Tax assessment and interest overturned after a field tax audit

The task

Following a tax audit of VK-I, the tax authority assessed the company RUB 93,504,586 of tax arrears and RUB 26,392,166 of late-payment interest and opened administrative proceedings under art. 122(3) of the Tax Code of the Russian Federation. The main allegations concerned loan agreements between the taxpayer and a foreign company: the tax authority treated a number of the transactions as artificial and devoid of economic effect.

What we did

• Carried out a detailed review of the documents and established what the tax authority's allegations actually amounted to.
• Showed that the tax authority's arguments were not supported by the audit file and that no causal link had been established.
• Assembled evidence of the economic purpose of the loan agreements: the taxpayer had been profitable since 2021 and the loans were advantageous to it.
• Confirmed that the taxpayer performed the agreement and that all free cash flow went to servicing the loan — which disposed of the allegation of non-repayment.
• Demonstrated procedural breaches during the tax control measures and the internal inconsistency of the audit report.

The result

We obtained the quashing of the tax authority's decision assessing arrears and interest. The administrative proceedings against the company were discontinued for want of grounds.

This description reflects the result in a particular matter on particular facts. A result in one case neither guarantees nor implies a similar result in another.