Reasonable care, due care... checklist.
Reasonable care, due care... checklist.

Reasonable care, due care... checklist.

Honest taxpayers face in practice and are wondering "what to do?", "What reference?", "How to protect the right to a tax credit and/or costs?" when:

  • The contractor is a sham, dishonest, doubtful, negative consequences.
  • Founding documents of the counterparty and the certificate of VAT declared invalid.
  • There is a discrepancy in the records of the SFS. The facts are not tax reporting. The impossibility of counter reconciliation on the GFS.
  • The absence of the counterparty at the location (or not responding was).
  • Fictitious counterparty confirmed by a court in a criminal case.

  • Extract from the Unified state register and other documents * registration documents are not sufficient?

    LETTER from G. 08.09.2016 N 2985/10/08-01-10-01-13 with respect to the choice of the counterparty.

    <...> The taxpayer must be reasonable and prudent when choosing a contractor. Checks whether the provider's state registration and registration with the tax authority does not characterize the company as a good payer, having a reputation as a competitive entity on the market of the relevant goods (services), which acts through an authorized person representing the interests of the company. Thus, measures aimed at obtaining extracts from the Unified state register and other documents * registration documents, are not sufficient because the received payer information do not allow to treat the counterparty as a trustworthy partner that guarantees the performance of their obligations through their authorised representatives. So, evidence of manifestation of reasonable care are not only the constituent documents and extract from the Unified state register, but the justification of motives of choice of the counterparty, the circumstances of the conclusion and execution of contracts, the check of business reputation of the counterparty, the authority of persons acting on behalf of the company.
    Adverse consequences of lack of caution in business the responsibility of the person who entered into the relevant transaction, and may not be transferred to the budget by reducing tax liabilities and the implementation of unreasonable payments. In case of bad faith counterparties, the buyer bears the risk of inaction is not only the execution of economic and legal obligations but also in terms of tax relations.
    Given is consistent with the position of the administrative courts of Ukraine (ruling of the Supreme administrative court of Ukraine dated 12.02.2014 N To/800/42298/13 (Ujwala N 826/6006/13-and, For/800/42298/13), from 26.03.2014 To N/9991/28864/11 (Ujwala N 2A-4419/10/2670, /9991/26540/11)).

Review the contents of the letter leave behind the scenes, however, such an approach exists.

What can you recommend?

In addition to the article "due diligence by the taxpayer or Instructions for preventing the chain tax fraud" can be recommended to lead a kind of check-list of the counterparty, which will include (Your choice):

1. The counterparty XXX is on tax accounting with H. H. XXXX 20XX with the assignment code, XXXX, , XXXX VAT, in confirmation of which provided stamped by the Contractor and signed by the authorized person copies of constituent and registration documents.

The contractor uses XXX system of taxation.

2. Documents requested by the Company in order to exercise due diligence and caution when selecting contractors.

3. The contractor confirmed that it timely and fully complies with all existing tax legislation of Ukraine, taxpayer obligations and that the Counterparty is not in bankruptcy and the Contractor is not under liquidation or reorganization.

4. The counterparty has the authority, financial means and other conditions necessary for the conclusion of commercial Contracts and the fulfillment of all financial obligations under the Contracts; execution of Contracts does not entail a breach or default of the provisions of any other contracts, agreements, injunctions or decrees that are binding for the Counterparty; and Counterparty is not the obligor of payments to be made in the budget.

5. To assess the performance of Contractor's obligations, such as properly executed.

6. The contractor has assured that he will actively interact with representatives of regulatory bodies on all issues related to the fact and legitimacy of VAT and income tax.

7. The counterparty has pledged to take all necessary steps to safeguards undertaken, during the term of the contract between the company and the Counterparty.

8. In case of impossibility of granting the Counterparty some or all of the documents, the Contractor undertook to provide a written response justifying the refusal to provide documents.

9. To request copies, certified by Contractor and signed by the authorized person, with the exception of Certificates of lack of debt that is granted in the original):

  •  The articles of Association (current version with all amendments);
  • Certificate of registration in the Unified state register;
  • The certificate on statement on the account in tax bodies as a taxpayer;
  • The governing body decision on the appointment of Executive body;
  • The order on the inauguration of the Executive body;
  • Power of attorney for person signing contract (if the contract is signed under power of attorney);
  • The lease of the premises at the address location of the organization (legal address);
  • Accounting and tax reporting for last accounting period with a mark of tax authorities on the adoption of either a Protocol of sending by electronic communication channels;
  • The certificate of no debts to the budget;
  • Documents confirming the legality of the use of exclusive rights (trademark, brand name, etc.) – if such rights;
  • Documents confirming the application of special tax regimes.

Do I need to run? No, at Your discretion.

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