Fiscal disputes due to the “unreality” (non-commodity) of transactions are one of the most common reasons for additional assessments of VAT and income tax by the State Tax Service. We give a brief reminder that really works during inspections and in court.
📌 What exactly gives the State Tax Service grounds to consider a transaction “fictitious”?
Most often, this is a certain activity that does not have consequences in the form of real changes in assets or liabilities: for example, a product/service exists only “on paper”, documents are drawn up with errors or with a direct violation, the counterparty does not have the resources or rights to perform the contract, etc.
Typical “red flags” for tax officials are as follows:
- missing or formal primary documents; errors or defects in details;
- non-registration of tax invoices or critical errors in them;
- a counterparty without personnel/warehouses/equipment, not at the address, with suspicious KVEDs;
- lack of licenses/permits for the relevant type of activity;
- the supplier or chain is involved in criminal proceedings;
- the counterparty’s “risky” status according to the State Tax Service criteria.
It is important to remember that according to the law, none of the signs alone proves the fictitiousness of the transaction. The supervisory authority must prove its position on this with a set of facts and support them with appropriate evidence.
📌 What will be proof of the reality of the transactions?
In court and during an inspection, the best result is provided by documented financial transactions (contracts, invoices, statements), confirmation of the movement of goods (TTN, acceptance certificates, warehouse orders), results of work or services (reports, photos, interim acts), business correspondence, and if necessary – technical examinations or data on further resale.
📌 What are typical business mistakes?
Entrepreneurs often neglect the basic check of the counterparty through the Unified State Register or the court register, conclude “empty” contracts without clear conditions, do not collect evidence of work performance or ignore licensing requirements. Passivity at the verification stage – refusal to provide explanations or objections – also plays against the payer.
The case law of recent years is gradually forming an important approach: a bona fide payer is not liable for the counterparty’s violations. The very fact of the supplier’s “riskiness” does not yet deprive you of the right to a tax credit, so it is important to prove the reality of the transaction and the absence of collusion.
The law firm “Beihul and Partners” systematically protects businesses in disputes about “unreal” transactions: from preventive audit support and procedure setup to representation in courts. Stay with us, seek help and learn everything about how to achieve justice in law enforcement!