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Russia - FNS application letter regarding Art. 54.1 tax code

Patrick Pohlit

The FNS has sent a new application letter to all tax authorities in order o ensure a uniform understanding of Article 54.1 of the RF Tax Code.

The letter contains judicial and administrative practice and gives examples of willful acts by taxpayers in the context of misuse.

In administrative practice, according to the companies, the local tax authorities apply the new Article 54.1 Tax Code RF in an inflationary manner as a sanction measure, especially with respect to the acceptnce of input VAT and operating expenses.

The clarifications of the FNS in the letter of March 10th, 2021 N БВ-4-7 / 3060 @ lead to more transparency in enforcement practice both for companies and tax authorities, in particular when determining the actual amount of tax liability and liability for tax debts, which is intended to protect taxpayers in good faith.

The letter also pays particular attention to the due diligence of taxpayers in the selection of contractual partners and suggests measures to be applied by the tax authorities in the context of a tax audit in order to identify the involvement of "technical" companies (bogus companies) in a transaction and to prove the deliberate use of such companies by taxpayers for the purpose of reducing the tax base.

One of the main statements of the FNS is that Art. 54 Para. 1 Tax Code RF only applies in cases in which the examples of abusive structures proposed in the letter "cause damage to the tax authorities". It remains to be seen how the application letter will affect current tax authority practice.



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