VAT tax gap: what is it?
Several information resources are currently analyzing VAT “gaps”, the presence of tax evasion schemes, the level of tax burden, and other similar issues: ASK VAT (the 4th version is being tested), analytical resources FIR “information from the Bank of Russia”, FIR “transfer price", FIR Unified State Register of Legal Entities, FIR "customs", PC "PPA Selection". Sometimes the information resource “Superanalyst” is used, which studies the database of bank statements.
Fiscal officials pay special attention to “gaps” in VAT. We are talking about situations when the buyer has an invoice in the purchase book, but at the same time it is not in the seller’s sales book. This means that the buyer received a tax deduction due to the fact that the seller had to make contributions to the budget. But at the same time, the seller did not pay anything to the treasury.
Such “gaps” are called “straight”.
But the tax authorities pay the closest attention to the so-called “complex gaps”, when the taxpayer and his counterparty of the first “link” have invoices and VAT amounts reflected in their reports correctly, but the “gap”, and therefore the failure to pay VAT, occurs at 3-5 or further links. As a rule, such “gaps” indicate deliberate “schemes” for non-payment of VAT, which involve various “platforms” that manage “one-day companies”, and sometimes employees of the Federal Tax Service and banks. The fight against such schemes is one of the policy priorities of the Federal Tax Service of Russia, therefore organizations with complex gaps immediately fall under special control not only of their inspectorate, but also of the regional Office of the Federal Tax Service of Russia.
The mentioned databases find discrepancies, and then, as a rule, at the level of the regional Office of the Federal Tax Service of Russia, lists of organizations that have identified VAT “gaps” are prepared. These lists are sent to local Inspections, which formulate Requirements for the submission of relevant documents and call Taxpayers to provide explanations.
Checking the entire chain
Returning to our example: if Sigma did not submit a declaration or did not reflect Gamma in it, then the tax authority has the right to check any company from this chain, even Alpha. Request documents regarding the transaction with Beta. After all, if in the chain there is a technical company that provides fictitious services, then there is also a customer of this service (beneficiary) who is trying to evade paying taxes, and for the tax inspectorate the target is precisely him, in order to recover missing payments from him to the budget .
Often, conscientious companies that carry out completely legal financial and economic activities and do not suspect that one of their “neighbors” is engaged in fraud are also caught in the chains. If your organization has received a request from the tax authority to provide documents or to summon a company official for questioning on a similar issue, do not be afraid. It is necessary to urgently contact the counterparties for whom the demand was sent, request from them the declarations that they submitted (book of purchases or sales) to make sure that you are reflected in the declaration, prepare all the documentation for the transaction and appear at the inspection. It is now pointless to check counterparties before making a transaction. “Dealers” skillfully disguise their activities and any verification system shows that the light is green. Moreover, you can only check your counterparty, and with whom he works, you will never know.
If, after a visit to the inspectorate, it is determined that the transactions in your chain were fictitious and the gap remained after the inspection, you will be asked to submit an amendment to the report, remove the unfinished counterparty from the sales or purchase books and, accordingly, pay additional taxes to the budget that you declared for deduction after working with him.
If the additional payment is not made on your part voluntarily, the tax authority may apply for forced collection of taxes and fees. If, after an audit, it is established that the company deliberately underestimated the tax base (attributed fictitious expenses), then a criminal case may be initiated against the company's officials under Article 199 of the Criminal Code of the Russian Federation (tax evasion).
Moreover, if taxes of 5,000,000 (five million) rubles or more were not paid to the budget over the last period of three years, these are sanctions under Part 1 of Article 199 of the Criminal Code of the Russian Federation; if taxes were not paid to the budget in the amount of 15,000,000 (fifteen million) rubles or more over the last period of three years, these are sanctions under Part 2 of Article 199 of the Criminal Code of the Russian Federation.
What should you be wary of?
As a rule, most entrepreneurs are now most often called to the tax office to provide explanations on their activities or to a “commission.” Tax audits are not ordered immediately after a “gap” is discovered, as this is too costly and ineffective. And the general policy in the field of tax administration is aimed at reducing audits. That is why you will first go to a commission at the Federal Tax Service of the Russian Federation.
At the same time, such calls indicate the risk of an audit. Therefore, as soon as the Federal Tax Service becomes interested in you, you must immediately begin preparation. And already at this stage you need to seek professional help from a lawyer who specializes in resolving such issues.
In particular, if you have received a Notice to appear at the tax authority to provide explanations on the company’s activities, or a Request to provide documents and information on a particular counterparty for a quarter or more, then our tax lawyers will help you navigate and correctly build a dialogue with the Federal Tax Service. We will tell you what documents need to be submitted to the Federal Tax Service, including in addition to those requested.
How to answer “uncomfortable” questions?
If you came to a conversation with an inspector without prior consultation with a tax specialist and any specific questions asked by him took you by surprise, it is best to avoid a direct answer or at least postpone it until the next meeting with the inspector. However, this must be done competently, since answers like “I don’t know”, “I don’t remember”, “I’m not aware of the situation”, etc. are more likely to be used by the tax inspector against you and will only push him to make a decision about the need to conduct a tax audit in your company. Therefore, your task is to convince the tax inspector that you are responsible in fulfilling your official duties in the company, do not shy away from answering his questions, but only want to provide him with the most accurate information. The optimal current answer to an “inconvenient” question would be “I’m not ready to answer your question now, I need to clarify the information, raise documents, and so on.” In a situation where a tax inspector asks “uncomfortable” questions, it is important to gain time and, in turn, find out for yourself in as much detail as possible what exactly the inspector is interested in and what facts he already has against you. This will allow you to correctly orient the tax consultant on the problem that has arisen, be well prepared for the next conversation with the tax inspector, and take worthy revenge.
How to interact with the tax office?
So, you've been called. What can you do?
There are 2 options:
- Recognize the “gap”, submit an updated tax return and pay an additional amount of tax, penalties and no longer be afraid of inspectors. This is the easiest option, and in some cases it is worth keeping in mind. Please note that if VAT is charged to you based on the results of an on-site tax audit, you will also have to pay an additional fine of 40% of the corresponding amount.
- Defend your right to a tax deduction. The very fact of the presence of an unscrupulous counterparty, especially the second or subsequent “links,” does not mean that it was you who violated something. If the counterparties of the first “link” are beyond your control and actually worked, then the tax authorities may change their position and withdraw their claims against you. This is doable if you have the proper evidence.
Note! Unfair actions of second and third level counterparties in themselves are not grounds for filing claims
to the taxpayer.
In a word, it is quite possible to defend your position. To do this, you need to collect the necessary package of primary documents that relate to specific transactions, as well as evidence of due diligence. Also impressive is the timely involvement
to the proceedings
of a tax lawyer
.
For example
Let’s say the Alpha company purchases building materials from the Beta company, Beta buys some of these materials (for example, paint and varnish) in Gamma, and some in Delta, i.e., it simply resells them at its own markup. Gamma paint is purchased from a representative of Sigma, who has an exclusive contract with the manufacturing plant.
A supply chain of Sigma – Gamma – Beta – Alpha is being built. Each organization reports quarterly to the tax authority on its activities. Accordingly, they must reflect all transactions with their counterparties in tax and accounting registers, as well as in tax returns. Also, each of the counterparties (if they operate on a common taxation system) declares a deduction for VAT (value added tax) as a result of transactions carried out with the counterparty.
The tax authority checks the submitted VAT returns for compliance with reality. If in the chain given above, some link submits a declaration and does not display its counterparty (as if there were no transactions with him), or displays the incorrect amount of the transaction, despite the fact that the counterparty declares the transaction and deducts VAT, a tax gap or discrepancy is formed in reporting.
The tax authority is obliged to conduct a thorough audit in each such case and establish the reasons for the occurrence of gaps.
How can we help you?
It should be noted that the Federal Tax Service of the Russian Federation has been rapidly increasing the efficiency of on-site inspections in recent years. This means the danger of an on-site tax audit for you, because if an audit is ordered due to VAT gaps, then with a 98% probability significant amounts of taxes and fines will be assessed, plus a criminal case may be initiated for tax evasion. Therefore, it is very important to prevent the appointment and implementation of an audit and begin to act proactively.
At the same time, the high percentage of effectiveness of tax audits means that the Federal Tax Service of the Russian Federation tries not to organize such events without identifying significant violations.
We have repeatedly provided qualified assistance in such situations. We know what needs to be done to minimize any risks.
Our lawyers will help you minimize the risk of an audit due to a VAT gap. We invite you to discuss the details.
We have extensive experience in providing assistance with any calls to the Federal Tax Service, and consultation with our lawyers is absolutely free!
In what form should explanations be submitted?
Starting from January 24, 2017, “paper” explanations for taxpayers reporting electronically are considered unsubmitted with all the ensuing consequences (a fine of 5 thousand rubles - clause 1 of Article 129.1 of the Tax Code of the Russian Federation, and in case of repeated violation a fine will be charged in the amount of 20 thousand rubles - clause 2 of article 129.1 of the Tax Code of the Russian Federation).
Thus, if a company is required to submit a VAT return in electronic form, then explanations to the declaration must also be submitted in electronic form in the format approved by Order of the Federal Tax Service of the Russian Federation dated December 16, 2016 No. ММВ-7-15/ [email protected] Also you cannot send a scan of “paper” explanations (Letter of the Federal Tax Service of the Russian Federation dated 02/09/2016 No. ED-4-2/1984).
If a company does not have an obligation to report via the Internet, then it has the right to provide explanations to the tax authorities both electronically and on paper.
CAMERA TAX AUDIT IN A NEW LOOK
To pay extra or not
It will be easier for you to decide whether to pay extra tax or not if you ask yourself three questions.
percent
tax authorities compose requirements in violation of the law
The first question: who is the first-link counterparty and what is the degree of its reliability? If the first-link counterparty is a real supplier, then this is one situation. If this is a “technical” company through which the company optimized taxes, then this is a completely different situation.
Second question: what is the amount of the gap? It’s one thing when it’s 100,000 rubles, another thing when it’s 200 million rubles. If the gap amount is large, the threat that the inspectorate will order a thematic on-site VAT inspection increases significantly.
The third question, or rather a whole block of questions: are you ready to prove that you are right if the tax authorities hand over documents to OEBiPK or come with an on-site inspection? Do you have all the documents for the transaction with the counterparty in order? Will you be able to prove the reality of business transactions and their execution by the counterparty?
In our practice, there was a situation when we knew the client’s business and understood that the tax authorities had only empty threats in their arsenal. And so it happened. It all ended with the appearance of the director, accountant and lawyer at the tax office. There was no follow-up from the tax authorities. But there have also been other cases where the client used “tech” companies. Then the tax authorities passed the information on his business to the Economic Safety and Inspectorate, and a month later they scheduled an on-site thematic VAT audit.
