Decide whether it is profitable for the company to show a loss.
Provide an explanation of why the company did not make a profit in this period.
Prepare for a losing commission.
Publication
Unprofitable reporting is always the subject of special attention of inspectors. At best, tax officials will limit themselves to asking for explanations of the reasons. But more often the consequences are more negative: a call to an unprofitable commission and an on-site inspection.
First, it is important to figure out whether to show the loss in the declaration or whether it is more profitable to hide it. If you nevertheless decide to submit a return without profit, then you need to prepare in advance for possible questions and requirements of the tax authorities.
Decide whether it is profitable for the company to show a loss
You summarize the financial year and discover that the company has made a loss. Probably the first thing you'll think about is hiding it. A positive tax base will save the organization from the prospect of commissions and on-site audits. But if you can document and justify expenses, is it really important to adjust the financial result? There are no safe maneuvers for distorting tax reporting. Each method has its own risks.
But if you still decide to adjust your reporting, carefully analyze possible options. We need to find a way that will help increase income or reduce the organization’s expenses with minimal risks. The most harmless option is to re-issue documents for expenses for a different period. Or, conversely, increase income and sign certificates for completed work from customers. Don't forget to check how the VAT amount will change in the reporting period. After all, you need to pay tax on additional sales. Only if you transfer expenses, then take into account the input VAT on them in another quarter.
Couldn't you reach an agreement with your counterparties? Consider other adjustment methods (see table).
Table.
How to hide a loss on your tax return
| Loss adjustment method | Tax consequences |
| Write off the unused balance of the reserve in the reporting period | To do this, the company needs to change its accounting policy and stop accruing reserves in the current year. Then she will not be able to account for expenses evenly and will write them off at a time |
| Artificially create income as a result of a fictitious transaction with a buyer | The company's financial statements will be distorted. And if the company decides to write off the buyer’s bad debt for such a sale, the tax authorities will file claims |
| Sell a product and then receive it back from the buyer | Inspectors may insist that the company record the return in the same period as the sale. But the judges do not agree with this position of the inspectors (resolutions of the FAS of the West Siberian District dated January 24, 2007 No. F04-9244/2006 (30394-A67-40), FAS of the East Siberian District dated January 11, 2007 No. A74-2087 /06-Ф02-7288/06-С1) |
| “Lose” documents and account for expenses on them in the next period | Difficulties arise when a company transfers standardized costs. It is necessary to calculate whether they fit into the standard of the period to which they originally belonged. If the condition is not met, the tax authorities will not allow the transfer. In addition, inspectors can pay attention to whether these costs fit into the current period standard |
| Recognize part of the costs as deferred expenses in account 97 | The company cannot stretch out those costs that need to be recognized at a time. When the company recognizes these expenses in the future, controllers will remove them in all periods to which the expenses do not apply. |
| Remove some expenses from the tax base | The organization will overpay income tax. There will also be a permanent difference between accounting and tax accounting. |
From a tax point of view, tricks that help hide a loss by increasing income are less risky. Before you start making adjustments, check that all sales for the reporting period have been accounted for. There may be documents that the company has not received from clients. If there is no doubt that sales are accounted for correctly, then consider other ways to increase income.
The company can reduce the loss, provided that it accrued reserves during the reporting period. Write off their unused balance in the reporting period rather than carry it over to the next one. This will increase the company's non-operating income. To do this, in the accounting policy on next year Fix the point that the company no longer creates reserves in tax accounting.
To hide losses, some companies recognize fictitious income. They enter into fictitious transactions with buyers and reflect income from a sale that never took place. The big disadvantage of this approach is that it distorts the company’s financial statements. There is a high probability that tax authorities will file claims against the organization’s counterparty if he writes off the costs of this transaction or accepts VAT as a deduction. And your company cannot avoid problems with inspectors if you write off such a bad debt from the buyer.
Another option to increase income is to sell the product with a return. The company ships products to a friendly counterparty at the end of the year, writes off its cost as expenses and recognizes income from sales. Next year, the buyer returns the product, and the company reflects it with the current date. The Tax Code allows you to correct errors in calculating the tax base in the current period if they led to excessive payment of tax (letter of the Ministry of Finance of Russia dated January 18, 2012 No. 03-03-06/4/1). A prerequisite for transferring expenses is the presence of profit in the period when the error was made. After all, if the company was at a loss, there is no question of paying tax at all. Returning goods will increase the organization's expenses by the amount of their sale to the buyer, and income by the amount of their cost.
Now let's look at ways that reduce losses by cutting costs. The company can carry forward the costs and take them into account in the next period. For example, put off documents confirming the consumption of paper for later. The familiar rule for correcting errors from the past will work here again. If due to an error the tax was overpaid, it can be corrected in the current period. But only if the company made a profit in the quarter with the error. Pay attention to what expenses you transfer - normalized for tax accounting purposes or not. For example, you decide to transfer expenses on advertising services to the next year. To completely protect yourself from tax claims, calculate whether these services fit into the standards of both the previous and current year.
Another popular way to hide a loss is to recognize part of the costs as deferred expenses. Such a mechanism is provided for in paragraph 1 of Article 272 of the Tax Code of the Russian Federation. If a company cannot establish a connection between expenses and specific income, then it distributes them between reporting periods independently. Such costs are taken into account in account 97 “Deferred expenses”. This method is often recommended by inspectors themselves to unprofitable companies in order to convince them to correct their statements. But here the inspectors forget that it is possible to extend the recognition of only those expenses that actually relate to the next reporting periods and are associated with generating income in the future. In other cases, the company must recognize the expense as a lump sum.
It is dangerous to use account 97 unjustifiably. When the company reflects such expenses in the future, inspectors can remove them and charge additional taxes with penalties and fines.
Sometimes companies hide losses by simply deleting expenses from the base. First of all, the accountant will exclude those expenses that he considers questionable from a tax point of view. But sometimes they get rid of legal expenses just to avoid inspection issues. In this case, the company forever deprives itself of the opportunity to recognize excluded expenses and overpays income tax. In addition, there is a constant difference between tax and accounting. After all, the organization excludes costs only from the tax base.
Adjust your tax accounting policies to your expected losses
If you expect that the company's reporting losses will last for a long time, review your tax accounting policies. First of all, refuse to accrue planned expenses - reserves. This will allow you to recognize only the actual costs that the company has incurred.
Do you use bonus depreciation and increasing factors? Give them up too. They accelerate the write-off of fixed assets, reducing current income taxes. On the contrary, it is better for a loss-making company to accrue depreciation in a slower manner. Establish in the accounting policy the right to apply reduction factors (clause 4 of Article 259.3 of the Tax Code of the Russian Federation).
Also review your cost allocation. Perhaps some of the indirect costs can be classified as direct. After all, these costs are not written off immediately, but only as revenue is recognized. Therefore, increasing the share of direct expenses will help the company reduce the resulting loss.
Provide an explanation of why the company did not make a profit in this period.
Let's say you decide not to hide the real state of affairs and submit your return at a loss. Inspectors will definitely check whether your company is using illegal methods to reduce taxes. Therefore, controllers often demand an explanation for the lack of profit. According to paragraph 3 of Article 88 of the Tax Code of the Russian Federation, an inspector has the right to request clarification during a desk audit of a loss-making declaration. Along with explanations, the company can submit supporting documents to the tax office. This is not necessary, but it is better to attach such documents to the explanations. After all, if the company explains the reasons for the loss and confirms them with documents, the likelihood of receiving an invitation to a commission will significantly decrease.
PARTICIPANT QUESTION
– We received a letter from the Federal Tax Service asking us to explain the loss. What happens if we don't answer it?
– The law does not provide any sanctions for the company and the manager in this case. In rare cases, officials still issue a fine, but it can easily be challenged in court. However, I do not recommend ignoring such a request. Even under the condition that there will be no sanctions from the inspectors. Failure to provide an explanation will definitely draw unnecessary attention to the company.
Prepare your explanations in any form. The main thing is to clearly explain the reason for the negative financial result. Tell us also about what measures are being taken to make a profit in the future.
In each case, the reasons for the loss are individual. For example, your organization is new to the market. Explain to the tax authorities that the company has just started its activities and the product is new to customers. Therefore, sales revenue is still minimal. And most of the costs are associated with advertising and marketing activities that will help develop the market. Or your company is just getting ready to start production and is spending large sums on the purchase of equipment. Support your arguments with a breakdown of income and expenses.
If the company has been in business for a long time, describe why revenue decreased or expenses increased. The decrease in revenue can be explained by a decrease in sales volumes or dumping policies. And the increase in costs is due to the development of new production facilities, repair or modernization of equipment. Write that a positive economic effect from today's spending is expected in the future.
In the explanations for inspectors, indicate the sources of financing for the company's activities. These could be: loans, credits or financial aid owners. Tax authorities are always interested in how a loss-making organization lives.
Typically, tax officials are satisfied with detailed and reasoned explanations. But if a company is at a loss for more than two reporting periods in a row, there is a chance that it will receive an invitation to a commission. And when inspectors have an unspoken intention to ensure additional revenues to the budget, they can even call an organization that has received a loss for the first time or the amount of it is very small.
Prepare for a losing commission
Before inviting a company to a commission, tax authorities will send an information letter. In it they will propose to reduce the loss, send adjustments, independently assess and eliminate tax risks according to twelve criteria from the Concept, approved by order of the Federal Tax Service of Russia dated May 30, 2007. No. MM-3-06/333. The inspectors will send this letter in advance - a month before the expected date of the meeting. And you will be given 10 working days to prepare a response. Such regulations were established by letter of the Federal Tax Service of the Russian Federation dated July 17, 2013 No. AS-4-2/12722.
If the inspectors do not receive a reasoned answer, they will call the company to a commission. They must do this by written notification in the form approved by order of the Federal Tax Service of Russia dated May 31, 2007 No. MM-3-06/338. If you receive such a notice, do not leave it unanswered. Otherwise, the tax authorities will hold the director of the company accountable (Part 1, Article 19.4 of the Code of Administrative Offenses of the Russian Federation).
Usually the manager is called to the commission, but instead an accountant or other authorized person can represent the interests of the company. The main thing is that the representative can have a constructive conversation with tax authorities and answer their questions about the company. You need to take your passport and power of attorney with you.
What if neither you nor the director can come to the commission? Ask the tax authorities to reschedule the meeting. Call the inspection, or better yet, send a letter indicating a valid reason. Most likely, the inspectors will reschedule the meeting.
So, the commission date has been set. If the company conducts real activity, and you can explain the reason for the loss, there is no need to worry before the meeting. Is the excitement too great? Bring a colleague with you to help. For example, a lawyer or an accounting employee.
The meeting will begin with questions about what the company does and how long it has been in business. Be prepared to list the organization's main customers and suppliers, legal and physical address, and sources of funding. One of the tasks of tax specialists at such commissions is to find out whether your company is a shell company. You will also be required to explain the reasons for the loss and talk about the measures that management is taking to correct the situation. Do not forget to collect and take with you the documents that the inspectors indicated in the invitation letter.
Most likely, tax authorities will insist that you adjust your reporting and show profit. But they have no right to demand this. The company decides whether to leave losses or not.
Following the meeting, the inspectors will draw up a protocol with their recommendations. The tax authorities are required to familiarize you with this document and give you a copy. After the commission, inspectors will continue monitoring the organization. If the company's tax burden does not increase over time, there is a possibility of being included in the on-site audit plan.
Contents of the magazine No. 8 for 2017CRIB
A.Yu. Nikitin,
accounting and tax expert
How to prepare explanations of losses for the Federal Tax Service
When tax authorities may require clarification
During a desk audit of a declaration in which the amount of loss is stated, the inspection has the right to demand explanations justifying the amount of such loss A clause 3 art. 88 Tax Code of the Russian Federation.
Attention
According to the rules established by the Federal Tax Service itself, “unprofitable” declarations can become a reason for an on-site inspection only if they are submitted for 2 years in a row, plus the loss is declared in the declarations for the reporting periods of the current of the year clause 2 of the Publicly Available Risk Assessment Criteria, approved. By Order of the Federal Tax Service dated May 30, 2007 No. MM-3-06/333@; Letter of the Federal Tax Service dated July 17, 2013 No. AS-4-2/12722. But in practice, tax officials are beginning to threaten to include on-site audits earlier in the plan.
Sometimes this is understood this way: the Federal Tax Service can request clarification during a desk audit only of the declaration for the period in which the loss occurred. But this is not true. After all, the company can carry the loss into the future e clause 1 art. 283 Tax Code of the Russian Federation. It turns out that tax authorities have the right to demand an explanation of the losses of previous years declared in the declaration for the reporting period or for the year in which the profit was made. That is, they can request clarification as long as the company reduces profit by the amount of the loss it once received. And it's legal O Resolution 1 of the AAS dated November 5, 2015 No. A11-372/2015.
Tax authorities can also ask for clarification when checking an updated declaration, in which either a loss is declared for the first time, or it has been increased compared to the initial declaration.
Our readers report that they are already receiving requests from tax authorities to provide explanations on “unprofitable” declarations for 2016. For example, in telephone conversation With one of the readers, the inspectors stated that they did not need declarations with a loss, and threatened with an on-site inspection if the company did not provide an update with the tax due. And they even promised that if such a clarification was submitted, they would not find fault with the discrepancies between the declaration and the financial statements.
Advice
If you really made a mistake in the declaration, then you can not provide an explanation, but immediately submit an updated declaration Yu clause 1 art. 129.1 Tax Code of the Russian Federation. This will allow you to avoid a fine for incomplete payment of tax, provided that the arrears and penalties are paid in advance th subp. 1 clause 4 art. 81, clause 9.1 art. 88 Tax Code of the Russian Federation.
How to provide explanations
To taxpayers who file returns under the TKS, the inspectorate will send a request to provide an explanation th Appendix No. 1 to the Order of the Federal Tax Service dated 05/08/2015 No. ММВ-7-2/189@ electronic. The company must, within 6 working days from the date of sending the request by the tax authorities, send them an electronic receipt of acceptance of the document A clause 5.1 art. 23 Tax Code of the Russian Federation; clause 14 of the Procedure, approved. By Order of the Federal Tax Service dated April 15, 2015 No. ММВ-7-2/149@. If this is not done, tax authorities may suspend transactions on bank accounts. m subp. 2 p. 3 art. 76 Tax Code of the Russian Federation.
In this case, the explanations themselves can be submitted to the inspectorate either on paper or via TKS in the form of a scanned copy of the paper explanations or in the form of a file signed with a qualified electronic signature Yu clause 3 art. 88 Tax Code of the Russian Federation. You can check with the inspectorate which option suits them best.
The company has 5 working days from the date of receipt of the request to prepare an explanation of the company’s loss. I clause 6 art. 6.1, paragraph 3 of Art. 88 Tax Code of the Russian Federation. If the company has received a request to provide clarifications on the TKS, then this period is counted from the day the receipt of acceptance of the document is sent to the tax authorities.
There is no special form for explanations of losses, so they can be prepared in any form.
Discuss with the manager
Sometimes in practice, tax authorities require a detailed description of the organization’s activities, a breakdown of income and expenses, an explanation of the reasons for the occurrence of receivables and payables, and submission of extracts from tax registers and accounting policy, information about concluded agreements and activities that the company will carry out in order to overcome the current situation, predict income tax payments by the end of the year, etc. But you can decide for yourself whether to follow the lead of the tax authorities and whether to comply with their requirements that go beyond the limits established by law.
Along with explanations, the company has the right to submit extracts from accounting and (or) tax accounting registers, primary documents confirming the amount of losses A clause 4 art. 88 Tax Code of the Russian Federation. But the tax authorities have no right to demand them from you, except in the case where an adjustment with an increased amount of loss is filed after 2 years from the date established for filing the initial declaration And clause 8.3 art. 88 Tax Code of the Russian Federation.
For example, an updated declaration for 2014 with an increased amount of loss was filed in April 2017. Then auditors may require both extracts from accounting registers and primary documentation on transactions.
What to write about in the explanations
The mere presence of a loss does not indicate an understatement of the tax base. Indeed, for tax purposes, a company can recognize any documented and economically justified expenses s Art. 252 Tax Code of the Russian Federation.
And the reasons that the company's expenses exceeded its income can be anything. For example:
doing business on initial stage or development of a new type of activity/new market (for example, a branch is opened in another region, which required significant financial investments);
falling demand for products in times of crisis and high competition in the market;
reduction in prices for products with expiring dates, unsold seasonal goods (clothing, shoes, etc.);
refusal of buyers from transactions, termination of contracts with suppliers, resulting in a decrease in sales and purchase volumes;
purchase of expensive equipment, Vehicle, real estate, the use of bonus depreciation on them;
repair of own or rented premises (if, under the terms of the contract, the tenant carries out routine repairs for his own check clause 2 art. 260 Tax Code of the Russian Federation);
emergencies, accidents (fire, flood) and so on.
We tell the manager
If a company has just started operating, then it is natural to have expenses in the absence of income. And the tax authorities, most likely, will have no complaints against such companies e Letter of the Ministry of Finance dated April 21, 2010 No. 03-03-06/1/279. At the same time, if, for example, a company was going to open a branch, rented premises for this, hired employees, but the opening for some reason did not take place, inspectors may consider the expenses unreasonable And Letter from the Federal Tax Service for Moscow dated January 11, 2012 No. 16-15/000705@.
A letter of explanation can be written something like this.
In the Federal Tax Service of Russia in Noginsk
Moscow region
from Carmen LLC, INN/KPP 5031543286/503101001,
contact person: gl. accountant L.I. Independent,
tel.: +7-496-514-17-24
Ref. No. 25 from 02/21/2017
Explanations for the income tax return for 9 months of 2016
In response to your request No. 08-17/02987 dated 02/15/2017 for the provision of explanations regarding the reflection of losses in the income tax return for 9 months of 2016, we report the following.
The company carried out an analysis of the results of commercial activities, as well as tax reporting for 9 months of 2016. The analysis showed that the losses are temporary and associated with a decrease in income and an increase in the company’s costs. The organization did not allow incomplete reflection of information or errors leading to an understatement of the tax base for profits. Therefore, there is no reason to submit an updated declaration in accordance with paragraph 1 of Art. 81 Tax Code of the Russian Federation.
For 9 months of 2016, the company’s revenue from the sale of products amounted to 43.8 million rubles, expenses taken into account for tax purposes amounted to 48.0 million rubles, including:
- material costs - 23.6 million rubles;
- labor costs - 6.4 million rubles;
- the amount of accrued depreciation and expenses in the form of depreciation bonus - 8.7 million rubles;
- other expenses - 9.3 million rubles.
Thus, the amount of the resulting loss amounted to 4.2 million rubles. The main causes of losses are as follows.
1. Fall in consumer demand due to the crisis and high competition in the market. For this reason, the company was forced to lower selling prices for women's clothing, which makes up the majority of the range. As a result, some of the goods were sold at a minimum trade markup or at cost. Compared to the same period in 2015, sales revenue decreased by 14%.
2. Increase in expenses in the current period due to repairs in the rented store premises at the address: Noginsk, st. 3rd Internationala, 76. In accordance with the terms of the lease agreement, the tenant carries out current repairs at his own expense. In addition, during the renovation (from May 15 to July 31), retail space was reduced.
3. Purchase of warehouse space at the address: Noginsk, st. Rabochaya, 64. The facility was put into operation on August 1, 2016, in accordance with clause 9 of Art. 258 of the Tax Code of the Russian Federation applied a depreciation bonus in the amount of 10% of the original cost.
Thus, the excess of expenses over income is caused by objective reasons. In order to overcome the current situation, it is planned in 2017 to develop a new pricing policy, expand the range, and search for new suppliers. In addition, the management of Carmen LLC approved a plan to reduce the organization’s expenses in 2017. At the end of 2017, the company plans to make a profit.
Applications:
1) report of the marketing department on the dynamics of market prices for goods sold - on 3 sheets;
2) copies of the contract with Versal LLC for repair work dated 04/29/2016 No. 34/2, the acceptance certificate for the work performed dated 07/31/2016;
3) a copy of the purchase and sale agreement for non-residential premises dated 07/05/2016 No. 10/16;
4) the marketing policy of the company for 2017, approved by order No. 5-r dated January 23, 2017.
In the explanations, you can show the dynamics of income and expenses, if the last year was more successful for the company, or decipher some items of expenses, due to which the loss was mainly formed. But there is no need to go into too much detail about each figure. Do not promise the tax authorities that you will receive a profit within a specific time frame, because if these promises are not fulfilled, you will most likely receive new letters demanding that you submit an update on the tax increase.
What are the dangers of artificially increasing the tax base?
It happens that a company follows the lead of inspectors and excludes some expenses in order to obtain a positive tax base for profits. But if you are able to justify the amount of loss in the explanations, then it is necessary to declare it. You should not distort reporting at the request of inspectors. After all, you will do this to your own detriment.
Firstly, by submitting a clarification, you will essentially increase the period of the desk audit, since it will begin again O clause 9.1 art. 88 Tax Code of the Russian Federation. Inspectors will have more time to find violations.
Secondly, you will not be able to carry forward a loss that you do not declare in your return, and in subsequent years you will pay a higher tax amount e clause 1 art. 54 Tax Code of the Russian Federation; Resolution of the AS SZO dated November 21, 2016 No. Ф07-10207/2016.
Thirdly, you can take into account excluded expenses in the current tax period only if you make a profit and the tax payable to the budget is calculated according to the declaration. Otherwise, you will again have to submit an update for the period in which you removed these expenses at the request of the tax authorities th Letters of the Ministry of Finance dated April 13, 2016 No. 03-03-06/2/21034, dated July 22, 2015 No. 03-02-07/1/42067. If by that time 2 years have passed after the deadline for filing the primary return, the tax authorities will require a primary loss claim. at clause 8.3 art. 88 Tax Code of the Russian Federation.
Advice
When the company begins to make a profit, it is better to transfer the loss in parts so that the declaration results in an additional tax payment, albeit in a small amount. Then the tax authorities will not have any questions for the organization.
Consequences of failure to provide explanations
Consequence 1. From this year, for failure to provide explanations provided for in paragraph 3 of Art. 88 of the Tax Code of the Russian Federation, a fine of 5,000 rubles may be issued. In the event of a repeated violation within a calendar year, the fine will be 20,000 rub. pp. 1, 2 tbsp. 129.1 Tax Code of the Russian Federation
Consequence 2. Directors may call a “unprofitable” commission to a meeting. And, even if a large loss is declared based on the results of only one year, it is possible that tax authorities will consider the company as a candidate for inclusion in the on-site audit plan.
Consequence 3. It is unlikely, but still possible, that the inspectorate will try to exclude any expenses from the tax base for profits and will charge additional tax, for example, based on the results of counter audits. And since the tax authorities have already notified the company that there are claims to the declaration, sending a request for explanations, it is possible that one fine day you will simply be handed a desk audit report with additional charges And Letter of the Federal Tax Service dated July 16, 2013 No. AS-4-2/12705 (clause 2.7).
Advice
It is better to provide explanations, even if you did not meet the allotted five-day deadline. This can be done right up to the review of the audit materials. In this case, you will have to pay a fine, but if the tax authorities’ explanations are satisfied, there will be no additional assessments for the audit.
If documents confirming the loss are lost, do not panic and try to challenge the legality of sending you a request for explanations - this is pointless O Resolution 10 AAS dated 02.02.2017 No. 10AP-18432/2016. After all, you are not required to provide a primary report; you just need to explain under what circumstances the loss occurred. If this is done correctly, it is possible that it will never come to an on-site inspection. But if you actively refuse to explain the loss, tax authorities may suspect that you simply have nothing to support the figures stated in the declaration. Please note that if the amount of the loss is confirmed by a previous on-site inspection and the primary documents are lost after that, the inspection does not have the right to refuse the company to transfer the balance of such loss to the future e Resolution of the AS UO dated February 28, 2017 No. F09-182/17.
There are ways to prevent a loss from appearing in reporting, but almost all of them have their own risks. Of course, there are safe options. For example, a company whose sales depend on the time of year may reconsider the distribution of expenses into direct and indirect so that more expenses can be written off as its products are sold. V Letter of the Ministry of Finance dated June 10, 2011 No. 03-03-07/21. But it is better when the organization can justify the amount of the loss received without distorting the reporting or making changes to the accounting policies.
Entrepreneurial activity is an independent activity carried out at one’s own risk, aimed at systematically obtaining profit from the use of property, sale of goods, performance of work or provision of services by persons registered in this capacity in the manner prescribed by law (Article 2 of the Civil Code of the Russian Federation).
27.04.2016But often when doing business we're talking about not only about the lack of profit, but also about the total excess of expenses over income. In this case, we must say that the company is incurring losses.
For the purpose of calculating income tax, the object of taxation is profit.
Profit is, for Russian organizations that are not members of a consolidated group of taxpayers, income received reduced by the amount of expenses incurred (clause 1 of Article 247 of the Tax Code of the Russian Federation). Let us recall that for the purpose of calculating income tax, the taxpayer has the right to transfer the loss he received to future reporting (tax) periods. The taxpayer has the right to carry forward a loss to the future within ten years following the tax period in which this loss was received (Article 283 of the Tax Code of the Russian Federation). It is worth considering that accounting for any expenses (losses) on the basis of Chapter 25 of the Tax Code of the Russian Federation must have an economic and documentary justification (Article 252, paragraph 4 of Article 283 and other articles of the Tax Code of the Russian Federation).
Order of the Federal Tax Service of Russia dated May 30, 2007 No. MM-3-06/333@ “On approval of the Concept of the planning system for on-site tax audits” established publicly available criteria for self-assessment of risks for taxpayers, used by tax authorities in the process of selecting objects for conducting on-site tax audits.
Among these criteria are:
Reflection of losses in accounting or tax reporting over several tax periods;
The organization carries out financial and economic activities at a loss for 2 or more calendar years;
Discrepancy between the growth rate of expenses compared to the growth rate of income according to tax reporting and the growth rate of expenses compared to the growth rate of income reflected in the financial statements.
As noted by the Supreme Arbitration Court of the Russian Federation in the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 12, 2006 No. 53 “On the assessment arbitration courts validity of the taxpayer receiving a tax benefit" and the Constitutional Court of the Russian Federation in the Determination of the Constitutional Court of the Russian Federation dated 04.06.2007 No. 320-O-P, the validity of expenses taken into account when calculating the tax base must be assessed taking into account the circumstances indicating the taxpayer’s intentions to obtain an economic benefit as a result real entrepreneurial or other economic activity. In this case, we are talking specifically about the intentions and goals (direction) of this activity, and not about its result. At the same time, the validity of obtaining a tax benefit, as noted in the same resolution, cannot be made dependent on the efficiency of the use of capital.
But this does not mean that the inspectorate cannot contact you with a requirement to provide explanations about the nature of your unprofitable activities.
Features of conducting a desk audit in case of claims of losses
When conducting a desk tax audit of a tax return (calculation) in which the amount of loss received in the corresponding reporting (tax) period is stated, the tax authority has the right to require the taxpayer to provide, within five days, the necessary explanations justifying the amount of the loss received (clause 3 of Article 88 Tax Code of the Russian Federation). The taxpayer has the right to additionally submit to the tax authority extracts from the tax and (or) registers accounting and (or) other documents confirming the accuracy of the data entered in the tax return (calculation) (confirming losses) (clause 4 of article 88 of the Tax Code of the Russian Federation).
When conducting a desk tax audit on the basis of an updated tax return (calculation) submitted after two years from the date established for filing a tax return (calculation) for the relevant tax for the corresponding reporting (tax) period, in which the amount of tax payable in budget system of the Russian Federation, or the amount of the received loss has been increased compared to the previously submitted tax return (calculation), the tax authority has the right to request from the taxpayer primary and other documents confirming changes in information in the relevant indicators of the tax return (calculation), and analytical tax accounting registers, for on the basis of which the indicated indicators were formed before and after their changes (clause 8.3 of Article 88 of the Tax Code of the Russian Federation).
Based on the above standards, the organization will have to provide appropriate explanations (documents).
How to explain losses:
Opening a new line of activity;
Recent start of business, lack of working capital
Concluding large transactions and making short-term volume expenses
Expansion of activities
Unfavorable market conditions
Business plan with the expected “correction” of the situation in the near future
Business plan for a large project that will generate profits in the future (large initial costs)
Other significant features of the company's business.
If in the accounting period the company's income turned out to be less than expenses, the income tax base is recognized equal to zero and there is no tax to pay. Of course, in the business world, ups and downs are possible, and if this happened once, and the amount of this negative difference is small, then most likely there will be no questions for the company. Systematic demonstration of losses or a serious excess of expenses over income in the income tax return may raise suspicions among controllers of illegal actions. In this case, the organization will have to prepare a written explanation for the losses to the tax office. We will consider a sample of drawing up such a document, as well as cases in which it is required to be drawn up, below.
Request for clarification
Any declaration is subject to a desk audit, which can last up to three months from the date of submission of the report. During this procedure, controllers analyze the data contained in the declaration, and, of course, they pay special attention to the figures that reduce the tax payable. In the income tax return, these are the declared costs within the framework of activities and non-operating expenses. If their total amount or distribution structure confuses the tax authorities, then the company is sent a request for explanations and the need to confirm the amounts of declared expenses. As a rule, the requirement immediately contains a proposal to file an amended declaration in case the company cannot explain the stated figures for costs or losses.
In general, according to paragraph 3 of Article 88 of the Tax Code, controllers have the right to demand explanations from any organization that showed losses in the reporting period. However, it must be recognized that inspectors do not always use this right. Typically, if a company has received such a request, this means that it has been included in the list of taxpayers whose activities are subject to consideration by the commission for legalization of the tax base. The activities of such structures are described in the letter of the Ministry of Finance dated July 17, 2013 No. AS-4-2/12722.
Similar commissions are formed in inspections to check indicators for all established in Russian Federation taxes. In the context of paying corporate income tax on the general taxation system, such commissions include taxpayers who have shown tax losses as part of financial and economic activities for the previous two tax periods, as well as in the current reporting period. Another way to get noticed by inspectors is to demonstrate low tax burden, that is, the minimum ratio of the calculated amount of income tax to the total amount of income from sales and non-operating income. The letter even established special guidelines for verification: for manufacturing companies, this figure should be at least 3%, and for trading companies, at least 1%.
How to write an explanation to the tax office regarding losses
After receiving a request for clarification, the organization has 5 days to respond. Actually, this will be discussed in the letter from the tax authorities.
The law does not establish a sample explanatory note to the tax office regarding losses. The company draws it up in free form with supporting documents attached. The answer must state why large expenses arose in the period under review, which led to losses. Perhaps the company is preparing for a big deal, which will be dated in the next quarter, or, conversely, in the current quarter, a deal on expenses incurred within the framework of income received in previous periods was closed. Perhaps we are talking about some factors that the organization itself cannot directly control.
In short, when drawing up such an answer, you need to remember that the activities of any company should be aimed at making a profit. At the same time, expenses that an organization makes are taken into account in calculating income tax only if they are economically justified, that is, again, they are carried out to make a profit in the future.
A sample explanatory note to the tax office regarding losses may look like this:
To the Head of the Federal Tax Service No. 28 for Moscow
fromAlpha LLC
TIN772812345678 , gearbox772801001
Legal address:
117279, Moscow, st. Profsoyuznaya, 106
On the reasons for reflecting losses in income tax reporting for 2016
In response to your request no.12-03/456 from17.04.2017 on providing an explanation of the reasons for recording a loss in the amountRUB 670,520in the income tax return based on the results2016We report the following.
The main activity of the organization isproduction of children's clothing. In connection with the planned increase in production volume in 2017, an additional clothing sewing workshop was opened in 2016 as preparatory measures. In this regard, in September-October 2016, additional expenses occurred: for the rental of new premises, repairs, and the purchase of equipment. In addition, in November 2016, the staff of the production complex was increased. As a result of these changes, the wage fund was increased by 20%. Due to the increase in production volumes, the volume of purchased materials also increased.
To confirm the above costs, we provide copies of the following documents:
- orders from the director of the organization to increase production volumes, open a new workshop and organize its work, expand the staff;
- premises rental agreement;
- purchase invoices additional equipment, as well as consumables as part of the renovation of the new workshop premises;
- change staffing table, as well as copies employment contracts with new employees.
All of the above expenses are economically justified and documented. In strict accordance with the norms of the current tax legislation, expenses were reflected in the income tax return for 2016. At the same time, the actual increase in sales volumes was first noted only in December 2016; as a result, insufficient revenue growth within the reporting period led to a loss at the end of the year. In 2017, this situation will be adjusted taking into account the extended validity of contracts concluded at the end of 2016 for the supply of products on a regular basis. Thus, at the end of 2017, Alpha LLC plans to demonstrate a 30% increase in profit compared to 2015, when no losses were reported.
CEO _____________ A.V. Petrov
Chief Accountant ________________ M.V. Sidorova
However, a separate excess of expenses over income or reflection of expenses in the absence of income is not considered a tax violation. In particular, this position was expressed in letters of the Ministry of Finance dated April 26, 2011 No. 03-03-06/1/269 and dated August 25, 2010 No. 03-03-06/1/565. Thus, if a company receives a request to provide explanations for losses incurred, this does not mean that by default we are talking about some kind of illegal actions or about a deliberate understatement of the level of the tax base.
At the same time, it is impossible to ignore the received request and leave it unanswered. Such inaction is fraught with a more detailed consideration of the declaration data, especially in terms of expenses, and, possibly, the initiation of an on-site tax audit against the taxpayer.
