The Russian authorities, represented by the Federal Tax Service (FTS), were puzzled by the desire of Russians from among the leaders and owners of companies to pay less taxes through the application of the tax reconstruction procedure, RBC writes with reference to a letter from the Deputy Head of the Federal Tax Service Konstantin Chekmyshev to the head of the department Daniil Yegorov. >
Chekmyshev’s appeal concerns the provisions of Article 54.1 of the Tax Code. It appeared in 2017 and regulates the application of VAT tax deductions by businesses and the recognition of expenses for calculating the base for income tax. The norms of the law raise many questions for corporate lawyers, including because they give tax authorities grounds for refusing the so-called tax reconstruction – a procedure that makes it possible to identify how economically justified certain operations of the company were, which made it possible to reduce the tax base, and what they have brought benefits.
Tax reconstruction was often applied before the introduction of Article 54.1 and often allowed businesses to prove the legitimacy of their actions or at least reduce the amount of additional tax charges to the amount of unreasonably obtained benefits. After the adoption of Article 54.1, the FTS, as a rule, refused to allow businesses to carry out reconstruction.
Recently, corporate taxpayers have been awaiting clarification from the Federal Tax Service on the application of Article 54.1. In November last year, the deputy head of the Federal Tax Service, Viktor Batsiev, warned that the department plans to return to the practice of tax reconstruction, but in a truncated form. In his letter, Chekmyshev expresses concern that this will lead to an increase in complaints to the Federal Tax Service from business with demands to reconsider the decisions taken earlier.
The press service of the Federal Tax Service told the publication that the department plans to launch a “platform for pre-trial settlement of tax disputes.” The main principle of its work will be that when a complaint is received from a particular company, not only itself is considered, but also the cause that caused it.