Called to the tax commission for VAT gaps: what to do?
One of the reasons a business representative can be called up for a commission at the Federal Tax Service is the so-called tax breaks, including VAT breaks. This approach is increasingly used by tax specialists: instead of on-site inspections, which involve a large amount of preparatory actions and require the involvement of a significant number of personnel, it is much easier to invite a representative of the company, who is suspected of underpaying taxes or other violations, to the Federal Tax Service office in order to provide explanations on another episode. What to do if you were invited to the tax commission, what is the VAT gap and when can it arise? We will understand this material.
What is the tax and VAT gap?
In the terminology of the Federal Tax Service employees, the tax gap refers to the discrepancy between the amount of taxes actually paid to the budget and the estimated amount of tax payments for the reporting period. In this case, only such a discrepancy will be considered as a gap when the company paid taxes less than it should according to the current legislation, overpayment of taxes is not considered a violation and the difference will be set off for the next reporting period.
Accordingly, if we are talking about a VAT gap, discrepancies in value added tax were revealed, then the taxpayer paid to the budget less than he should have.
Tax gaps can arise for various reasons, including:
errors in the preparation of the tax return – if errors were made during the preparation of the statements – this may lead to discrepancies in the amount of taxes;
ignorance of the legislation in the field of tax law – if persons who are involved in calculating taxes at the enterprise do not navigate all the nuances of the legislation, this can lead to various errors;
deliberate attempts to evade taxes – some companies specifically lower their tax base in order to pay less taxes than required by law;
cooperation with unreliable contractors – if the companies with which you cooperate implement various tax evasion schemes, this may lead to discrepancies in VAT for your company.
Any of these reasons, as well as other circumstances, may lead to the fact that the budget will be paid less taxes than is required by law. As a result, there will be a gap in VAT or another tax.
When can they call to the tax at VAT breaks
In recent years, tax authorities have been consistently implementing a program to evade a large number of field inspections, replacing them with other types of tax control. And the call to the commission at the IFTS branch fits in perfectly with this trend – more and more often company representatives are called in to give explanations instead of organizing a full-fledged field audit at the place of registration of the taxpayer. On the one hand, this can be regarded as a relief for business – after all, a call to the commission is not so stressful for company employees, on the other hand, it also requires certain actions by the taxpayer representatives to defend their interests and can lead to fines and other sanctions, similar to field checks.
The determination of VAT gaps in most cases occurs automatically after analysis of the submitted declarations. At the same time, special attention is paid to the tax authorities of those companies that in the past have been implicated in various schemes for tax evasion or other similar violations, as well as their counterparties. One of the typical situations when revealing the VAT gap: one of the companies participating in the transaction did not include information about the contract in its reporting, and the other entered all the information. Accordingly, the difference will be immediately fixed, and for the first company the chances of being invited to the commission at the Federal Tax Service will be very high.
What to do if you are called to the tax office
When taxpayers call a commission at the Federal Tax Service, there are two options for the development of events:
to agree with the requirements of the tax authorities – if the violations on the part of the company really were, the best option would be to recognize the validity of the claims on the part of the tax and pay the missing taxes;
to challenge the requirements in the prescribed manner – if, in your opinion, there were no VAT gaps, and the FTS claims are unlawful, you can file a complaint with a higher authority or a court. If there are arguments in your favor and legal support, the chances of a positive decision are quite high.
Which option to choose depends on the specific circumstances in which the taxpayer is located. To determine how to proceed, it is best to seek legal assistance. But it’s even better not to violate tax laws and ensure that VAT gaps do not arise.