Artificial crushing of business on the example of wholesale trade in auto parts: risks, problems
The times of documentary business tax optimization have passed. Case No. A58-547 / 2016 (decision of the Supreme Court No. 302-KG17-382) was indicative. The taxpayers competently executed documents submitted by the taxpayer protested by the discrepancy between the business operations themselves and the documents. The next case No. А12-15531 / 2015 came to the Constitutional Court and in its decision No. 1440-О he confirmed that the tax benefit from the “documentary fragmentation” of the business is illegal. Fiscals learned very well how to unwind business processes. Therefore, correctly formatting documents is now not enough.
Today we will consider the widespread scheme of “VAT optimization” with the help of an additional sleeve of sales for simplifiers. Any tax lawyer will say that in such a scheme, the business goal is seriously lame - for what merits does the IP buy goods from the LLC at such a low price? If you are not greedy and put a mark-up between LLC and IE not 1% but, for example, 8%, then you can try to justify the discount for IE by the sales volume. To reduce risks, you can also rent different offices for LLC and IE. And even give the preparation of IP tax reporting to outsourcing, since there is a simplified taxation system, and IP accounting is not required.
But despite this, the scheme can hardly be called working, because any entrepreneur will almost certainly “inherit” in the process of operating activities. Now I will tell you what difficulties the organizers of such a scheme will still face on the example of a real business in the wholesale trade in auto parts.
1. To save on VAT, it is necessary to divide customers into simplistic and classic. In this business (and in many others) it is implemented like this. When a client calls, he is asked whether he is a simplist. Depending on his answer, he is billed from the IP or from the LLC. This procedure is almost impossible to hide and easy to fix. It clearly demonstrates the true purpose of business splitting - tax benefit. With such a texture, it will be difficult to prove in court the independence of these business entities.
2. The department of active sales is in the state of LLC “Auto Parts”. At the same time, the department’s employees work with both LLC clients and IP clients. Any tax lawyer will indicate in his recommendations that employees should only keep clients of the organization in which they are registered. However, this recommendation contradicts the operational effectiveness of the trading business.
Try to pick up a new client from the seller, on whom he spent a lot of effort to bring it to the first transaction on the sole ground that the client has a different tax system. This will have a very strong demotivating effect. It will be very difficult for a company that will divide potential customers between tax system managers to form a sales department. For the trading business, this is a key factor in functioning.
3. Both LLC and IP sell goods from the same warehouse. A simplified buyer who buys goods from an individual entrepreneur can book goods in a container sent to the LLC. Such facts are difficult to identify, but if they are revealed, for example, as a result of a survey of customers, they will clearly indicate the artificiality of crushing.
4. Another “hook” for fiscals is the lack of a procedure for ordering goods from IP to LLC that complies with business standards. In the business in question, the accountant draws up these shipments upon the sale of IP to their customers. The problem is not even the convenience of the accountant. Suppose we somehow predicted the sale of IP and wrote out the sale at the beginning of the month with a small margin.
As a result, some residuals will remain on the IP, for example, a generator. In fact, this generator continues to lie in the same warehouse and may be needed when selling an LLC client. The company will not miss the opportunity to sell this product only due to the fact that it is listed in accounting as an IP. In this case, there will be two options: to do the reverse sale or exclude the goods from the original. Both options are not much better. In the first case, there will be a lot of return implementations directly related to the implementation from the LLC. The second option is more time-consuming for the accountant and is limited to the case when both operations occur in the same period. If the generator is shipped from LLC in the next period, you still have to do a return sale.
5. Another problem will be the automation of such a business. This is not only about management accounting, but also about the implementation of any CRM. The creators of these programs caught the request of entrepreneurs to automate a business consisting of several legal entities.
All reports both on financial condition and various sales funnels do not take into account the legal structure of the business. And the problem here is not only in summary reports, but also in the complete absence of separate sales reports. For an LLC, this is a report consisting of sales to customers with VAT and sales by IP. Such a report does not have any managerial sense, therefore it is not done to avoid unnecessary labor costs. The lack of separate accounting of actually received revenues is indicated as one of the arguments for the artificiality of business fragmentation is indicated in case No. A12-15531 / 2015.
Documentary tax optimization without reengineering business processes is money down the drain. Structure your business correctly.
In the event that your litigation or other dispute, contractual work or any other form of activity concerns the issues discussed in this or our other material, we recommend checking and making sure that your legal position complies with the latest changes in practice and legislation.
We will be happy to provide you with legal assistance regarding the minimization of legal risks and available opportunities. We will try to find a solution that is right for you.
Call +7 (383) 310-38-76 or write to info@vitvet.com.
August 18, 2017
Kirill Soppa, partner. I am engaged in taxes, I like to build business processes. I am writing articles, looking for interesting information and suggest ways of its practical use. I believe that thanks to high-quality legal analytics, clients come to a law firm, and not vice versa. Do you agree? Then let's be friends on Facebook.
