax Code of the Russian Federation does not require them to be submitted to the Federal Tax Service along with the declaration.
The second group is written explanations . Tax authorities may require them if the declaration under the simplified tax system contains errors or contradictions between the information contained by the inspectors themselves. And also if the controllers received a simplified declaration in which a loss was declared. Or an updated declaration with the amount of tax to be reduced (clause 3 of Article 88 of the Tax Code of the Russian Federation).1
In addition, tax officials may call you to give oral explanations. In this case, you should appear at the Federal Tax Service within the time specified in the notice of summons.
— How should explanations be formatted? Is there any unified form for this?
— No, there is no unified form. Explanations should be made in any form.
— What data needs to be reflected in the explanation of a loss?
— The explanation of the loss should set out the specific reasons for which it arose. Thus, newly created companies can justify the loss by starting operations and high expenses for the purchase of equipment, raw materials, advertising, etc. Entities that have been on the market for several years - mastering production, modernizing equipment and reconstructing premises. Also, the reduction in revenue can be explained by a decrease in the volume of orders, lower prices, etc. In general, everything here is quite individual.
If a specific cause of losses cannot be identified (for example, when it is associated with a general increase in costs), then it is better to provide an item-by-item analysis of costs with a breakdown in the explanation.
In addition, if desired, the explanation can be noted that the loss is a temporary phenomenon, and the company will take certain measures to eliminate it.2
— What to do if inspectors find errors in the declaration under the simplified tax system?
“In such a situation, you should carefully study the inspectors’ requirement and double-check the calculation again. If an error led to an underpayment of “simplified” tax, you need to prepare an explanation with the correct calculation of the amounts. And submit an updated declaration.
If the error did not result in an underpayment or is not related to the payment of tax, an explanation should be provided. It is up to you to decide whether to file an amended tax return in case of excessive tax assessment (Clause 1, Article 81 of the Tax Code of the Russian Federation).
If there is no error, then write in the explanation that the declaration was drawn up correctly and there are no errors.
—The declaration under the simplified tax system indicates a small profit. And in the financial results report there was a loss, because last year they wrote off accounts receivable as expenses, but they are not taken into account in taxation as expenses, only in accounting. How can I explain this discrepancy to the tax authorities?
— So write that in accounting they wrote off bad receivables, while these amounts cannot be attributed to expenses during the “simplification”.
— Do I need to confirm my conclusions in the explanations with any documents?
— Firms and individual entrepreneurs decide independently whether to confirm explanations with documents or not (clause 4 of Article 88 of the Tax Code of the Russian Federation).
Of course, it is better to substantiate all conclusions so as not to be unfounded. To do this, you can attach to the explanations extracts from the accounting and tax registers under the simplified tax system and other documents (copies of contracts, bills).
Read more: Correction of an error in the arbitration court’s determination
— When should documents and explanations be sent to the inspectorate?
- Documents required by tax authorities within 10 days, and explanations - within five days from the moment they received the request (clause 3 of Article 93 and clause 3 of Article 88 of the Tax Code of the Russian Federation).
Features of checking the simplified tax system 6%
Those who apply the simplified tax system at a rate of 15% must be prepared to document both their income and their expenses. As for conducting an on-site audit of taxpayers who have chosen a simplified taxation system with the object “income,” the inspectors may also request expense documents from them. First of all, you will need documents confirming the payment of insurance premiums, because they have a direct impact on the calculation of tax.
Which insurance premiums reduce the simplified tax, see the material “Single Tax under the Simplified Taxation System (STS)”.
If a “simplified person” (6%) pays a trade fee for one of several types of activity, he can take the paid fee into account when calculating the simplified tax system if he organizes separate accounting of income and the simplified tax system for the type of activity for which the trade fee is paid. The presence of such accounting is also under the close attention of tax authorities when checking the “simplified tax”.
The article “How to calculate the trading fee for individual entrepreneurs?” will help you calculate the amount of the trading fee..
Also, documents on expenses may be needed in case of checking the correctness of the accrual and withholding of personal income tax, if the simplifier acts as a tax agent.
For more information about what you need to know about accounting in the simplified tax system with the taxable object “income”, read our article “USN “income” in 2019-2020 (6 percent): what do you need to know?” .
Table. What documents may be requested by tax authorities checking a declaration under the simplified tax system?
Type of papers
When they may require
How to apply
Documents confirming benefits
As a general rule, inspectors request these papers if there are tax benefits, but documents confirming them are not presented along with the declaration. However, “simplified” people do not have special benefits for the single tax under the simplified tax system. Therefore, there is nothing to confirm. In practice, as a benefit, some Federal Tax Service Inspectors are considering the possibility of “simplified” income earners to reduce the single tax under the simplified tax system on insurance premiums. And they require receipts confirming the payment of these fees. Therefore, if such a request has been received, send the appropriate payment orders to the inspectors (Clause 6 of Article 88 of the Tax Code of the Russian Federation)
Read more: Conversion rate from working days to calendar days
You can make a cover letter (inventory) where you list all the papers being sent
Documents that must be attached to the declaration in accordance with the Tax Code of the Russian Federation
In some cases, the Tax Code of the Russian Federation obliges payers to attach certain documents to the declaration. For example, if the declaration was signed by a representative of a simplified person, then you need to attach to the calculation a copy of the power of attorney confirming the person’s authority. Accordingly, if there is no copy, the tax authorities will request it (clause 6 of Article 88 and paragraph 3 of clause 5 of Article 80 of the Tax Code of the Russian Federation)
Inspectors can ask for clarification in three cases: 1) if errors are found in the declaration or contradictions between the information that the inspectors have; 2) a loss is declared in the declaration under the simplified tax system; 3) a “clarification” is presented with the amount of the single tax under the simplified tax system to be reduced (clause 3 of article 88 of the Tax Code of the Russian Federation)
Explanations must be made in writing. Form - free
Desk control is carried out in accordance with Article 88 of the Tax Code of the Russian Federation on a regular basis, as a rule, for 3 months after submission of documentation. At the same time, the entrepreneur himself may not even know that some kind of inspection is being carried out against him, since it does not involve a special procedure or a separate delivery of notification. The Federal Tax Service of the Russian Federation traditionally studies the documents it already has for a specific person, and also checks the recently submitted declaration, etc.
Tax audits of simplified people and new art. 54.1 Tax Code of the Russian Federation: what to pay attention to
Art. 54.1 appeared in the Tax Code of the Russian Federation quite recently (introduced by law dated July 18, 2017 No. 163-FZ) and is devoted to issues of unjustified tax benefits.
You will become familiar with the concept of “unjustified tax benefit” in the material “Presumption of good faith of the taxpayer - a new article in the Tax Code of the Russian Federation” .
When conducting desk and field audits, controllers will collect evidence of the reality of transactions, and will also look with particular scrupulousness for evidence of deliberate tax evasion.
For example, a “simplifier” may be suspected of deliberate tax evasion if he fragmented his business solely for one purpose - to reduce the tax burden through the use of special tax regimes. The controllers themselves directly indicate this in their letter No. ED-4-2/13650 dated July 13, 2017 (clause 13.2 of the Methodological Recommendations for establishing, during tax and procedural audits, circumstances indicating intent in the actions of taxpayer officials aimed at non-payment of taxes ).
Get free trial access to ConsultantPlus and find out 17 criteria for assessing business fragmentation, which tax authorities focus on when conducting an audit.
Thus, a “simplifier” needs to be ready to prove a reasonable business purpose for his actions (for example, the purpose of splitting up a business), as well as take care of documentary support for the reality of his transactions, confirm due diligence when choosing counterparties, etc.
Desk tax audit
The taxpayer has the right, guided by Art. 81 of the Tax Code of the Russian Federation, submit a declaration in which tax obligations can be either increased or decreased. This may be a reduction in tax from the budget due to the use of tax deductions or an increase in expenses. There may be correction of errors and reduction of deductions, respectively, increasing the amount paid to the budget. The Tax Code of the Russian Federation does not establish a restriction on the submission of updated declarations, nor does the number of updated declarations for one period.
The peculiarity is that a desk tax audit is carried out only on the basis of documents submitted to the tax authority. But if there is no reporting, is it possible to conduct a desk audit? The fact is that during a desk audit they check, among other things, the provision of reports. The tax authority’s database indicates within what time frame and what kind of reporting must be submitted by each taxpayer.
Results
Checks of simplified tax authorities are not much different from checks of taxpayers working under the general taxation system. The exception is that there are fewer reasons for conducting a tax audit of the activities of businessmen using the simplified tax system.
All information about tax audits is contained in our “Tax Audits” .
Usually, if tax inspectors do not have any questions regarding the declaration, then an audit should not be expected. Nevertheless, you should carefully maintain accounting and tax records and store all documentation, because the decision to conduct a desk audit is executed by inspectors immediately, without prior notification to the taxpayer, and the audit period during an on-site audit covers 3 years.
Sources:
- Tax Code of the Russian Federation
- order of the Government of the Russian Federation dated March 18, 2020
You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.
Tax risk criteria
For all individual entrepreneurs and LLCs
- Low tax burden. It is calculated using a simple formula: the amount of taxes paid is divided by revenue and multiplied by 100%.
The obtained result is compared with the average for a specific industry. This data can be found in the public domain on the tax website. If the result is noticeably lower than the industry average, then you are one step closer to a tax audit. For example, you have a small hotel. During the year, we earned 1,200,000 rubles and paid 140,000 in taxes. Tax burden = (140000/1200000)*100% = 11.6%. This is higher than the average tax burden for the hotel business: it is 9.5%. So there is nothing to worry about. - Ignoring requests from tax authorities. If, during a desk audit, the tax office identifies errors in reporting or finds contradictions in the submitted documents, it sends a request to the company. According to the regulations, a response or explanation is sent to the supervisory authority within 5 working days. If a company doesn't respond, it may no longer exist. To find out if this is so, the tax office initiates an on-site audit.
- Repeated “movement” of the taxpayer between tax authorities. This applies to companies that change their location twice during a calendar year. Tax authorities interpret a change of address as a desire to avoid audits.
- Employee salaries are below the industry average in your region. Industry average data can be viewed on the Rosstat website. Why is this factor so important? It may mean that the company pays part of the salary in an envelope, therefore saving on taxes and contributions for employees.
- Repeatedly approaching the indicators of companies operating under special regimes to their maximum values. This criterion is valid for companies and individual entrepreneurs in special regimes: simplified tax system, UTII and unified agricultural tax.
If a company approaches the limit values by less than 5% at least a couple of times during the year, this is a reason for the tax authorities to take a closer look at the company’s activities. The limit values for the special regimes of the simplified tax system and UTII are specified in Art. 346.12, 346.13 and 346.26 of the Tax Code of the Russian Federation. We cited them in articles about the simplified tax system and UTII. For example, a company pays the Unified Agricultural Tax tax. It must receive at least 70% of its income from agricultural activities. Throughout the year, her income remains at 70-75%. The tax office suspects that the company has already lost the right to apply the regime and is understating its income from other activities. The inspector checks it according to other criteria and discovers that the employees’ salaries are below the industry average, or rather, all of them according to the minimum wage. He calculates possible additional charges and provides a verification plan to the manager. There is a knock on the door at the entrepreneur's office.
For the simplified tax system “Income minus expenses” and OSNO
- Reflection of losses in financial statements over several tax periods. The critical indicator is two or more calendar years. The supervisory authority may get the impression that this is being done artificially in order to avoid paying taxes. - only for foundation and additional expenses
- The growth rate of expenses exceeds that of income. What’s criminal about this, the entrepreneur asks? And there are plenty of reasons for suspicion: after all, there are ways to deliberately inflate expenses or reduce income. And all this with the goal of paying less taxes. If your expenses are growing, be prepared for the tax office to send a letter demanding clarification.
- The amounts of expenses are almost equal to the amounts of income received during the calendar year. This point applies to individual entrepreneurs. It is a signal that if the amount of expenses is as close as possible to the amount of income, tax authorities have every reason to believe that the entrepreneur is adjusting the amount to reduce the amount of tax. - again for expenses
For VAT payers
- Reflection in reporting of significant amounts of tax deductions for VAT. According to this criterion, companies operating on the common taxation system (OSNO) are checked. Why is it so important? Sometimes entrepreneurs abuse fictitious transactions with suppliers of goods and services in order to increase the size of the deduction. An alarming figure is 89% or more; the tax office has every reason to start an audit.
- Building activities through concluding agreements with a chain of counterparties without reasonable economic or other reasons. In other words, a company that operates in a chain of interconnected suppliers and buyers and spends fairly large sums of money has all the signs of a fly-by-night company. They are listed in more detail in the Resolution of the Plenum of the Supreme Arbitration Court of Russia dated October 12, 2006 No. 53.
- Conducting activities with high tax risks. The tax authority divides payers into three categories: low, medium and high risks.
High risk means that the company is similar to a fly-by-night company: perhaps it is involved in schemes to reduce VAT. The tax authorities provide the criteria on the website, in paragraph 12 of Appendix No. 2. Among them, for example, a lack of information about the company and the manager’s refusal to communicate. Dealing with problematic counterparties is also bad. The tax office will suspect that you are participating in the schemes. Therefore, check the company before making a deal.
Only for OSNO
- Low level of profitability. Relevant for companies on OSNO. For control, indicators of return on sales and assets for the industry are taken. If they are 10 percent or more lower, the tax office suspects a deliberate understatement of income. The calculation of profitability for different types of OKVED is specified in Appendix No. 4 to the Order of the Federal Tax Service of Russia dated May 30, 2007 N MM-3-06/ [email protected]
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