‘Where is the line between: A BUSINESS SOLUTION and an offence? Risks of entrepreneurs in tax evasion’.

Let's look at an example.

A business owner, instead of hiring a director, hires a manager who is paid substantially more than the previous manager. Such expenses automatically affect the total expenses of the company. 

And if there are more expenses, 

- then profits are reduced, 

- and the amount of tax payable on the profits becomes less,

- This means that law enforcement and tax authorities may be interested in the activities of such an entrepreneur and subsequently make claims.

Various means of proof are used: interrogation of witnesses, expertise on the market price level, comparison of the manager's remuneration with the total labour salary fund in the company, etc.

What is the DIFFERENCE between a business decision and a crime:

If the owner of a company can competently justify the business purpose of such an action (not only to show economic efficiency, but also to draw attention to other relevant circumstances, such as the opening of new markets, the need to reduce licence risks, etc.) - it is an effective business decision.

If it is a fictitious expense with the sole purpose of reducing the tax burden, it may be considered a tax offence.

Read more about how to distinguish between criminal and non-criminal acts in the tax sphere, as well as the current positions of the Supreme Court of the Russian Federation on tax offences in the article by Nikita Rozhentsov, Attorney-at-law, adviser of criminal and general practice of the Consulting Group ‘Alliance Legal’, in the scientificjournal ‘Criminal Law: strategy of development in the XXI century’. The issue presents current research and analytical materials devoted to the main topic: ‘Criminal Liability of Entrepreneurs’.