In total, no more than two on-site tax audits can be carried out in a company during a calendar year (clause 5 of Article 89 of the Tax Code of the Russian Federation). At the same time, the inspectorate cannot conduct on-site inspections more than twice for different taxes. For example, if at the beginning of the year the tax authorities conducted an on-site audit on income tax, and at the end of the year on VAT, conducting a third audit (on any grounds) will be unlawful. However, the number of independent on-site inspections of the company’s branches and representative offices (if any) is not taken into account.
The Federal Tax Service of Russia, in letter No. ED-4-2/7305 dated April 17, 2019, explains that during an on-site tax audit, inspectors can check the taxpayer’s activities for the three previous years and expired reporting periods of the current year. Since the Tax Code of the Russian Federation does not prohibit tax authorities from including the reporting periods of the current year in the audited period.
Article 89 of the Tax Code of the Russian Federation establishes the rules for conducting on-site tax audits. As part of an on-site tax audit, a period not exceeding three calendar years preceding the year in which the decision to organize the audit was made (clause 4 of Article 89 of the Tax Code of the Russian Federation) can be checked.
The Federal Tax Service of Russia believes that this clause does not prohibit on-site inspections for reporting periods of the calendar year in which the decision to conduct the inspection was made. And along with previous years, tax authorities can check the current year of the taxpayer’s activity. The position of the tax authorities is shared by the Russian Ministry of Finance (letter of the Russian Ministry of Finance dated July 26, 2018 No. 03-02-07/1/52519).
In the commented letter, tax officials also refer to the ruling of the Supreme Court of the Russian Federation dated September 09, 2014 No. 304-KG14-737, in which the court confirmed that the implementation of an on-site audit in relation to the reporting periods of the current year does not violate the norms of tax legislation.
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The Federal Tax Service of Russia has updated the indicators of profitability and tax burden that tax authorities use when including companies in the plan of on-site tax audits (Information of the Federal Tax Service of Russia dated May 23, 2019)
Desk inspection
As part of a desk tax audit, the inspectorate can only control the period for which the organization filed a declaration or calculation, including an updated one (clause 1 of Article 88 of the Tax Code of the Russian Federation). This means that if an organization has submitted a VAT return to the inspectorate for the second quarter of 2015, then as part of a desk audit of the submitted declaration, the inspection can check the correctness of the calculation of this tax only for the second quarter of 2015. At the same time, to carry out the inspection, the inspection has the right to use data from other reporting periods.
Situation: is it possible to cancel the inspection decision based on the results of a desk audit? Based on the results of the inspection, the inspection made conclusions that were not related to the period for which the declaration (calculation) was submitted.
Answer: yes, it is possible, in terms of those conclusions that relate to periods that are not subject to desk audit.
As part of a desk audit, the inspection can only control the period for which the organization filed a declaration or calculation (clause 1 of Article 88 of the Tax Code of the Russian Federation). Deviation from this period will be a violation on the part of the inspectorate. Therefore, the inspection decision based on the results of the desk audit is subject to cancellation in that part of the findings that relate to periods not subject to inspection. In arbitration practice there are examples of court decisions confirming the legitimacy of this conclusion (see, for example, the decision of the Supreme Arbitration Court of the Russian Federation dated February 17, 2009 No. 1437/09, resolution of the Federal Antimonopoly Service of the Ural District dated October 21, 2008 No. F09-7599/08-S2 , East Siberian District dated August 27, 2007 No. A58-6343/06-F02-5686/2007, Northwestern District dated March 5, 2007 No. A56-16972/2006).
On-site inspection
As part of an on-site tax audit, the inspectorate can monitor any periods. As a general rule, these periods should not extend beyond the three calendar years preceding the year in which the decision to conduct an on-site inspection was made. This follows from the provisions of paragraph 2 of paragraph 4 of Article 89 of the Tax Code of the Russian Federation. Specific periods of on-site inspections must be indicated in the inspectorate’s decision to conduct an inspection (paragraph 7, paragraph 2, article 89 of the Tax Code of the Russian Federation).
A similar approach to determining periods of on-site inspections also applies in cases where the inspection conducts:
- repeated on-site inspection in order to control a higher tax authority over a lower one (paragraph 3, clause 10, article 89 of the Tax Code of the Russian Federation);
- on-site inspection in connection with the reorganization or liquidation of an organization (clause 11 of article 89 of the Tax Code of the Russian Federation).
A special period of on-site inspection is provided if the inspection conducts:
- initial on-site inspection in connection with the organization’s filing of an updated declaration. In this case, the inspectorate can check the period for which the updated declaration was filed, even if the specified period exceeds three years (paragraph 3, paragraph 4, article 89 of the Tax Code of the Russian Federation, letter of the Federal Tax Service of Russia dated May 29, 2012 No. AS- 4-2/8792);
- repeated on-site inspection in connection with the filing by the organization of an updated declaration with the amount of tax to be reduced. In this case, the inspectorate can check not any period within the three-year limit, but only the one for which the clarification was submitted (subclause 2, clause 10, article 89 of the Tax Code of the Russian Federation);
- on-site inspection of an organization that applies a special regime when executing an agreement on the division of property. In this case, the inspectorate can check any periods during the entire validity period of the specified agreement, even if the agreement came into force three years ago or earlier (clause 1 of Article 346.42 of the Tax Code of the Russian Federation);
- on-site inspection of a resident excluded from the register of residents of a special economic zone in the Kaliningrad region. If this inspection concerns income tax and (or) property tax and the decision to conduct it is made no later than three months from the date of payment of the relevant tax, then the inspectorate can check any periods without any year restrictions (paragraph 5, paragraph 10 Article 288.1, paragraph 5, paragraph 7, Article 385.1 of the Tax Code of the Russian Federation);
- on-site inspection of a participant in a regional investment project. In this case, the tax office may audit the five-year period preceding the year in which the decision to conduct the audit was made. But in order to take advantage of this opportunity, it is necessary that the period for capital investments established by the regional project be five years from the date the organization is included in the register of participants in regional investment projects (clause 2 of Article 89.2 of the Tax Code of the Russian Federation).
General provisions on tax audits
Due to the requirements of Art. 31 of the Tax Code of the Russian Federation, audit activities are carried out by tax inspectorates in order to verify compliance by the subjects of audits with the requirements of tax legislation in terms of the correctness of calculation, timeliness and completeness of payment of tax payments.
Both on-site and off-site events can be held. Their order is fundamentally different (as is the period being tested). The timing of inspections also differs. Desk tests last 3 months, and field tests last from 2 to 6 months (depending on whether the inspection period was extended).
Based on the results of inspection activities, a report is almost always drawn up. Its form was approved by Order of the Federal Tax Service of Russia dated May 8, 2015 No. ММВ-7-2/ [email protected] (Appendix No. 23). The exception is the case when no violations were identified during desk inspections.
If the taxpayer does not agree with the final act, or with any part of it, objections may be filed against it.
Periods covered by on-site inspection
Situation: can the inspection, as part of an on-site tax audit, control the current year (the year in which the decision to conduct an on-site audit was made)?
Answer: yes, it can.
The three-year period provided for by law limits only the lower limit of the period that can be covered by an on-site inspection (clause 4 of Article 89 of the Tax Code of the Russian Federation). The upper limit of this period is limited by the date of the decision to conduct an on-site inspection. The fact is that the inspection period must be determined in advance and reflected in the decision to conduct it (paragraph 7, paragraph 2, article 89 of the Tax Code of the Russian Federation). This means that the year in which the inspectorate makes a decision to conduct an on-site inspection can be verified up to the date of such a decision (decision of the Supreme Court of the Russian Federation of September 9, 2014 No. 304-KG14-737).
The current year review may include:
- taxes that have a short tax period (month, quarter). For example, VAT, the tax period for which is a quarter (Article 163 of the Tax Code of the Russian Federation);
- taxes for which the tax period is a calendar year, for example, income tax (Article 285 of the Tax Code of the Russian Federation).
In the second case, during the audit, the inspectorate will monitor the correctness of payment not of the tax itself, but of advance payments for it, since the tax period has not yet ended. If the audit reveals late transfer of advance payments, the organization may be assessed penalties. At the same time, the tax inspectorate has no right to fine an organization for such a violation. This procedure is provided for in paragraph 3 of Article 58 of the Tax Code of the Russian Federation.
The legality of this approach is also confirmed by arbitration practice (see, for example, decisions of the FAS Volga District dated December 6, 2012 No. A72-2607/2012, Moscow District dated April 15, 2009 No. KA-A40/3000-09-P, Vostochno -Siberian District dated January 29, 2009 No. A19-3295/08-50-F02-7091/08, dated October 17, 2007 No. A69-3781/05-F02-2938/2007, Northwestern District dated December 2 2008 No. A52-5071/2007, Far Eastern District dated September 20, 2007 No. F03-A37/07-2/2195).
It should be noted that in relation to organizations that are tax agents, exemption from tax liability for late transfer of taxes to the budget does not apply. The fact is that the obligation of tax agents to transfer withheld tax amounts to the budget is not associated with the end of reporting (tax) periods, but with the moment of payment of income to taxpayers. This follows from the provisions of subparagraph 1 of paragraph 3 of Article 24, Articles 161 and 174, paragraph 6 of Article 226, Articles 287 and 310 of the Tax Code of the Russian Federation. Thus, if during the audit it is discovered that the organization, as a tax agent, violated the deadlines for paying withheld taxes, the inspection has the right not only to charge it a penalty (clause 7 of Article 75 of the Tax Code of the Russian Federation), but also to fine it under Article 123 of the Tax Code of the Russian Federation.
In arbitration practice there are examples of court decisions confirming the legitimacy of this conclusion (see, for example, the rulings of the Supreme Court of the Russian Federation dated September 9, 2014 No. 304-KG14-737 and the Supreme Arbitration Court of the Russian Federation dated April 26, 2013 No. VAS-4862/13, resolutions of the Federal Antimonopoly Service of the North-Western District dated April 19, 2011 No. A56-25496/2010, dated March 18, 2011 No. A56-18448/2010, West Siberian District dated April 4, 2011 No. A03-9949/2010, Ural District dated January 27, 2011 No. F09-11127/10-S2).
Situation: can the inspectorate monitor the 1st, 2nd and 3rd quarters of 2011 as part of an on-site inspection? The decision to conduct an audit was made in the fourth quarter of 2014.
Answer: yes, it can.
As part of an on-site inspection, the inspectorate can monitor any periods that do not extend beyond three full calendar years (from January 1 to December 31) preceding the year the decision to conduct the inspection was made (paragraph 2, paragraph 4, article 89 of the Tax Code of the Russian Federation). In this case, the quarter (month) in which the decision was made does not matter. If the decision to conduct an on-site inspection was made in 2014 (no matter what quarter or month of a given year), the inspection can inspect any of the periods that fall in 2011, 2012 and 2013. The first, second and third quarters of 2011 fall within the specified period. Therefore, the inspection has every right to check them. In arbitration practice, there are examples of court decisions confirming the legitimacy of this conclusion (see, for example, decisions of the FAS Volga District dated August 20, 2009 No. A55-9816/2008, dated July 3, 2009 No. A57-8348/2008, East Siberian District dated May 5, 2009 No. A33-10180/07-F02-1850/09, Ural District dated April 21, 2009 No. F09-1805/09-S3).
Situation: can an inspection, as part of an on-site inspection, control a period that has already been inspected as part of a desk inspection?
Answer: yes, it can.
Tax legislation establishes a ban on repeated audits of the same period for the same tax (clause 5 of Article 89 of the Tax Code of the Russian Federation). But this rule only applies to on-site inspections. In other words, if an inspectorate monitored a period for a specific tax during an on-site inspection, then it will not be able to conduct another on-site inspection for the same period in relation to the same tax. For exceptions to this rule, see When tax audits are repeated.
The fact that the inspection conducted a desk inspection is of no importance and does not have any impact on the period of the on-site inspection. In arbitration practice there are examples of court decisions confirming the legitimacy of this conclusion (see, for example, the decisions of the Supreme Arbitration Court of the Russian Federation dated April 27, 2010 No. VAS-5083/10, dated May 19, 2009 No. VAS-1588/09, decisions of the FAS Povolzhsky District dated March 4, 2010 No. A65-26158/2009, Northwestern District dated December 2, 2008 No. A52-5071/2007, Far Eastern District dated May 19, 2008 No. F03-A04/08-2/1276) .
Situation: can the inspection change the period of the on-site inspection during its conduct?
Answer: yes, it can.
Specific periods of on-site inspections must be indicated in the inspectorate’s decision to conduct an on-site inspection (paragraph 7, paragraph 2, article 89 of the Tax Code of the Russian Federation). The Tax Code of the Russian Federation does not prohibit the inspectorate from making changes to this decision (clause 2 of Article 89 of the Tax Code of the Russian Federation).
Moreover, by order of the Federal Tax Service of Russia dated May 7, 2007 No. MM-3-06/281, a special form of the decision to amend the decision to conduct an on-site inspection was approved.
Based on the above, we can conclude that the inspection has the right to make changes to the inspection decision during the inspection, in particular, change the inspection period. In this case, the new verification period must be indicated in a special decision, which is an annex to the main decision.
Arbitration courts confirm the legitimacy of this conclusion (see, for example, the resolution of the Federal Antimonopoly Service of the Moscow District dated September 11, 2009 No. KA-A41/7737-09).
Situation: is it possible to challenge the decision of the inspectorate based on the results of an on-site inspection? The inspection went beyond the three-year limitation on the inspection period.
Answer: yes, it is possible, in terms of those conclusions that are made regarding periods that are not subject to on-site inspection.
As part of an on-site inspection, the inspectorate can monitor any periods that do not exceed three calendar years preceding the year the decision to conduct the inspection was made (paragraph 2, paragraph 4, article 89 of the Tax Code of the Russian Federation). Going beyond the three-year limit will be a violation on the part of the inspectorate. Therefore, the inspector’s decision based on the results of the on-site inspection can be challenged in that part of the findings that relate to periods not subject to the on-site inspection (paragraph 1, clause 12, article 101 of the Tax Code of the Russian Federation).
In arbitration practice there are examples of decisions confirming the legitimacy of this conclusion (see, for example, decisions of the FAS of the North-Western District dated April 30, 2009 No. A05-11647/2008, Volga-Vyatka District dated October 27, 2008 No. A39-1580 /2008, North Caucasus District dated October 13, 2008 No. F08-6070/2008).
Situation: is it possible to challenge the decision of the inspectorate based on the results of an on-site inspection? The inspectorate examined the period, which falls within the three-year limit, but exceeds the period specified in the decision to conduct the inspection.
Answer: yes, it is possible, but only in that part of the conclusions that are made in relation to periods not specified in the decision to conduct an audit.
Specific periods for on-site inspections must be determined in advance and indicated in the decision to conduct an inspection (paragraph 7, paragraph 2, article 89 of the Tax Code of the Russian Federation). Inspectors cannot deviate from them. Otherwise, the inspection decision based on the results of the on-site inspection can be canceled, but only in that part of the conclusions that were made in relation to periods not indicated in the decision. In arbitration practice there are examples of court decisions confirming the legitimacy of this conclusion (see, for example, the resolution of the Federal Antimonopoly Service of the Ural District dated September 15, 2009 No. F09-6838/09-S3).
Verification of the assignee
Situation: can the tax inspectorate conduct an on-site audit of the successor organization for the period preceding the reorganization?
Answer: yes, it can.
As part of an on-site inspection, the inspectorate can monitor any periods that do not exceed three calendar years preceding the year the decision to conduct the inspection was made (paragraph 2, paragraph 4, article 89 of the Tax Code of the Russian Federation). At the same time, tax legislation does not establish special requirements for conducting an on-site audit in the successor organization. Consequently, the tax inspectorate can conduct an audit of such an organization for the period preceding its reorganization. The main thing is that the specified period does not go beyond the three-year limit. Similar clarifications are contained in letters of the Ministry of Finance of Russia dated July 29, 2011 No. 03-02-07/1-267, dated February 5, 2009 No. 03-02-07/1-48.
Arbitration practice confirms the legitimacy of this approach (see, for example, the ruling of the Supreme Arbitration Court of the Russian Federation dated May 19, 2008 No. 5863/08, the resolution of the FAS Volga-Vyatka District dated January 14, 2008 No. A82-4644/2007-14).
Results
The purpose of a tax audit is to monitor the correctness of calculation and payment of taxes. The procedure for conducting an on-site tax audit is regulated by Art. 89 Tax Code of the Russian Federation. The results of an audit can be canceled only in cases of significant violations on the part of the tax authority, for example, if the taxpayer is not given the opportunity to participate in the consideration of the audit materials and provide explanations.
Sources:
- Tax Code of the Russian Federation
- order of the Government of the Russian Federation dated March 18, 2020
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