Tax reconstruction. What can this mean for the organization

When a company resorts to some questionable actions in terms of tax optimization, there is a possibility of tax reconstruction by the Federal Tax Service in order to calculate the amount of arrears. It turns out that the company may suffer some losses if the tax service notices tax violations on the part of the organization. But, nevertheless, taxpayers may consider tax reconstruction as a means to protect against disproportionate claims from the tax service.

In a situation where an organization has been caught splitting up a company in order to evade taxes, as well as in making fictitious transactions, with the participation of one-day firms, tax reconstruction may be applied. The Tax Service will calculate what amount of taxes the organization was obliged to pay to the budget, provided that the transaction would have occurred without questionable actions on the part of the company.

How can the reality of an operation

In 54.1 of the Tax Code of the Russian Federation, several criteria are specified that an operation must meet in order to be considered real:

• Has a business purpose. It is worth noting that the operation should not carry actions aimed at doubtful reduction of the tax amount.
• Executed by the proper person. In its letters, the Federal Tax Service indicates that this provision is necessary to combat one-day firms, i.e. technical organizations that do not actually conduct any activity. Considering such a case when an organization does not perform its duties, we can say that it is a one-day company, which, on its part, will entail a refusal to recognize these operations that they were actually performed, but at the same time may entail a tax reconstruction by the tax service.
• Corresponds to the actual economic meaning (no distortion of legal qualifications).

Tax reconstruction in case of negligence

In this case, it is considered that the taxpayer should be attentive to those organizations with which he works, i.e. he himself should check information about them and request documents so that it can be seen how much these companies can be trusted, how reliable and conscientious they are.

There are two possible scenarios:

1. If the contractor is set based on the parameters of the actual execution, the deduction of VAT amounts is provided and expenses are taken into account.

2. If the contractor is not installed, the deduction of VAT amounts is not provided, and expenses are determined by the settlement method according to Article 31 of the Tax Code of the Russian Federation. Based on judicial practice, proving the market price is the taxpayer’s responsibility, because it was he who had to find out who he was doing business with.

What are the criteria for checking counterparties

The Tax Service focuses on certain criteria by which it is possible to determine how real the activity in the organization is and how it conducts its activities:

• the history of the organization’s activities is known;

• this organization is well-known in its market segment;

• the organization does not avoid public positioning;

• during her activity, she has earned a certain business reputation;

• the organization has a specific place of business (e.g., office, industrial sites, etc.), as well as its own or acquired assets and use;

• there are already executed contracts, and the company can also provide recommendations from counterparties;

• the nature of the obligations assumed, their size and cost of execution correspond to the period of the company’s existence, as well as the scale of its activities.

You can advise documenting the organization’s decisions on the choice of counterparties. For example, if a contract is concluded with another organization, it is desirable to record how the company checked the counterparties and how it realized that it was possible to do business with it, due to his reliability.