The concept of tax monitoring was introduced into the Russian Tax Code on 1 January 2015.
Tax monitoring is a new form of control over the correctness of calculation, fulness, and timeliness of payment (transfer) of taxes and levies. It has a number of advantages for the taxpayer, compared to the traditional forms of tax control:
- exemption from desk and field audits (with a few exceptions envisaged by the tax legislation) – which mean lower administrative costs
- reduced timeline of tax audits to one year and nine months for tax audits covering up to one calendar year
- reduced scope of control measures and reduced number of source documents to be reviewed
- reasoned opinions on complex issues
- real-time information exchange with the tax authorities
- recognition of the company as a bona fide taxpayer
- voluntary participation
- The Russian Tax Code (Section V.2 Tax Control in the Form of Tax Monitoring)
- Order of the Russian Federal Tax Service No. ММВ-7-15/323@ On Approval of Forms of Documents Used for Tax Monitoring and Related Requirements dated 21 April 2017
- Order of the Russian Federal Tax Service No. ММВ-7-15/509@ On Approval of Requirements for Internal Control System Organization dated 16 June 2017
To qualify for the Tax Monitoring regime, a taxpayer needs to
1. Comply with the formal criteria:
- Annual taxes (VAT, excises, profit tax, MET)≥ RUB 300 million
- Annual reveneus ≥ RUB 3 billion
- Total value of assets ≥ RUB 3 billion
2. Submit the following documents to the tax authorities before 1 July:
- an information exchange procedure
- information on holders of direct and (or) indirect interest in it, exceeding 25 percent
- a tax accounting policy for the current year
- internal documents regulating the organisation’s internal control system, in particular:
- the register of risks identified for tax monitoring purposes
- the register of the organisation’s control procedures performed for tax monitoring purposes
- a report on the analysis of the organisation’s control procedures performed for tax monitoring purposes
- a matrix of risks and control procedures
- results of the organisation’s control procedures performed for tax monitoring purposes
- internal control system’s maturity assessment
- internal control system improvement events
- Other documents required to participate in tax monitoring
- Diagnostics of the current state of the organisation in terms of tax monitoring participation requirements, including:
- economic and practical feasibility
- identification of open tax positions and tax risks
- assessment of business processes
- internal control system maturity assessment
- analysis and assessment of the information environment.
- Preparation of recommendations to ensure compliance with tax monitoring requirements, including:
- on the improvement of the internal control system (procedures for the identification, assessment and documentation of risks as part of business processes, identification and documentation of control procedures, assessment of ERP efficiency, etc.)
- on the development of a roadmap towards the implementation of tax monitoring
- Development/improvement of business processes and IT platforms to achieve the target ICS maturity level and efficient exchange of information with the tax authorities.
- Preparation and/or support in the preparation of a full set of documents required to participate in tax monitoring.
- Development or support in the development of functional and technical requirements, including:
- for the IT platform for the purposes of information exchange with the tax authorities
- for the disclosure of information for a the selected IT platform (by return/register line, etc.)
- for ICS automation
We have extensive experience in delivering projects on the preparation and support of the largest companies in their participation in the tax monitoring regime, as well as implementing long-term projects on the introduction of an internal control system, for the largest Russian steel and mining, oil and gas, petrochemical, nuclear, telecommunication, FMCG, and IT companies.
We have successfully implemented long-term structurally complex projects on the implementation, updating of the internal control system (ICS) and process management, requiring the engagement of a large number of business owners with diverse objectives.
Our team has implemented numerous projects on the development and improvement of a tax accounting methodology and tax risk analysis, which enables us to support clients at all stages of tax monitoring implementation, in particular:
- analyse the company’s tax function efficiency
- unify the tax accounting methodology for a group of companies
- develop and improve the tax accounting methodology while implementing new ERP systems and technology solutions (for example, electronic document flow systems)
- identify the tax risks that can derail the implementation of tax monitoring participation and prepare risk mitigation recommendations
Our team consists of experienced tax monitoring, tax and legal, and risk management specialists.
Our tax specialists have worked extensively with the Russian Federal Tax Service. Deloitte’s professionals have their qualifications confirmed by international certificates, such as ACCA, membership in tax committees of major business associations, etc.