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Court Enforces Statute Of Limitations On Tax Fines

The tax authorities will begin forgiving some outstanding debts.

If a company is unable to write off its overdue debt, it may demand the tax authorities issue certificates that do not indicate the debt. Judges from the Presidium of the Federal Arbitration Court reached such a decision on Tuesday.

Experts claim that after the Federal Arbitration Court’s decision, the legal precedent created will mean that taxpayers will no longer have to take every analogous case to court.

The Kemerovo region’s Union of Consumer Cooperatives took the issue to the Federal Arbitration Court. In June 2008, the Union, hoping to receive budgetary credit, requested a certificate certifying its account standing with the tax inspection. The inspection issued the certificate, but on it was indicated that the organization needed to pay a fine on taxes for some 29,900 rubles of profit it had accrued sometime in the past.  Furthermore, the three-year statute of limitations for paying the fine had already passed. The Union lost in both the regional and county courts before bringing its case to the Federal Arbitration Court.

The court’s decision states that judicial practice on the issue has been contradictory. For example, the arbitration courts of the Ural, Northwest, and Northern Caucasus regions consider it illegal to issue certificates to companies indicating their outstanding debt. The reasoning behind this is that such information does not reflect the actual size of the organization’s tax liabilities, violates the company’s legal interests, and interferes with how the company conducts business.

Tax consultants explain that organizations need these certificates in order to receive licenses to enter into any kind of competition or proposal. They are also required for the reorganization of a company, the sale of a business, and for obtaining credit.

The court indicated to the tax authorities that those businesses had already passed the time allowable to impose sanctions according to both judicial and extrajudicial proceedings. The court ruled that the lower-level courts’ rulings need to be reviewed.

Experts say that the court pointed to a recurrent gap in tax regulations in making its decision. Although the Tax Code has a provision for writing off debt that realistically cannot be paid for reasons of a legal nature, tax experts explain that this is not done because similar instances are not mentioned in the government resolutions established for absolving debt. As a result, taxpayers have to go to court in order to defend their status.

However, a lingering problem that concerns lawyers is that, even after the Court’s decision, the state financial authorities will usually issue the permits correctly, without the outstanding debt listed, but the debt will still remain on the organization’s account. Subsequently, the tax authorities will continue to charge penalty fees on the debt and demand payments from businesses.

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