Business fragmentation: risks of an entrepreneur
Many so-called "optimizers" suggest minimizing taxes by splitting up the business.
17 signs (clause 1 of the Letter of the Federal Tax Service of Russia dated 11/08/2017 No.СА-4-7 / 15895 @), indicating the consistency of actions of participants in business splitting schemes in order to avoid fulfilling the tax obligation:
1. the splitting of one business (production process) occurs between several persons using special taxation systems (UTII or STS) instead of calculating and paying VAT, corporate income tax and corporate property tax by the main participant carrying out real activities;
2. the use of the business splitting scheme influenced the conditions and economic results of the activities of all participants in this scheme, including their tax liabilities, which decreased or practically did not change with the expansion of all economic activities in general;
3. he taxpayer, its participants, officials or persons who actually manage the activities of the scheme are beneficiaries from the use of the business splitting scheme;
4. the participants in the scheme carry out a similar type of economic activity;
5. the creation of participants in the scheme for a short period of time immediately before the expansion of production capacity and / or an increase in the number of personnel;
6. the participants of the scheme pay costs for each other;
7. direct or indirect interdependence (affiliation) of the participants in the business splitting scheme (relatives, participation in governing bodies, official control, etc.);
8. formal redistribution of personnel between the participants of the scheme without changing their job responsibilities;
9. lack of human resources at the controlled persons, their fixed and current assets;
10. use by the participants of the scheme of the same signboards, designations, contacts, a site on the Internet, addresses of the actual location, premises (offices, warehouse and production bases, etc.), banks in which settlement accounts are opened and maintained, cash registers, terminals, etc.;
11. the only supplier or buyer for one participant in the business splitting scheme may be another participant, or the suppliers and buyers of all participants in the scheme are common;
12. the actual management of the activities of the participants in the scheme by one person;
13. unified service schemes for the participants, carrying out: accounting, personnel records management, personnel recruitment, search and work with suppliers and buyers, legal support, logistics, etc.;
14. the representation of interests in relations with government bodies and other counterparties (not included in the business splitting scheme) is carried out by the same persons;
15. performance indicators, such as the number of employees, the occupied area and the amount of income received, are close to the limit values that limit the right to apply a special tax system;
16. the accounting data of the taxpayer, taking into account the newly created organizations, may indicate a decrease in the profitability of production and profit;
17. distribution between the participants of the scheme of suppliers and buyers, based on the taxation system applied by them.
Splitting a business is not prohibited by the legislation of the Russian Federation. But the scheme of splitting a business, aimed only at minimizing the tax base as a result of distorting the facts of economic activity, is not allowed by the Tax Code of the Russian Federation (clause 1 of article 54.1 of the Tax Code of the Russian Federation).
The Tax Code of the Russian Federation does not restrict the organization in choosing the option of the transaction, but provided that the selected option of the transaction does not contain a sign of artificiality (Letter of the Federal Tax Service of Russia dated October 31, 2017 No. EED-4-9 / 22123 @).
Frequent mistakes due to which the fragmentation of a business will be called unreasonable:
- division of the company into several organizations in order to retain the right to apply the special tax regime of the simplified tax system. In order not to exceed the limit values and not fly off the simplified system, the founders divide the business into several organizations that will continue to engage in the same type of activity, often in the same premises (Resolution of the AU of the Far Eastern District of 10.22.2015 No. F03-4073 / 2015);
- the coincidence of the founders and leaders of the group of companies. Participants of organizations, officials, actually managing the company, are the beneficiaries from the use of the business splitting scheme (Resolution of the CA of the East Siberian District of December 7, 2016 No. F02-6540 / 2016).
- The use of individual entrepreneurs in business under special tax regimes, who are at the same time employees of the company to sell their products through them (Resolution of the AC of the Volgo-Vyatka District of 06/30/2016 No. F01-2276 / 2016).
Rules that will help substantiate the legitimacy of the division of the business, such as, for example, all companies conduct different types of activities that are not part of a single production process (Resolution of the CA of the West Siberian District of 01/31/2017 No. Ф04-6830 / 2016), each company has their property (Resolution of the Federal Antimonopoly Service of the West Siberian District dated May 26, 2014 No.A81-4180 / 2013). That is, each company has decent resources and operates independently of each other.
If, as a result of the splitting up of the business, the inspectors will have evidence that, in the aggregate and interrelationship, will indicate that a group of companies has committed guilty actions aimed at obtaining exclusively unjustified tax benefits by reducing the tax liability, then the inspectorate will recalculate the tax liabilities of all organizations involved, as if it were only one legal entity.
For example, in April 2019, the Supreme Court considered an entrepreneur's complaint against the actions of three previous courts on the issue of the business division scheme established by the tax authorities. The court refused to the entrepreneur, the tax authority proved the fact that he received an unjustified tax benefit. In the scheme, the individual entrepreneur used the STS with the object "income minus expenses" 15% and LLC (organized by the individual entrepreneur) using the same STS with the object "income minus expenses" 15%.
The inspection proved that there is no independent activity, control over the entrepreneur and the full influence of the latter on the economic activities of the company, the presence of a common labor resource and unified software, a single management personnel and a controlling person, the acquisition and sale of goods by the company and an interdependent person from the same suppliers and buyers, redistribution of financial flows with an interdependent entity.
Yes, the current legislation was formally observed, but the situation is artificial, the visibility of the actions of several taxpayers covered up the actual activity of one real one.
As a result, non-payment of personal income tax of 13% and VAT at a rate of 10%, as well as penalties and fines for these taxes.
"Schemes" for splitting a business in order to save on taxes should give way to competent tax planning, which our experts are ready to provide you with.