Why You Should Check Your Business Partners

The major trend of Russian tax law, and the one that is still gaining momentum, is that you can be held responsible for someone else. If a company you dealt with does not pay tax, you can get the bill unless you can prove that you took necessary precautions and checked that this company was not a fraud.

The Commercial Court of the Ural District has ruled in favour of a company which was punished for dealing with a fraud. The company was refused to deduct the amounts it paid to the fraud – so they got extra income tax and VAT to pay plus interest and penalty.

However, the taxpayer has managed to get off the hook by showing that it took reasonable precautions and did due diligence of this counterpart.