How lemons almost led to jail

Towards the end of 2022, our company was contacted by a wholesale fruit supplier based in St. Petersburg. The reason for contacting was due to the fact that the Federal Tax Service imposed additional VAT and income tax debts on the company, totaling 43,063,000 rubles after an on-site tax audit. Additionally, a penalty of 24,408,000 rubles was imposed. According to the tax authorities, the client had committed a tax violation in 2018 by engaging in transactions with several companies, resulting in unjustified tax benefits. That situation has caused a significant fine, which could potentially lead to the termination of the business, not to mention the potential criminal liability for the company's owners and managers. 

Andrey Kriulin, head of the tax practice at the Tsentralny Okrug Law firm, explains that the Tax Inspectorate accused our client of not paying VAT and not having a valid source in the budget for deducting VAT. This accusation was based on our client's involvement with empty shell companies in the second and subsequent links of the relationship chain. It was also found that the company had no real activity, as the contracts it concluded involved the direct shipment of goods (fruits) from its suppliers to buyers, bypassing its own warehouse. 

Upon commencing the examination of the tax documents given by the client, our lawyers became convinced that the suppliers were legitimate functioning businesses. The products acquired from them were indeed real and could be easily traced through the customs freight declarations provided by the fruit importer in the verification materials. 

Consequently, the tax authority considered our objections and the documents we provided, and decided not to hold the client responsible for taxes. The accumulation of outstanding payments and interest on VAT and income tax was eliminated, and the business was preserved. 

Andrei Kriulin believes that this story has become a model for perfect tax protection. 

Usually, the Federal Tax Service conducts inspections that have an accusatory nature and often make decisions that lead to court proceedings. However, we were able to successfully challenge this practice and protect our client's interests even before going to court. This is a significant achievement for both our client and us.