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How the tax agencies do monitor your business in Russia?

Today the Russian Federal Tax Agency is investing billions of rubles in the business monitoring system. As this is a mere fact, there are only two issues in this regard: 
  1. Exactly what kind of information is available for the Federal Tax Agency monitoring?
  2. What should entrepreneurs do if they don't want to draw the attention of the Federal Tax Agency? 
Let's see how matters stand.

Which data is visible to the tax agency?



Probably most businessmen know that a patent works only for a certain range of business activities. Moreover, the annual revenue must not exceed 60 million rubles, while the number of personnel must not exceed 15 people, otherwise you might face problems from the tax agency's side. 

Simplified System of Taxation

Annual tax declaration handover and quarterly prepayments are crucial here. 

The Tax agency will see only total amounts and it will request the transcripts and look through your incomes and payments in the scope of every transaction when needed. 

If any inconsistencies between the transcript outcomes and declaration rates are found, the Federal Tax Agency will request to submit the documents and explain the reasons for those inconsistencies. 

General Taxation System

Sole Proprietors, using the General Taxation System, quarterly submit VAT declarations to the Federal Tax Agency and other types of companies also submit income tax declarations. 
Data reconciliation goes through 3 sources: income tax declarations, VAT declarations and bank statements. The agency will request explanations if any inconsistencies are found. 
In the reporting on VAT the tax agency sees the sums and dates on any invoice of every contractor then it compares your VAT data and the one of your contractor. Thus,  there's no opportunity for you to draw up your data as you have to demand the same from your contractor and the contractor is not often ready to help with this.
If your sum and the sum of the contractor differ within the same VAT reporting, the Federal Tax Agency will definitely ask for explanations and request the handover of all the necessary documents from your side. 
In general, all the possible oppression from the tax agency finally comes to the same thing — you have to remove the incoming VAT from the deduction on the objectionable contractor. 

Other data sources

Online cash registers

All the transactions of retail customers are visible for the tax agency. The Federal Tax Agency will request the cheques and documents if there are  any inconsistencies found in the online data sources from the online cash register. 

Marking of goods

A significant method of monitoring the goods for the Federal Tax Agency is done by means of a two-dimensional bar code, marked on a packing or a label. For this purpose you have to buy special equipment and adjust it for the data to go directly to the tax agency. 

Product traceability

On the 30-th of June, 2021, the government finished a two-year experiment on the product traceability. There is a range of inbound goods in the register, for example: washing machines, refrigerators, loading machines etc. 

Salary taxes

Companies and sole proprietors submit personnel reports to the Federal Tax Agency if they have any employees.
6-Income Tax (6-НДФЛ in Russian), calculations on insurance payments and  records on policyholders are very important data for a tax agency. 
When a company has a small number of employees and a big trade volume at the same time, it grabs the attention of the tax agency immediately. 

Outlook for the tax agency

In January 2021 the head of the Russian Federal Tax Agency read out the strategy on the development of the Agency: there must be full transparency of the economy and the economy must be transformed into an online format. 
It seems to be a true aim, according to the report of roscongress.org, already in 2018 the government invested 20% of the overall federal budget expenditures on the digital infrastructure.

What should entrepreneurs do?

There are 6 basic clauses to observe for your business to stay away from the tax investigations in Russia. 
1.Your tax payment have to consider the aggregate figures within your field
Briefly speaking, if you want to avoid a severe tax investigation, you have to pay the average or even bigger amount of taxes, which are typical for your field of activity.
2.Observe the share of permissible VAT deduction 
Within the regions this index equals 88% (it's defined as a ratio of incoming VAT to outcoming VAT) If you're not sure that your documentation is kept in good condition, it's better to stick to the permissible exponent of VAT deduction, if you want to avoid the tax agency's attention. 
3.Show a permissible profit level
If your business is fresh and you are losing revenues, it's ok. The real worst of it would happen if you have a mess in documentation, your tax payment is irregular and if you also have a considerable VAT charge. 
What needs to be done in this case? You have to stick to the average figures within your field, reducing the attention of the tax agency and keep the documents in a perfect order. 
4.Match account details
Updating and proper maintenance of 1C are crucial as very important clauses are being processed there: changes in current legislation, mending of bugs, additional functionality. 
5.Do not work with dubious contractors 
Tax agency software will put you on a blacklist if you start collaboration with those who are already on the blacklist at the moment. 
6.Look at everything in perspective
The aim of the Federal Tax Agency is to provide a 24/7 access to bank data and a direct access to the data of taxpayers. 
So if you have a «dark side» in your business, it's time to neutralize it step by step. 

What about you? Do you happen to deal with some of the highlighted possible issues? You will avoid all the problems if you find a qualitative partner for your accounting. We offer full accounting services to most of the major companies in Russia, this to have them feel secure and minimize their tax risks. 

If you have any questions, please submit a request in the contact form to have one of our experts consulting you for free today!