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Rating of safety of tax ideas: taxes on income, property and insurance contributions

10.10.2013

Idea No. 1. How to revoke the additional insurance contributions on a formal basis

Economized: Additional insurance contribution payments

The idea is based on: Judgments № А44-6087/2012 dated 18.07.13, № А44-6086/2012 dated 16.07.13 by the Federal Court of Arbitration of the North-Western District

If the inspectors of the SIF deliver the act and the notice of study of the materials of insurance contributions to the head of the checked subsidiary and not to the head organization, such decision is illegal and is subject to revocation. Such is the conclusion contained in the judgment № А44-6087/2012 dated 18.07.13 by the Federal Court of Arbitration of the North-Western District.

According to the arbitrators, the controllers from the Fund have seriously breached the insurer’s rights. And since the decision concerning the results of the check was taken without possible arguments from the company itself, it needs to be revoked. The judges of three judicial instances reminded the inspectors that not the subsidiary or another separate division is the insurer but the organization (clause 1 of part 1 of Article 2.1 of the law No. 255-FZ dated 29.12.06 and clause 1 of part 1 of Article 5 of the law No. 212-FZ dated 24.07.09). Therefore, it is not the head of the separate division who should be notified but the legal representative or the attorney of the company, under a power of attorney empowering that person to represent the organization in the course of relations with the Fund (resolution No. 12902/10 dated 25.01.11 by the Board of the HCA of Russia).

The idea shared by Svetlana Andreeva, Chief Accountant

Evaluation of the idea’s safety

Public official Elena Melkonian, Councilor 1st class of the State civil service:

“Arbitration practice shows that any violation of procedural matters by the bodies of control is punishable by the revocation of the decision for formal grounds. Judges pay special attention to the procedure of delivery of the documents to the duly empowered company officials”.

Expert Irina Mostovaya, Senior Lawyer on taxation of the NAFKO-Consultants law company:

“Breaches of the check procedures are not always taken into account, when the decisions are contested with a superior body. At the same time, the courts readily acknowledge the mistakes made by the inspectors when studying the check results, and revoke the additional charges”.

Practitioner Alena Shimko, Chief Accountant of Felix Company LLC:

“Formal breaches per se cannot be an unconditional basis for ruling the Fund controllers’ decision illegal. The decision may be revoked if it does not comply with the insurer’s actual duty of payment insurance contributions”.

Idea No. 2: the Ministry of Finance gave a tip how to work with “one-day” firms in a correct way

Economized: VAT, income tax

The idea is based on: Letter № 03-02-07/1/17050 dated 16.05.13 by the Ministry of Finance of Russia

Now sending inquiries regarding all one’s contractors to the tax authorities makes sense. Especially regarding those contractors that are known to be “one-day” firms. The point is that the public officials have finally acknowledged that, if the inspectors refuse to provide a company with information concerning the honesty of a contractor, this may make contesting their tax claims easier for that company (letter № 03-02-07/1/17050 dated 16.05.13). So it happens that both the Ministry of Finance and the courts (judgment № А27-25441/2009 dated 27.07.10 by the Federal Court of Arbitration of the Western-Siberian District and judgment № Ф09-6957/10-С3 dated 01.09.10 by the Federal Court of Arbitration of the Urals District) take the company’s side on this matter. The idea of the wave of queries is that any answer of the tax officers actually benefits the company. It may freely work with the contractor if it receives the information that the latter gives reports and pays taxes as well as if the tax officers refuse to give any information. If the tax authorities’ information indicates dishonesty, it is reasonable to change the contractor. However, the inspectors, in practice, do not consider it their duty to inform the taxpayers alleging Article 32 of the TCRF. Thus, the latter variant is improbable.

The idea shared by Andrey Zimin, tax lawyer

Evaluation of the idea’s safety

Public official Svetlana Sergeeva, Councilor 3rd class of the State civil service:

“The TCRF does not stipulate the inspectors’ duty to supply information on tax payments by contractors. Even if the tax authority replies that the contractor submits actual reports, the veracity of those reports may only be confirmed by a field check”.

Expert Maxim Rovinskiy, Head of the Tax and Customs Law Practice of the Law Firm "YUST":

“Making queries is a proof of due care. However, if the fiscal bodies give no answer, this does not mean that they will not present any claims if a “one-day” firm is discovered. And it is more probable to deflect those claims in court”.

Practitioner Oksana Kostyleva, Chief Accountant of “Chemtech-Engineering” LLC:

“A minimum set of documents that confirm due care should be collected. It is wise to check the database on mass addresses and disqualified persons. Only then will the answer to a query carry any significance for laying claims”.

Idea No. 3: How to keep the right to a special regime even breaching rules

Economized: Taxes under the general system

The idea is based on: Letter № 03-11-06/3/29239 dated 24.07.13 by the Ministry of Finance of Russia; clause 2.3 of Article 346.26 of the TCRF

If the company that uses a special regime committed any breaches of the rules of application of that system, but managed to correct them on time, before the end of the tax period, it should not be obliged to adopt the common system. Such conclusion may be drawn from the letter № 03-11-06/3/29239 dated 24.07.13 by the Ministry of Finance. The public officials have studied the situation, when a company using the UTII first exceeded the limitation on the share of legal entities among its founders (25% - subclause 2 of clause 2 of Article 346.26 of the TCRF) and corrected the breach later during the tax period. Formally in this case, the organization would lose the right to the special regime since the beginning of the tax period, during which the breach occurred (clause 2.3 of Article 346.26 of the TCRF). However, the Ministry of Finance provided a different and more beneficial explanation. Why not follow the same logic regarding other limitations on the imputed taxes? For example, the area of the commercial premises, the number of personnel etc. Also, such interpretation of the provision by analogy may be applied to those using the simplified taxation regime as well. All the more so that their reporting period is one year, not one quarter.

Liudmila Dolgopolova, financial director

Evaluation of the idea’s safety

Public official Alexander Kosolapov, head of section of special tax regime of the Department of the Ministry of Finance of Russia:

“The letter concerns the legal relations of 2012. Thus it is logical: if the breach is corrected, the UTII obligation is restored. The UTII became voluntary in 2013. And if the company commits any breaches, the common regime is applied to the company since the quarter, when those breaches were made”.

Expert Maxim Rovinskiy, Head of the Tax and Customs Law Practice of the Law Firm "YUST":

“The Ministry’s explanation is the correct interpretation of the legal norms. The expansion of the idea to include those who utilize the simplified tax regime should be taken with a reservation. The check for compliance with the STS requirements is done at the end of the tax as well as of the reporting period”.

Practitioner Victoria Tsirulnikova, Chief Accountant of NISA LLC:

“As far as the STS is concerned, the subclause 15 of clause 3 of Article 346.12 of the TCRF mentions breaches of limitations during a tax or a reporting period. The 1st quarter, the semester and 9 months are reporting periods (clause 2 of Article 346.19 of the TCRF). Therefore, expanding the Ministry of Finance’s opinion to include the entire simplified range for the entire year is dangerous”.

Idea No. 4. How to circumvent the unfavorable explanations of the Ministry of Finance concerning the property tax

Economized: Property tax

The idea is based on: Paragraph 3 of clause 5 of the Accountability Regulations 6/01, letter № 03-03-06/1/20 dated 21.01.11 by the Ministry of Finance

Keeping movable property for leasing on the account 01 is safer and more profitable. This will allow not paying property tax from its value. According to the Ministry of Finance, such objects are not fixed assets. And if such movable property has been purchased after January 1st of 2013, the benefit stipulated by subclause 8 of clause 4 of Article 374 of the TCRF does not apply to it. This is not so. The composition of the fixed assets is calculated in accordance with the rules of the accountability. And paragraph 3 of clause 5 of the Accountability Regulations 6/01 says that the assets planned for leasing are fixed assets. Therefore, the company may apply the benefit to them no matter the account they are accounted for at. But there is no need to argue. The use of the object for one’s own needs for some time will solve the problem completely. The company is not obliged to transfer the fixed asset from account 01 to account 03, even if it changes its purpose. Morevoder, the Ministry of Finance itself is against it (letters № 03-05-05-01/04 dated 02.03.10, № 03-05-05-01/32 dated 10.06.09).

The idea shared by Mark Natkin, tax adviser

Evaluation of the idea’s safety

Public official Elena Melkonian, Councilor 1st class of the State civil service:

“The Ministry of Finance in its letter mentions not a simple rent but leasing. Disputes are possible due to the specificity of such objects – leasing is the purpose of their purchase. But one cannot say that common rent objects’ purpose is precisely rent. It is possible to not account for them as profitable investments in material valuables”.

Expert Irina Mostovaya, Senior Lawyer on taxation of the NAFKO-Consultants law company:

“It is not clear how one may prove the use of an object for his personal needs, if it is obviously purchased for leasing purposes. This approach has a significant risk of claims by tax authorities, and the courts will hardly take the taxpayer’s side”.

Practitioner Tatiana Kerpatenko, Accountant of “Agroholding Dubovsky” LLC:

“There is no dispute or any need for such complications. The most important thing is that the assets intended for leasing should comply with the conditions of acknowledging them fixed assets. They are then accounted for as fixed assets, are subject to property tax and to the benefit, no matter the account”.

Idea No. 5: How to postpone the tax payment by replacing cash with a cheque

Economized: Income tax, unified tax under the STS

The idea is based on: Clause 4 of Article 877 of the CCRF, letter № 03-11-11/33121 dated 14.08.13 by the Ministry of Finance of Russia

The use of cheques by the sellers, who use the cash basis accounting of income and expenses will enable them to postpone the tax payment. The issue of a cheque does not eliminate the obligation, according to clause 4 of Article 877 of the CCRF. Therefore, pursuant to clause 2 of Article 273, clause 1 of Article 346.17 of the TCRF, there is no basis for acknowledging income at the receipt of a cheque. The Ministry of Finance of Russia confirms this in its letter № 03-11-11/33121 dated 14.08.13. In the case of cheque payments, income should be acknowledged as of the date of crediting the money after the cash-in of the cheque or if the cheque is given to a third party. Even in the case of a significant delay of cashing-in of the cheque the matter of commercial credit does not come up – and neither does the matter of interest, therefore. Interest on a cheque cannot be exacted, even if such term is directly stipulated in the document (Article 878 of the CCRF). This is an advantage of a cheque as compared to a promissory note, in the case of issue of which disputes concerning interest occur due to clause 2 of Article 48 of the Regulations on promissory notes and transfer notes (Resolution № 104/1341 dated 07.08.1937 by the CEC of the USSR and the CPC of the USSR).

The idea shared by Arvidas Liutsis, financial director

Evaluation of the idea’s safety

Public official Svetlana Sergeeva, Councilor 3rd class of the State civil service:

“When the cash basis accounting is employed, the income is accounted for only if it is actually received. Therefore, during cheque payments, income is only acknowledged, when the funds are credited to the bank account, when cash is received after the cheque is cashed in at a bank or given to a third party”.

Expert Maxim Rovinskiy, Head of the Tax and Customs Law Practice of the Law Firm "YUST":

“The interpretation given by the Ministry of Finance corresponds to the norms of civil and tax legislations. The taxpayers may only be advised to adequately assess financial risks of such payment delay connected to the debtor’s and the bank’s reliability etc.”

Practitioner Victoria Tsirulnikova, Chief Accountant of NISA LLC:

“This method is completely safe but only acceptable in the situations, when cash under the cheque is not essential for the sellers, who employ cash basis accounting – for example, they have other funds for payments under their obligations. Then the date of acknowledging the income may certainly be put off for later”.

Source: «Tax Planning in Pracice» magazine


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