In order to improve the examination of tax audit materials and tax control procedures, amendments to the Tax Code of the Russian Federation have been adopted.
The amendments in Federal Law No. 130-FZ, dated May 1 2016, "On Amendments to Part One of the Tax Code" (the Amended Tax Law), will provide greater transparency and fairness when the tax authorities are issuing decisions based on the results of tax control measures.
Involving the taxpayer
The Amended Tax Law provides additional grounds for a taxpayer to exert their right to be involved in the examination of tax audit materials by a higher tax authority. These rights can be used:
- If there are contradictions in the information contained in the junior tax authority's material; or
- If there is inconsistency between the information submitted by the taxpayer and the information contained in the materials of the junior tax authority.
Before adopting the Amended Tax Law, there was only one basis on which a taxpayer could be given the right to be involved in examining tax audit materials with a higher tax authority. This was if the junior tax authority had violated significant procedural conditions during the examination of tax audit materials.
In recent years, the higher tax authorities have significantly improved the way they treat appeals against the conclusions of examinations and the resulting decisions conducted by junior tax authorities, and have reversed a significant number of the decisions of the junior tax authorities (e.g. 33.8% of appeals in Russia in 2015 were overturned in favour of the taxpayers). These amendments add substantial additional value to taxpayers.
The legislative amendments will most likely lead to improved examinations and more objective final decisions by the tax authorities at the pre-trial stage.
The amendments also provide taxpayers with the opportunity to be involved in reviewing the reason for an appeal, as well as all audit materials and additionally submitted documents with lawyers and other professionals working at the higher tax authority, delivering a higher level of examination.
It also gives the taxpayer the opportunity to provide sound oral reasoning, and to discuss issues/questions with members of the group examining the case, including the chief/deputy chief of the higher tax authority (the person who will issue the appeal decision).
As such, pre-trial tax dispute examinations will become more complex and longer.
As a result of these amendments, Russian taxpayers, after two direct oral interrogations, will receive more complex analysis of the issues pertinent to their case, and so be able to give and gain additional information to decide whether they should begin litigation proceedings against the tax authority.
The amendments affect appeals submitted after June 2 2016.
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