The Ministry of Finance has made changes to the Rules on the refund of excess value-added tax and the application of risk management systems to confirm the accuracy of the excess VAT amount, as well as risk criteria.
The amendments specifically address the conditions for the formation of an analytical report "Pyramid" on the risk of non-fulfillment of tax obligations by direct suppliers, the amount of excess VAT subject to refund in case of violations by certain categories of taxpayers, signs of risk of tax evasion schemes by suppliers, and the appointment of a counter check for settlements with the direct supplier.
The "Pyramid" report is aimed at determining the accuracy of the excess VAT amounts claimed for refund and identifying risks of non-fulfillment of tax obligations and the use of tax evasion schemes by suppliers. It results in a summary table of settlements between the service recipient and suppliers of various levels for each tax period.
The report is generated for all supplier levels of the service recipient, except in specific cases such as exceeding the amount of violations over the amount of VAT credited to the supplier, cases provided by certain rules, or when the service recipient is the subject of the report.
For service recipients under horizontal monitoring, the "Pyramid" report is generated solely for direct suppliers. The service provider generates the report on the risk of non-fulfillment of tax obligations exclusively for direct suppliers of the service recipient.
According to the rules, direct suppliers are those who directly or through intermediaries supplied goods, performed work, or provided services to the service recipient for whom the "Pyramid" report is generated.
Linked entities are defined as individuals or legal entities with relationships that meet specific conditions, such as one entity being a major participant in another, or entities being connected by a contract allowing one to make decisions for the other.
The risk of tax evasion schemes by suppliers is identified through indicators indicating transactions aimed at obtaining the right to offset VAT amounts without actual supply of goods or services. Indicators include restricted issuance of electronic invoices, invalid court decisions on registration, involvement in criminal investigations, and court-invalidated transactions.
When confirming the accuracy of the excess VAT amount, discrepancies are not considered risks of non-fulfillment of tax obligations for suppliers who have adjusted VAT payment deadlines, received low-risk violation notices, or resolved identified violations.
The new regulations also specify conditions under which certain suppliers are not considered at risk for tax evasion schemes, including those who have resolved violations, ceased criminal proceedings, or are engaged in specific activities like energy supply or telecommunications services.
The amendments provide detailed criteria for identifying violations and exceptions for different types of suppliers and aim to enhance tax compliance and transparency in VAT refund processes. The order will come into effect on March 26, 2024.
