An income tax loss reflected in a return often causes an accountant to worry: will such reporting cause unnecessary attention from the tax authorities? Let's take a closer look at what awaits the taxpayer in these circumstances.
For video instructions on how to explain losses to tax authorities, see our YouTube channel.
What happens when filing an income tax return if there is a loss?
A tax loss is a negative result that arises in line 100 of sheet 2 of the declaration when the income of the reporting period does not cover the expenses taken into account for tax purposes. It is not prohibited by law. But tax authorities, as a rule, do not trust information about losses, suspecting that the organization, for example, has inflated expenses, or has hidden part of the proceeds, or is using other schemes to artificially reduce income taxes. Therefore, tax services not only send the taxpayer requests for additional explanations on such a declaration, but also create special commissions to verify unprofitable reports.
So if a taxpayer has filed a tax return with a loss, then he may well be called to the so-called loss commission by the Federal Tax Service.
What the tax authorities don’t like about a loss
The main task of tax inspectors is to monitor the tax collection process in order to replenish the budget. To achieve this, tax services are developing a number of special measures, the implementation of which should contribute to the timely receipt of taxes, fees and other obligatory payments to the budget.
In their work with taxpayers who have shown losses, tax authorities rely on clause 1 of Art. 2 of the Civil Code of the Russian Federation, which contains a definition of the essence of entrepreneurial activity as independent, carried out at one’s own risk and aimed at systematically generating profit. Therefore, if an organization regularly shows losses, then, according to inspectors, it is most likely unscrupulous.
What are unprofitable commissions?
These are special commissions created under the Federal Tax Service to consider issues such as the completeness of payment of taxes and contributions on wages and monitoring the validity of losses from financial and economic activities.
In Moscow, for example, these commissions operate on the basis of the order of the Federal Tax Service of Russia for the city of Moscow dated February 22, 2008 No. 96, which approved a new edition of the order of the Federal Tax Service of Russia for the city of Moscow dated April 18, 2006 No. 240, that is, these structures have existed for many years. The activities of such commissions are regulated by letter of the Federal Tax Service of Russia dated July 17, 2013 No. AS-4-2/12722@.
Before calling a taxpayer to a commission, tax officials collect information to control the risks of unprofitability, conduct counter audits, and receive bank statements. Next, they will have to analyze these documents along with the organization’s reporting. If the taxpayer is identified as having a sufficiently high degree of risk, the inspectorate will send him an information letter in which the organization will be asked to independently check its calculations and submitted reports in order to reduce losses and assess its risks using known methods.
The taxpayer must receive the letter no later than a month before the date of the planned call to the commission. Within 10 working days after receiving the letter, the organization must either submit an updated declaration, reducing the loss, or respond to the tax authorities, providing the Federal Tax Service with convincing explanations for the loss that has arisen. If within 10 days the taxpayer does not take any action in response to this letter, the tax authorities will send him a notice of summons to the commission.
In addition, if the organization does not respond to the letter at all, then the directors can be fined up to 4,000 rubles (Article 19.4 of the Code of Administrative Offenses of the Russian Federation). Inspectors have the right to call taxpayers in order to obtain from them explanations on the calculation and payment of taxes and fees, and taxpayers are required to appear when called by tax officials (subclause 4, clause 1, article 31 of the Tax Code of the Russian Federation).
What happens if the taxpayer does not appear at the commission meeting?
For example, according to clause 10 of the order of the Federal Tax Service for Moscow dated February 22, 2008 No. 96, if authorized representatives of the taxpayer ignored a call to a meeting of the working group of the commission in the inspection without explaining the reasons, or if they refused to comply with recommendations for changing tax and (or) indicators financial statements, then the tax services are allowed to carry out priority on-site tax control in relation to such taxpayers and inform the owners about the unsatisfactory financial condition of the organization.
Tax services believe that they have the right to file a demand in court to liquidate the organization and initiate bankruptcy proceedings (however, the courts often recognize this possibility as unlawful), as well as send materials regarding such a taxpayer to law enforcement agencies.
The tax authorities summon the head of the taxpayer to a loss-making commission only in writing. The letter is drawn up on a special form (order of the Federal Tax Service of Russia dated November 7, 2018 No. MM-7-2/628@). No verbal invitations should be accepted.
The head of the organization called to the commission meeting can invite his employees there, who will help him give the necessary explanations. Representatives of the organization are recommended to take with them documents that will help confirm the correctness of calculation and payment of income tax and explain the resulting loss.
Representatives of tax services during the commission meeting will demand to justify the reasons for the losses, and if the explanations provided do not convince them, they will most likely offer to submit an updated declaration without loss.
In what cases can a loss be inevitable?
Let's imagine that the organization was registered relatively recently. Even if it has already concluded contracts and has begun to implement them, the result (revenue from the sale of goods, work, services or other activities) may appear much later than the end of the reporting period. In this case, naturally, the organization will suffer a loss.
True, regarding this situation, the Ministry of Finance and the Federal Tax Service of the Russian Federation have repeatedly explained in their letters that losses arising from newly created organizations are allowed to be taken into account in the future (letters of the Ministry of Finance of Russia dated August 26, 2013 No. 03-03-06/1/34810, dated September 20. 2011 No. 03-03-06/1/578, dated 04/21/2010 No. 03-03-06/1/279, dated 07/17/2008 No. 03-03-06/1/414, letter of the Federal Tax Service of Russia dated 04/21/2011 No. KE-4-3/6494).
How best to explain a loss to tax authorities
The Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 24, 2006 No. 18 states that making a profit is the goal of entrepreneurial activity, and not its obligatory result.
You can substantiate losses by collecting evidence that the organization conducted ordinary business activities, the purpose of which was to make a profit, and explain why this activity did not bring profit.
The reasons that led to the loss determine which “exculpatory” documents are needed in each specific case. Let's look at them:
- Development of new types of activities. Here, the supporting document will be a business plan, which will show that losses are related to the specifics of the new activity and are planned in advance for the first few years. The business plan should also show when the investment will begin to pay off.
- Unprofitable sale of goods. In any organization, situations may arise when goods are sold at a price below cost. The fact of such sales must be confirmed by an act of the inventory commission and an order from the manager to reduce prices, drawn up on the basis of this act. The act must provide data on the quality of the product, its properties and characteristics, as well as the reasons why this product cannot be sold at a profit; cite the conclusions of the inventory commission that in these circumstances the organization has to make a sale at a loss.
- Dumping policy. Let's say a company decides to oust competitors and expand its sales market through a temporary reduction in prices, planning to significantly increase future sales volumes due to this. These intentions must be substantiated through the organization’s marketing policy, through a business plan and a sales market development plan. The expected effect of these activities must be shown in numbers.
- Changes in supplier prices. Let's assume that a long-term contract with fixed prices (let's say in rubles) has been concluded with the customer. According to the terms of the contract, upward price revisions are not provided. And the contract with the supplier is in foreign currency (imported products). A loss here may arise due to fluctuations in exchange rates. If the question arises about why the organization did not terminate the contract, which suddenly became unprofitable, it is necessary to provide the tax authorities with evidence that, by terminating the contract, the organization would have suffered even greater losses in fines. And a profitable customer, with whom there may be other contracts or prospects for contracts, would be lost.
- Z The customer (buyer) refused the previously concluded contract. Or, a similar situation, when the termination of economic relations occurred due to a change in the owner of the customer. In these situations, it is necessary to present to the tax authorities an agreement to terminate the contract, correspondence with the former counterparty in connection with a change of owner, and correspondence with counterparties regarding the conclusion of new contracts.
- Force majeure (flooding, fire, office destruction, etc.). In this case, you need to have a certificate from the government agency that recorded this situation, and be sure to draw up an inventory list in connection with the losses.
Well, if the income tax loss ended not in the year, but in any of the interim periods, it is important to convince the tax authorities that since the final calculation is made at the end of the year, and the organization has to close a large contract at the end of the year, then there is no reason to doubt that the year ends with a profit.
Results
A loss in the income tax return will result in the taxpayer being summoned to a special commission at the Federal Tax Service to provide explanations. Tax authorities believe that, due to the implementation of Article 2 of the Civil Code of the Russian Federation, any business is created for the purpose of making a profit, and its absence is a reason not to pay taxes. The article discusses in detail the algorithm for explaining losses.
An explanation for losses must be given to the tax service if a corresponding requirement has been received from this supervisory authority.
Why write an explanation?
Quite often, tax specialists have various questions based on the results of reports submitted by a tax agent. In such situations, inspectors send a letter to the organization asking for clarification. Most often, problems arise due to any contradictions, inaccuracies and errors identified in the declarations, inconsistencies between the data available in the tax and indicated in the reporting documentation of the enterprise, as well as due to the lack of profit based on the results of work in the reporting period, and even especially with obvious losses.
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The latter raises well-founded doubts among tax authorities, since the main purpose of any company is to derive benefits, and if there is no profit based on the results of the submitted declaration, then this may indicate attempts to hide income to evade taxes, which is especially important in case of systematic losses.
We should not forget that income tax is one of the main sources of budget formation, which means that tax authorities monitor transfers in this tax area especially closely.
What can lead to losses
Lack of income and losses of organizations is not such a rare occurrence as it might seem to an uninitiated person. They can be associated with a variety of circumstances. They can be caused by a general financial crisis, a decline in demand for products (including due to seasonal factors), an excess of expenses over profits (for example, when purchasing expensive equipment, major repair work, etc.), problems in production , ineffective company management, re-profiling of the enterprise and development of new markets and many other reasons.
How an organization is verified
In order to check and control a particular enterprise that has raised doubts about its financial and tax “purity,” the tax services create special, so-called “loss commissions.”
In accordance with the law, their main task is to stimulate organizations to independently understand the causes of losses and prevent their further occurrence.
The commission pays special attention to those companies that have shown no profit in their declarations over the previous two years, as well as those that make too little tax deductions (tax specialists have average figures for income and tax payments in a particular industry area of business) .
To achieve their goals, employees of the loss-making commission not only write demands for explanations of losses in the organization, but also, in particularly dubious situations, call the management of the companies (usually the director and chief accountant) “on the carpet.”
Is it possible not to provide explanations for losses?
Explanations about losses must be given. Moreover, this should be done in writing and no later than five days after receiving the corresponding request from the tax authority.
Despite the fact that no punishment is provided for the lack of explanations in the legislation of the Russian Federation, ignoring letters from tax authorities can have very dire consequences for the organization. In particular, additional taxes may be assessed or any administrative measures may be taken. But the most unpleasant thing, which is also quite possible, is that the lack of a logical and clear picture of the company’s financial activities can lead to an on-site tax audit, during which all documentation for the last three years will be “shooked up,” and this is fraught with completely different, more serious sanctions. It has been noticed that tax authorities are very willing to include companies with regular losses in the schedule of on-site inspections.
How to write an explanation of losses
The explanation can be written in any form. The main thing is that the structure of the document meets the norms and rules for drawing up business documentation, and the text of the explanatory note itself is clear, understandable and fully reflects the real state of affairs at the enterprise.
If some events characteristic of the entire economy led to losses: for example, a crisis, then sometimes it is enough to simply formulate this correctly, pointing out a decline in demand and a forced reduction in prices (attaching reports, price lists and other documents indicating this to the explanation). But if the reason for the lack of profit was, for example, large expenses of the taxpayer with a simultaneous decrease in sales, then this information must be supported by more serious documents (contracts and agreements on termination of contracts, acts, tax extracts, etc.). If possible, you should also provide a detailed report on expenses and income.
If losses arose as a result of any emergency situations (fires, floods, thefts, etc.), then certificates from the relevant government agencies (police, Ministry of Emergency Situations, management company, etc.) must be attached to the explanation.
The document will also include a description of the measures that the organization’s employees are taking to prevent further losses (they will indicate the desire of the enterprise management to correct the unfavorable situation).
It should be noted that large companies’ explanations sometimes reach several dozen pages, which is understandable, since the more accurate the explanatory note, the fewer claims from tax authorities may appear in the future and the lower the likelihood of an on-site tax audit.
How to fill out a form
You can write the document by hand, but it is better to print it on a computer. To print, it is permissible to take a regular sheet of paper or a form with details and the company logo. The explanation must be made in at least two copies, one of which should be sent to the destination, the second one should be kept with you. Information about the note must be entered in a special accounting journal - all you need to do is put its number and date here.
Who should sign the document
The explanation is written on behalf of the head of the organization or an employee temporarily in his place. Accordingly, it is the director who must sign his autograph on the letter. It would be good if the chief accountant of the enterprise signed the document as the financially responsible person who prepares financial and tax reporting.
How to send an explanation
If a company submits reports to the tax service electronically, then explanations must be submitted in the same format. However, if the tax agent uses the right to submit reporting documentation on paper, then it is allowed to generate an explanatory note in “live form”. Then it can be taken to the tax office in person, handed over to a representative (who has the appropriate power of attorney) or sent by mail.
If the tax office has sent you a request to provide explanations for losses, take into account the above recommendations and look at the example - based on them you can easily write your own document.
- First, in the explanatory note you need to indicate the addressee (on the right or left at the top of the form), i.e. the tax office where this letter will be sent.
- Then the sender is indicated: the name of the company, its details and contact information,
- After that, go to the main section. First of all, provide here a link to the request for clarification received from the tax office.
- Next, describe in as much detail as possible the circumstances in connection with which the losses occurred.
- After that, move on to explanations in numbers. Here you need to provide data on income and expenses, as well as provide links to documentary evidence (indicating their name, number and date).
- After the explanatory note has been generated, do not forget to sign it.
E. Dirkova, General Director of BUSINESS ACCOUNTANT LLC
The accountant always opens the envelope from the tax office with a sinking heart: “Well, thank God, it’s not an on-site audit!” However, if a company reports losses over several tax periods, the letter may well foreshadow such an audit. Tax authorities usually require justification for “unprofitable” reporting. In such a situation, it is not enough to simply prepare a duty “unsubscribe”. We advise you to consider options for further developments.
Let us remind you that the “dangers of unprofitable reporting” of a company are warned by the Concept of the planning system for on-site tax audits, approved by order of the Federal Tax Service of Russia dated May 30, 2007 No. MM-3-06/333@ (hereinafter referred to as the Concept). If a company is asked to explain the reasons for losses or to appear before a commission to review the validity of losses, then it is not recommended to ignore such “signs of attention.”
Thus, one of the risk factors for the company is officially referred to as “failure by the taxpayer to provide explanations to the notification of the tax authority about the identification of discrepancies in performance indicators.”
Justify your expenses!
So, the company received a requirement to submit documents in the form of explanations confirming the reasons for the loss based on the results of financial and economic activities. Such a document does not exist in financial and economic activities, so you have to create it yourself. Additionally, tax authorities can request an analytical note from the chief accountant on the legality of including expenses incurred in the tax base. What are these tax demands based on?
Please note that within the framework of a desk audit, these actions are not entirely legal. As follows from paragraph 3 of Article 88 of the Tax Code, requests for explanations can be sent only in cases where the following are identified:
- errors in the tax return;
- contradictions between the information contained in the submitted documents;
- discrepancies between the information provided by the taxpayer and the information available to the tax authority and received by it during tax control.
But information about the latter basis is of a proprietary nature and remains closed to the taxpayer. Therefore, he has no choice but to assume that the inspector does not believe in the company’s losses.
Do you need profit?
When determining the level of profitability of a company, tax authorities are guided by industry average indicators of financial and economic activity. These data are presented in the document “Publicly available criteria for self-assessment of risks for taxpayers, used by tax authorities in the process of selecting objects for conducting on-site tax audits dated June 25, 2007.” (prepared on the basis of the Concept).
Therefore, firms should carry out their own calculations of their “safe” tax burden and profitability. Unfortunately, this approach of officials is reminiscent of taxation based on the principle of imputed income. Meanwhile, the requirement for business profitability is laid down in civil legislation itself.
Civil law is based on the fact that entrepreneurial activity is aimed at systematically generating profit (Clause 1, Article 2 of the Civil Code of the Russian Federation). But this principle still cannot be considered universal for Russian reality. He “works” in big business for foreign companies whose shares are traded on the stock market. Profit for such firms is vital in a shareholder environment because it provides dividends to shareholders. But small and medium-sized businesses do not set themselves such tasks.
Undoubtedly, profits not withdrawn by the company's owners contribute to business development. But not everyone can and should be developed to the level of a major taxpayer: prospects depend both on the field of activity and on the personal qualities of the leader.
In a situation where the director of a company is its founder, it is more profitable for him to increase his salary than to pay himself dividends (due to the regressive UST scale). In practice, it turns out that management often has no economic interest in profit, and it is a purely fiscal category.
Getting rid of losses
A legal entity is characterized by its separate property (Clause 1, Article 48 of the Civil Code of the Russian Federation). Therefore, it is not able to carry out unprofitable activities for a long time. Otherwise, an unprofitable company can only survive within a successful holding company or serve as a source of illegal income for its management. For these reasons, tax authorities will begin to look for related transactions and fictitious expenses. Note that today the technologies for such “searches” have been sufficiently developed.
Systematic losses lead to a decrease in such an important financial indicator as the value of net assets. As a rule, it coincides with the amount of equity capital (Section III of the balance sheet). And if the value of net assets turns out to be less than the minimum amount of authorized capital, then the company is subject to liquidation due to financial insolvency (clause 3 of Article 20 of the Federal Law of February 8, 1998 No. 14-FZ “On Limited Liability Companies”).
In this case, a claim for liquidation may be filed with the court (Clause 11, Article 7 of the Federal Law of March 21, 1991 No. 943-1 “On the Tax Authorities of the Russian Federation”). An example of such an arbitration case is the resolution of the Federal Antimonopoly Service of the Moscow District dated December 15, 2004, December 9, 2004 No. KG-A40/11372-04.
It turns out that losses threaten the very existence of the company.
We act according to the situation
If in accounting a company must reflect all expenses without exception, then in tax accounting there is no such obligation. Expenses for tax purposes are rather the right of the taxpayer (Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 12, 2006 No. 53). Therefore, a prudent accountant may “ignore” problematic expenses when calculating the tax base.
For example, it is not at all necessary for a construction company to reflect the costs of consulting and intermediary services when obtaining a license. Moreover, no one provides transcripts of the contents of such services in acts worth about 150,000 rubles.
But inspectors will look favorably on the costs of preparing and developing new production facilities (subclause 34, clause 1, article 264 of the Tax Code of the Russian Federation). When investing activities, tax losses are explained by the fact that not all costs are subject to inclusion in the cost of fixed assets. An example of this is interest on loans and borrowings attracted when creating an investment asset.
Of course, the explanatory note for the Federal Tax Service on the reasons for the loss depends on the specific conditions of the company’s activities (see the document on the previous page). But the main “alibi” for an organization is the presence of a business plan to get out of an unfavorable financial situation.
document
Explanations confirming the reasons for the loss
based on the results of financial and economic activities
LLC "PERSPECTIVE" for 9 months of 2007 in the amount of 43,737 rubles
The type of activity of PERSPECTIVA LLC is the provision of legal services.
The income tax loss for 9 months of 2007 was formed due to the excess of the Company's expenses over its income.
Recognized income and expenses comply with the criteria of Chapter 25 of the Tax Code and are confirmed by tax accounting data. The excess of expenses over income is not an accidental result, but the result of a targeted investment policy of the sole founder of the Company, G.L. Kuznetsov. Financing of the prevailing expenses of the Company is carried out from the personal funds of Kuznetsov G.L. - by providing interest-free loans, loan forgiveness and gratuitous cash assistance. This path was chosen as an alternative to a one-time increase in the authorized capital.
The company has a business plan for long-term development, according to which it expects to make a profit from the second half of 2008.
Personal funds of Kuznetsov G.L., aimed at the development of the Company, have official origin and other sources than PERSPECTIVE LLC.
Analytical note on the legality of inclusion
expenses incurred to reduce the tax base
on income tax for 9 months of 2007
| Decoding by tax return lines | Name of expense | Norm of the Tax Code of the Russian Federation | Amount, rub. |
|---|---|---|---|
| Line 030 of sheet 02: total expenses that reduce the amount of income from sales - 195,415 rubles. | Updating SPS "Consultant", 1C maintenance | subp. 26 clause 1 art. 264 | 30 576 |
| Compensation for using a personal car for business trips | subp. 11 clause 1 art. 264 | 24 000 | |
| Information consulting services |
subp. 15 clause 1 art. 264 | 13 975 | |
| Low value | subp. 3 p. 1 art. 254 | 16 906 | |
| Depreciation of fixed assets | clause 2 art. 259 | 8518 | |
| Communication services | subp. 25 clause 1 art. 264 | 3781 | |
| Repair of fixed assets | Art. 260 | 300 | |
| Notary services | subp. 16 clause 1 art. 264 | 200 | |
| Realization of property rights | subp. 2.1 clause 1 art. 268 | 3168 | |
| ... | ... | ... | |
| Line 040 of Sheet 02: total non-operating expenses - 1837 rubles. | Bank services | subp. 15 clause 1 art. 265 | 1837 |
Income tax is one of the federal taxes that forms the revenue side of the budget. The tax office always vigilantly monitors its timely payment. And, as a rule, the termination of income tax payments raises questions from the inspectorate, the answers to which it will expect from the organization.
The main reason that an organization does not pay income tax is the loss that occurred according to tax accounting data. Demands from organizations to provide explanations for losses have become a common occurrence lately.
Who may be asked for an explanation of the loss?
The Tax Code permits requiring explanations from all organizations that declared a loss during the reporting (tax) period. This right appears to the inspectorate based on the results of a desk audit of the income tax return (paragraph 3, paragraph 3, article 88 of the Tax Code of the Russian Federation).
In what form is the organization required to provide clarification?
Upon receipt of a request for explanations, the organization is obliged to submit explanations within 5 working days that justify the amount of the loss received. Tax inspectorates create commissions to legalize the tax base, incl. so-called “loss commissions”, the purpose of which is to encourage organizations to independently analyze the correctness of tax calculations and the causes of losses.
Thus, the commission will select organizations that, according to line 100 “Tax base” of Sheet 02 of the income tax return, showed a loss both during the 2 previous years and in the current year. Those organizations that have a low income tax burden will not go unnoticed. This burden is determined by correlating the calculated tax and the organization’s income according to the income tax return. So, for trade organizations, low load means:
To review the results of the organization's activities, representatives of the organization (manager, chief accountant) are called to the tax office for a commission.
Entrepreneurial activity is an independent activity carried out at one’s own risk, aimed at systematically obtaining profit from the use of property, sale of goods, performance of work or provision of services by persons registered in this capacity in the manner prescribed by law (Article 2 of the Civil Code of the Russian Federation).
27.04.2016But often when running a business, we are talking not only about the lack of profit, but also about the total excess of expenses over income. In this case, we must say that the company is incurring losses.
For the purpose of calculating income tax, the object of taxation is profit.
Profit is, for Russian organizations that are not members of a consolidated group of taxpayers, income received reduced by the amount of expenses incurred (clause 1 of Article 247 of the Tax Code of the Russian Federation). Let us recall that for the purpose of calculating income tax, the taxpayer has the right to transfer the loss he received to future reporting (tax) periods. The taxpayer has the right to carry forward a loss to the future within ten years following the tax period in which this loss was received (Article 283 of the Tax Code of the Russian Federation). It is worth considering that accounting for any expenses (losses) on the basis of Chapter 25 of the Tax Code of the Russian Federation must have an economic and documentary justification (Article 252, paragraph 4 of Article 283 and other articles of the Tax Code of the Russian Federation).
Order of the Federal Tax Service of Russia dated May 30, 2007 No. MM-3-06/333@ “On approval of the Concept of the planning system for on-site tax audits” established publicly available criteria for self-assessment of risks for taxpayers, used by tax authorities in the process of selecting objects for conducting on-site tax audits.
Among these criteria are:
Reflection of losses in accounting or tax reporting over several tax periods;
The organization carries out financial and economic activities at a loss for 2 or more calendar years;
Discrepancy between the growth rate of expenses compared to the growth rate of income according to tax reporting and the growth rate of expenses compared to the growth rate of income reflected in the financial statements.
As noted by the Supreme Arbitration Court of the Russian Federation in the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 12, 2006 No. 53 “On the assessment by arbitration courts of the validity of the taxpayer receiving a tax benefit” and the Constitutional Court of the Russian Federation in the Determination of the Constitutional Court of the Russian Federation dated June 4, 2007 No. 320-O-P, the validity of expenses taken into account when calculating the tax base, must be assessed taking into account circumstances indicating the taxpayer’s intentions to obtain an economic effect as a result of real business or other economic activity. In this case, we are talking specifically about the intentions and goals (direction) of this activity, and not about its result. At the same time, the validity of obtaining a tax benefit, as noted in the same resolution, cannot be made dependent on the efficiency of the use of capital.
But this does not mean that the inspectorate cannot contact you with a requirement to provide explanations about the nature of your unprofitable activities.
Features of conducting a desk audit in case of claims of losses
When conducting a desk tax audit of a tax return (calculation) in which the amount of loss received in the corresponding reporting (tax) period is stated, the tax authority has the right to require the taxpayer to submit within five days the necessary explanations justifying the amount of loss received (clause 3 of Article 88 Tax Code of the Russian Federation). The taxpayer has the right to additionally submit to the tax authority extracts from tax and (or) accounting registers and (or) other documents confirming the accuracy of the data entered in the tax return (calculation) (confirming losses) (clause 4 of Article 88 of the Tax Code of the Russian Federation ).
When conducting a desk tax audit on the basis of an updated tax return (calculation) submitted after two years from the date established for filing a tax return (calculation) for the relevant tax for the corresponding reporting (tax) period, in which the amount of tax payable in budget system of the Russian Federation, or the amount of the received loss has been increased compared to the previously submitted tax return (calculation), the tax authority has the right to request from the taxpayer primary and other documents confirming changes in information in the relevant indicators of the tax return (calculation), and analytical tax accounting registers, for on the basis of which the indicated indicators were formed before and after their changes (clause 8.3 of Article 88 of the Tax Code of the Russian Federation).
Based on the above standards, the organization will have to provide appropriate explanations (documents).
How to explain losses:
Opening a new line of activity;
Recent start of business, lack of working capital
Concluding large transactions and making short-term volume expenses
Expansion of activities
Unfavorable market conditions
Business plan with the expected “correction” of the situation in the near future
Business plan for a large project that will generate profits in the future (large initial costs)
Other significant features of the company's business.