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   Main rights and obligations of a taxpayer during tax checks taking into consideration legal practice.
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Tax control is established by Chapter 14 of the RF Tax Code. 16articles of this Chapter (from 87 to 101.1) are dedicated to tax checks.
In spite that these articles describe in detail all procedures and types of checks, rights and obligations of taxpayers are not stipulated at all. Lack of specification of taxpayer’s rights and obligations during tax checks often results in abuses on the part of checking authorities and consequently in taxpayer’s reference to court.
This kind of references creates juridical precedents, which help to specify the circle of rights and obligations more.
In my report I will put a light on the most important rights and obligations of taxpayers taking into consideration the existing legal practice.
First of all I would like to remind you that there are two types of checks: cameral and going-out. This division also influences the quantity of rights and obligations of taxpayers for the reason that each of these two types of checks has particularities.
Let me go through taxpayer’s obligations during the tax checks:

1. Presentation of documents regarding calculation and payment of taxes to tax authorities:

  • only those required for this specific check, which means that if the check is dedicated to the issue of VAT payment for the year 2003, there is no obligation to present documents for the year 2004, as well as there is no obligation to present documents calculation of VAT does not depend on.
  • not earlier than 3 years before the check, which means that there is no obligation to present documents for the year 2000.
  • if the check is cameral, specific documents connected with specific declaration must be indicated.

Documents cannot be requested for a certain period not connected to the declaration under check, as well as during check a specific declaration must be indicated and not all the borrowed funds, shown on the company’s balance as of October 1, 2004.

  • in case of cameral check documents must be presented at the place of seat of the tax authority, in case of going-out tax check, at the place of seat of the taxpayer.
  • responsibility for non-presentation of documents is established according to Article 126 of the RF Tax Code in amount of 50 rubles for each document not presented.

Person that did not present a document cannot be called to account for non-presentation of one and the same document twice

2. Presentation of data and explanations on payments of the taxes checked to tax authorities
This obligation does not mean that a taxpayer has to present information and give explanations, which could result in worsening of his financial state.

3. Presentation of access to the territory and premises where the taxpayer performs business activities.
This obligation arises in case of going-out tax checks.

4. Justification and documental confirmation of expenses (tax deductions) in tax declarations.
This obligation is in interests of the taxpayer himself, for the reason that tax authorities will not consider expenses not justified and not confirmed with documents.
Obligation to justify the income part is borne by tax authorities, therefore the taxpayer does not have to prove his incomes.
But in case tax authorities proves that the taxpayer lowered the taxable income base for any tax, the taxpayer will be obliged to prove that the income registration method presented by tax authority is not correct or that his own counter-calculation is correct.
In opposite cases, court rather often ignores motivation of taxpayers that the obligation to prove the income part is borne by tax authorities, thinking that the presented evidences of the tax authorities are sufficient.

To conclude the general taxpayer’s obligations íàëîãîïëàòåëüùèêà, it must be said that the most important and principal obligation borne by taxpayer during a tax check is to submit (present) to tax authorities not more than the tax authority asks within the limits of existing powers thereof.

Taxpayer’s Rights

1. Receipt from tax authorities of explanations in writing of taxes payment procedure.
This right is connected to tax checks indirectly, but explanations are usually taken into consideration by the checking authorities.
Although received explanations do not always guarantee loyalty of the tax authorities in regard to the issue under check, in case the explanation is erroneous the explanations are grounds for the court to release the taxpayer from responsibility.

2. Representation of his own interests personally or through a representative, this right is to be exercised during the whole period of check. Due to the fact that an uncontrolled matter is always more complicated to manage, passive position of taxpayer usually results in complication of the situation.
According to practice, disputable points sometimes are solved easier in the period of writing the Check act by the checker than after the act is submitted officially to the taxpayer.
Attraction at an earlier stage of a company specialized in taxpayer’s representation in tax authorities or in court will considerably bring down the risk of increase of taxes, penalties and fines amounts, due to the fact that such representative companies usually have their own practice of arising disputable situations solution.

3. Presentation to tax authorities of explanations relating calculation of taxes.
This right is to be exercised when the inspecting authorities ask questions related to validity and appropriateness of payment of a tax.
Before presenting explanations it is necessary to analyze presented documents and arguments.
If documents are not drown up properly, taxpayer’s position can be aggravated.
Giving explanation it is necessary to take in account that in this case an inspector is likely to accept your arguments, but at the same time will increase other taxes. At the same time the general financial result can be worsened.

4. Being present in case of going-out checks
This right sometimes causes displeasure of inspectors. But it is extremely important during check to understand what the documents are requested for and which specific violation is being criminated by inspectors.
I can give you a simple example: at one of the companies tax officer found out invoices which did not have necessary signatures and document requisites. The company’s accountant, after having heard from the tax officer that these invoices will not be subject to VAT deductions, spoke to purchases department and during the period of check the purchases department provided original copies of the invoices, properly executed. The tax inspector refused to accept these invoices properly executed, motivating it by the fact that they were presented in the end of the check period, which was fixed in the accompanying letter. Court in this case supported the taxpayer, saying that as the tax inspector during the check was aware that there are invoices properly executed, there are no grounds for increase of VAT, penalties and fines.
There are also other examples, when invoices properly executed were presented directly at the court proceeding, and the court considered valid tax authorities’ decision, as at the moment of decision-taking to call the taxpayer to tax responsibility the taxpayer did not have a right for tax deduction due to the defect in execution of the invoices.

5. Receipt of a copy of Check act and decisions taken on the basis of these acts.
Violation of this right brings to court decision to consider invalid the decision to call the taxpayer to tax responsibility, as the violation of such right is considered essential by court.
At the same time, if the taxpayer did not exercise this right, tax authority is obliged to send the act by post in a registered letter and then according to Article 100, point 4 of Tax Code, the Check act will be considered submitted on the sixth day starting from the sending date.
Taxpayer is interested himself in receipt of the check results as soon as possible, to exercise the following right.

6. Taxpayer has a right in case he does not agree to the facts described in the Check act, and to the conclusions and proposals of the checking authorities in the period of two weeks from the date of receipt of the Check act, to present to the respective tax authority a written explanation of the reasons, due to which he had refused to sign the act or any objections regarding the act in general or any of its clauses.
At the same time taxpayer has a right to enclose to the written explanation (objection) or in an approved period to submit to the tax authorities documents (or their notarized copies), confirming foundation of the objections or reasoning of the Check act not being signed.
This right is also an essential one. Tax authorities are obliged to analyze objections presented and additional evidences in order to take a correspondent decision.
At the same time another taxpayer’s right arises.

7. Taxpayer has a right to be present while head of tax authority considers materials of the check taking into consideration additions and objections presented.
Place and date of check materials consideration are to be advised to the taxpayer by tax authority in advance.
There exists an opinion that check materials consideration by the head of tax authority is a formal action, for the reason that at this moment the tax authority already has its own view point in regard to taxpayer’s violations of tax legislation. But according to our practice of representation of taxpayers, in 10 cases out of 100, a qualified reasoning makes the tax authority revise the view point formed beforehand in some issues in taxpayer’s favour.
The chances are not so high, but at the same time, why lose a chance, even the most minimal? At the same time at such meetings sometimes additional arguments of the checking authorities come out, which often helps to appeal the decision taken by tax authority to call the taxpayer to tax responsibility in court more carefully.
Again, non-notification of the taxpayer in regard to case materials consideration, given taxpayer’s objections, can also be a foundation to consider invalid the decision taken by tax authority.

8. And the last right to speak about is a right to appeal the decision taken in result of the check.
Taxpayer has a right to appeal the decision taken by tax authority either to the higher tax inspection or in court.
Appeal to the higher tax inspection has two disadvantages:

  • the to the higher tax inspection often refuses to re-consider the decision due to professional solidarity,
  • presentation of claim does not suspend of the decision being contested and during the proceeding, the authority which had taken the decision might levy the increased amounts of tax and penalties, as well as the three-month period of possibility of appeal to court might finish.

Whereas in case of appeal to Arbitration court, taxpayer has a right to realization of the contested decision as guarantee of Request to consider invalid the decision of tax authority.
Besides, court is an independent institution and rather often takes decision in favour of taxpayers.



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