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An arbitration court has issued a ruling that vividly illustrates the risks of using "technical" counterparties and attempting to obtain unjustified tax benefits. LLC "21 Vek" filed a lawsuit seeking to invalidate the tax authority's decision to assess additional taxes, penalties, and fines totaling RUB 317,830,289. However, the court fully rejected the company's claim, upholding the position of the Federal Tax Service.
Core Allegations by the Tax Authority
The Federal Tax Service established that LLC "21 Vek" included in its expenses and VAT deductions costs related to transactions with 23 companies that, in the tax authority's view, did not actually perform work or supply goods. These counterparties were deemed "technical" companies used for cash withdrawal and tax minimization.
Key Violations Identified:
- Understatement of VAT and Corporate Income Tax Base. The company improperly recorded expenses and applied deductions for transactions with "technical" counterparties.
- Cash Withdrawal. Funds transferred to the "technical" companies were cashed out and channeled to individuals' accounts, as well as used to purchase real estate.
- Attempt to Account for Cryptocurrency Mining Expenses. In a transaction with LLC "Bitriver Rus," the company tried to include cryptocurrency mining service costs as expenses. However, the general director of LLC "21 Vek" stated in his explanations to law enforcement authorities that the services were never rendered and that the documents were forged.
- Obstruction of the Audit. The company submitted forged documents, including lists of subcontractor employees that included real individuals (such as research institute staff members) who had never worked at the construction sites.
Why the Court Sided with the Tax Authority
The court found that the totality of evidence gathered by the tax authority left no doubt about the intentional nature of the violations. The evidence included:
The court concluded that LLC "21 Vek" deliberately created a scheme involving "technical" companies to obtain unjustified tax benefits. The company's claim was fully rejected, and the tax authority's decision was deemed lawful.
- witness testimony;
- analysis of fund flows;
- results of document seizures;
- evidence of document forgery.
The court concluded that LLC "21 Vek" deliberately created a scheme involving "technical" companies to obtain unjustified tax benefits. The company's claim was fully rejected, and the tax authority's decision was deemed lawful.
What This Means for Businesses
This case is a clear example of how tax authorities consistently prove in court that tax benefits are unjustified when "technical" counterparties are used. Even when documents are formally in order, if the actual business transactions are not substantiated, and the flow of funds indicates cash-out operations, courts side with the tax authorities.
Particular attention is paid to:
Particular attention is paid to:
- the absence of real resources for counterparties to perform the work;
- the transit nature of fund movements;
- the presence of witness testimony and other evidence of document forgery.
How to Protect Your Business from Similar Risks
To avoid tax authority claims, it is essential to:
- verify counterparties for real resources and business reputation;
- build a solid evidence base substantiating actual business transactions;
- ensure primary documentation aligns with actual circumstances;
- respond promptly to tax authority inquiries.
How Acsour Can Help
Acsour experts are ready to:
Contact us — we will help you establish a robust tax security system and protect your business from assessment risks.
- conduct tax audits of your counterparties and transaction chains;
- assess risks of tax benefits being deemed unjustified;
- prepare recommendations for building safe contractual relationships;
Contact us — we will help you establish a robust tax security system and protect your business from assessment risks.
