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Tax Evasion Schemes


A letter from a Federal Tax Service inspectorate to other inspectorates describes evidence of unjustified tax benefits thus disclosing a list of new criteria to be considered reasons for opening an investigation.

The inspectorate requests their colleagues share their experience of completed inspections and judicial practice. The letter mentioned the following business practices.

Employees registered as private entrepreneurs

Tax authorities consider it suspicious when, within a short time frame, several former employees of a company register as private entrepreneurs, open accounts in the same bank, and start making transactions with the organization. Suspicions increase if entrepreneurs claim the same type of activity and work at the same address as their previous employer.

United accounting service

Inspectors will believe that contractors’ activity is coordinated if they receive accounting services from the same organization.

Recurrent utilization of loans

In tax inspectors’ opinion, a company which often borrows and does not have its own funds is most likely avoiding taxes. Inspectors calculate whether the company will be able to pay its debts. In the example described in the abovementioned letter, tax inspectors compared amount of company’s debt and its annual profit. They concluded that company would need over 30 years to pay back the loans. This pattern of conducting business shows that lending and contracting of loans are done for minimizing taxes. In other words, the company draws out the profit from the company with privileged tax regime (ie, simplified taxation), and then returns the funds as loans. By doing this it uses loan interest as an extra expense.

Unique suppliers and customers

Inspectors will be suspicious if customers of the company only make purchases from this company and no other and/or if the company sells only to these customers and no others. It will be even more suspicious if they use a privileged tax regime. In tax inspectors opinion this scheme exists only for tax profit.

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