"Tax reconstruction" in tax legal relations.

Farkhutdinov Ruslan Damirovich ORCID: 0000-0002-7138-6161 PhD in Law Associate Professor, Department of State and Legal Disciplines, Kazan Branch of RSUP 420100, Russia, tatarstan oblast', g. Kazan', ul. Glushko, 22, kv. 79 r77farhutdinof@yandex.ru

Tax legal relations in the context of sanctions restrictions and the digital economy are undergoing regulatory changes in the regulation of financial legal relations, where an equivalent regulator, on a par with the legal one, is such an individual regulator as a judicial act. At the same time, individual regulation is complicated by the absence of a number of concepts and definitions in the tax law doctrine, the use of which by payers allowed choosing mechanisms for protecting rights.

The novelty of the research is due to the need to comprehend and develop concepts and definitions, their enforcement by taxpayers to protect their rights in tax audits, the development of the process of using "tax reconstruction" as an effective tool in relations with the tax service. At the same time, not only the format is important – as a mathematical calculation, but the methodology of the approach itself – the basis of which will be a systematic approach of contractual legal relations, which is the foundation for calculating tax liabilities.

The relevance of the study is determined by the need to develop effective criteria for achieving a reasonable balance of public and private interests, where an independent calculation of "tax reconstruction" as a criterion, taking into account the theory formed by the Supreme Court of the Russian Federation that "the method of reconstruction of tax obligations of a taxpayer in relation to VAT deductions is not provided by current legislation, but is not limited by law", it will allow him to compensate for the protection of private interest by an additional regulator.

The purpose of the "tax reconstruction" is, in its legal essence, to restore the economic component of the taxpayer's rights to expenses and VAT deduction. From a practical point of view, digital indicators, through the restorative function of tax law, reconstruct (restore) the reality of economic activity, documented facts and circumstances. The form of "tax reconstruction" will be an economic calculation, through a comparative analysis of primary documents, the essential terms of commercial contracts and have a legal and economic basis through an assessment of the subject of the contract.

S.G. Pepelyaev ^[1] drew attention to some conclusions of R.V. Yakushev, head of the Department of Pre-Trial Settlement of Tax Disputes of the Federal Tax Service of Russia, in his interview with the journal "Tax Policy and Practice" ^[2]. Explaining the term "tax reconstruction" quite in the spirit of the long-known principle of the priority of substance over form, the representative of the tax department nevertheless concludes that this tool is not used within the framework of Article 54.1 of the Tax Code of the Russian Federation

The tax service's revision of the approach to tax reconstruction is largely determined by taking into account the positions of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation regarding the procedure for applying Article 54.1 of the Tax Code of the Russian Federation and the general principles of taxation and tax control ^[3].

The objectives of the study are to develop a methodology for calculating, in accordance with Article 31 of the Tax Code of the Russian Federation, "tax reconstruction", determining the procedure for its application at the stages of objections, pre-trial settlement and judicial tax disputes.

Regulation of tax legal relations includes legal regulation through the principles and norms of law, and individual regulation through local non-normative acts of state bodies, acts of courts of general jurisdiction and arbitration courts, where the opinion expressed by the Supreme Court of the Russian Federation sometimes determines the direction not only for practical implementation by the parties, but also for scientific research.

Thus, according to the Supreme Court of the Russian Federation, "in relation to taxpayer transactions made using "technical" companies, there is a possibility of applying "tax reconstruction", including under the terms of Article 54.1 of the Tax Code of the Russian Federation, which is determined not by formal, but by material conditions – i.e. the result of a tax audit, including with the assistance of the taxpayer himself" ^[4]. Thus, the supreme judicial body determined the criterion of application – material conditions – but only those that were established by the tax authority. Meanwhile, 25% of the results of tax audits for 2018-2020 are canceled by the courts, which aims us to independently establish significant facts and circumstances.

          In the Ruling of December 15, 2021 in case No. A40-131167/2020, he indicated that "recognition of a tax benefit as unjustified implies additional accrual of the amount of taxes and fees payable to the budget as if the taxpayer had not abused the right, on the basis of the relevant provisions of the Tax Code of the Russian Federation."

Arbitration courts, agreeing with this opinion, point out that "in the provisions of Article 54.1 of the Tax Code of the Russian Federation there is no prohibition on carrying out the so-called "tax reconstruction" of the income tax liability by establishing the expenditure part by calculation on the basis of subparagraph 7 of paragraph 1 of Article 31 of the Tax Code of the Russian Federation ^[5].

The legal regulation of contractual obligations in tax relations has an intersectoral feature, which suggests taking into account such a feature when preparing the calculation of the "reconstruction" of the conclusion, execution and termination of a commercial contract.

Intersectoral relations of civil and financial law, as noted earlier ^[6], occupy a special legal position in the doctrine of tax and civil law, defining the legal basis in other branches of law. The idea of an intersectoral approach in the study of the contract in tax legal relations was put by Chelyshev M.Yu. ^[7], and we need to take into account that they are expressed in the instrumental limits and boundaries of the regulation of tax legal relations, and imply an understanding of regulation not only by the principles and norms of tax, but also by the principles and norms of civil law.

Legal regulation of tax legal relations provides for regulation by the principles and norms of law, as V.V. Ershov rightly noted ^[8] from the perspective of an integrative legal understanding, taking into account the provisions of Article 11 of the Tax Code of the Russian Federation determines that "institutions, concepts and terms of civil, family and other branches of legislation of the Russian Federation used in the Tax Code of the Russian Federation are applied in the meaning that in what they are used in these branches of legislation" ^[9]. Thus, the legislator provided for the regulation of tax legal relations by the concepts enshrined in the Civil Code, but the doctrinal approach to the enforcement of Rule 54.1 of the Tax Code of the Russian Federation indicates a number of unresolved regulatory issues, for example, the application of concepts and definitions, such as "the purpose of the transaction".

Civil legislation assumes three stages in contractual legal relations: discussion of the essential terms of the contract (at this stage the purpose of the transaction will be determined), execution and termination of the contract, thereby, only the parties to the contract determine the purpose of the contract for themselves, no other person has the right to overestimate the essence of the purpose of the transaction. Tax legislation refers only in one norm to such a concept, the application of which is possible only within the framework of civil law relations.

To calculate the "tax reconstruction", it is necessary to determine the purpose of the transaction – what the essential terms of the contract are aimed at: subject – object or product, service and amount for such a product or service. Further, in two directions – legal – what documents confirm the transfer of the goods or object to the customer, how the provision of the service is executed – terms and a report on its provision; mathematical - calculation and movement of amounts due to the delivered object or goods, or the service rendered. Reconstruction of tax liabilities is impossible without analyzing executed contracts between the payer and his counterparty, where the reality of the consequences of the transaction is not denied by the tax authority, but their economic consequences are not accepted – the tax authority "removes" all expenses incurred and refuses to deduct VAT. In this case, the payer calculates the real income tax expenses that are directly related to the object or subject of the contract. The mathematical calculation is a proportion of the ratio of independent expenses with expenses for an "unscrupulous" counterparty, stated earlier.

 Article 54.1 of the Tax Code of the Russian Federation defines "the limits of the exercise of rights to calculate the tax base and (or) the amount of tax, collection, insurance premiums, preventing the taxpayer from reducing the tax base and (or) the amount" ^[10]. The absence of the concept and criteria of such a limit was compensated by the Federal Tax Service with subjective conditions such as

- such a transaction is executed by a proper person, i.e. a "bona fide" party to a commercial contract; 

- such a transaction corresponds to the actual economic meaning (i.e. it provides for the absence of distortions of legal qualifications);

- such a transaction has a "business purpose" - scientists have previously focused on such a tool ^[11].

Accordingly, reconstructing the mathematical model of calculating taxes, it is necessary to form a legal aspect that allows taking into account the economic meaning of the transaction and specifying the business purpose.

Letter of the Federal Tax Service of Russia dated 10.03.2021 No. BV-4-7/3060@ "On the practice of applying Article 54.1 of the Tax Code of the Russian Federation" ^[12], addressed to employees of the tax service does not define the procedure and criteria for calculation. Thus, the arguments set out in the letter do not systematize the procedure for calculating the "tax reconstruction" for the payer, which does not prevent, however, it is unsubstantiated to apply it by lower-level tax authorities without taking into account a reasonable balance of public and private interests.

Moreover, the document contains a number of controversial theses - in the decisions of the tax authority, where some circumstances are established that trigger the application of Article 54.1 of the Tax Code of the Russian Federation, the burden of proof, in violation of the principles of tax law, is placed on the taxpayer. 

 The Supreme Court of the Russian Federation "on the issue of applying the method of "tax reconstruction" in the implementation of tax control measures somewhat corrected the published Recommendations of the Federal Tax Service of Russia and indicated that a taxpayer can claim compensation from the budget only in part of the tax paid by suppliers, which, according to scientists in a similar situation, the calculation method does not provide any guarantees ^[13]".

         Of course, an important thesis is what constitutes a tax reconstruction in the event that the taxpayer "had" intent, and necessarily direct – that is, he knew and allowed the onset of negative consequences.  However, the Tax Code of the Russian Federation provides not only direct intent, but also indirect, when a taxpayer "knows" that his counterparty does not pay to the budget, but treats it indifferently, despite the fact that "knows" is not regulated by the principles and norms of law, and even more so is not stated in decisions on bringing to tax liability.

If indirect intent is established, which is not indicated in 98% of decisions, then tax reconstruction is possible, but it must be carried out based on the parameters of real execution, which is formally indicated, but not documented by the tax authority.

Carelessness, according to the opinion enshrined in the letter, means that the taxpayer "should have noticed", but did not do it, while which regulators allow the payer to "notice", and then protect their rights and private interests is not indicated in the document.

With regard to the taxpayer's transactions made using "unscrupulous" organizations, this means that the possibility of applying "tax reconstruction", including under the terms of Article 54.1 of the Tax Code of the Russian Federation, is determined not by formal, but by material conditions - by establishing the results of a tax audit, including with the assistance of the taxpayer himself"^[14], i.e., first of all, the emergence of the obligation of proof by the tax authority itself is seen, including the permissible use of "confessions" on the part of the payer.

"Taxpayers who have faced accusations in relations with technical companies and expect to apply income tax reconstruction now need to focus on proving not only the market level of expenses incurred, but also that they did not know for sure about the "problematic" supplier," he said Alexey Artyukh ^[15]. The question remains – at what stage and how to form the facts and circumstances that the payer did not know about the "bad faith and problematic nature" of the counterparty.

Tax reconstruction, which provides for a legal and economic opportunity to partially restore income tax expenses and claim VAT deductions, with a formal legal status and procedure that is not regulated, is an individual regulator that allows the payer to protect the right to record taxes and fees. The criteria of "tax reconstruction", as the purpose of the work, are: the reality of the consequences of the transaction – as the basis for reconstruction; the economic assessment of the object or object, as the amount of tax payable to account for expenses, which in turn solves the tasks of legitimate protection of constitutional rights to legally establish taxes and fees.