Pepeliaev Group’s lawyers have proved the right of taxpayers to book expenses of previous years in the current periods

Pepeliaev Group’s lawyers have successfully defended a client in a dispute with a tax authority in which the company had allegedly committed an offence by booking, for profit tax purposes, expenses incurred in previous years. The taxpayer wrote off accounts receivable for which the limitation period had expired several years before. 

Within the framework of this dispute the Russian Supreme Court (the ‘Supreme Court’) for the first time clarified that taxpayers are allowed to correct accounting errors made in the current period if the errors have caused tax to be overpaid. There is no need to file adjusted tax returns. This will allow taxpayers to book in the current periods expenses incurred during the past 3 years. The Supreme Court referred to the provision of article 78 of the Russian Tax Code regarding a three year period for a tax refund and defended the interests of the treasury at the same time. 

Moreover, the Supreme Court acknowledged that the tax authority is obliged to independently determine the actual tax obligations of the taxpayer during an audit. With respect to the dispute in question the court indicated that the tax authority is obliged to independently book the taxpayer’s expenses for 2010-2011 that were covered by the same audit.