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Here are the major tax traps to watch for 2014:

Services

• Not listing final cost of services
  
  Inspectors often doubt the necessity of management and consulting services. Especially if the contract does not include a final price for these services, they may be regarded as unfounded.
  
  How to avoid problems. The contract must include not only general methods of calculating the cost of services, but also the total compensation amount. If the final price is unknown at the time the contract is drawn up, the contract should include the approximate amount with a disclaimer that it may be amended later. The later correction of the sum should be reflected by an additional agreement.
• Not dividing services into categories
  
  Services for merchandise display are often included in a general contract for promotional services rather than forming a separate contract. In cases where the costs of individual services are not itemized, inspectors require accounting all costs as standardized advertisement expenses – within 1% of revenue. The courts have supported this opinion.
  
  How to avoid problems. Costs of each of individual service must be prescribed in the contract. This will allow costs to be divided into standardized and non-standardized expenses, with the full amount of the latter declared as expenditures. An even safer option is to separate standardized and non-standardized expenses into different contracts.

Contract

• Not listing the subcontractor
  
  A contractor has a right to outsource the job to subcontractors without confirming his choice with the client. It is only required when the condition is included in the contract. But inspectors usually insist on written confirmation in any case.
  
  How to avoid problems. The choice of subcontractors must be coordinated with the Client through mail exchange or an agreement.

Delivery/Supply

• Giving bonuses for not returning goods
  
  Supply contracts often include a condition that the buyer has a right to return unsaleable stock and gives a bonus to buyers who do not return the goods. However, this type of bonus is illegal for contracts for delivery of food commodities.
  
  How to avoid problems. The safest option is to replace the bonus for not returning goods is to give a bonus for reaching a prescribed volume of sales. This bonus must not exceed 10% of the cost of goods; otherwise, it may be subject to fines of up to 5 million rubles.
• Declaring contract penalties as income
  
  Penalties (fines, fees, etc.) for violation of contract terms are not to be included in taxable base for VAT. Most important, these payments must not be associated with the payment and must not affect the original price, which would then be subject to additional VAT.
  
  How to avoid problems. Penalties must not affect price formation. A safer option is to include in the contract a fine of 10,000 rubles as a late fee, rather than increase in price of goods by 10%.

Credit

• Stating an inflexible purpose of credit
  
  A credit agreement usually includes a description of the purpose of credit. But if the contract prescribes funds for the purchase of equipment, but instead the funds are used to repair equipment, the tax inspectors deny the credit interest from being expensed – deeming it an inappropriate use of funds.
  
  How to avoid problems. The use of funds must not contradict the terms of the credit contract. If it is impossible, it is safer to avoid specific wording about the purpose of funds in the contract and to prescribe more flexible conditions for its use.
  

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