Tax offense is a penal socially dangerous act in the field of taxation, consisting of action or inaction, and Criminal Code of the Russian Federation implies liability for such a crime. List of tax crimes is provided in Chapter 22 of the Criminal Code of the Russian Federation.
1. In case if a citizen fails to pay taxes, fees or insurance contributions (Article 198 of the Criminal Code of the Russian Federation).
2. In case if a legal entity fails to pay taxes, fees or insurance contributions (Article 199 of the Criminal Code of the Russian Federation).
3. In case if a tax agent fails to fulfill its duties (Article 199.1 of the Criminal Code of the Russian Federation).
4. Concealment of assets by an organization or an individual entrepreneur, taxes, fees, and insurance contributions shall be deducted from (Article 199.2 of the Criminal Code of the Russian Federation).
5. Evasion of an individual acting as an insurer from paying insurance contributions to the state off-budgetary fund for compulsory social insurance against industrial accidents and occupational diseases (Article 199.3 of the Criminal Code of the Russian Federation).
6. Evasion of a legal entity acting as an insurer from paying insurance contributions to the state off-budgetary fund for compulsory social insurance against industrial accidents and occupational diseases (Article 199.4 of the Criminal Code of the Russian Federation).
The most "popular" articles are and remain the Articles 198 and 199 of the Criminal Code of the Russian Federation, implying liability for tax evasion. They have been included in the Criminal Code of the Russian Federation back in 1997, and have undergone many changes since then.
It should be noted that tax offenses can be committed solely with direct intent; all irremediable doubts should be interpreted in favor of the taxpayer: this condition was pointed out by the Supreme Court of the Russian Federation in itsResolution of the Russian Federation No. 48 of November 26, 2019.
What is the punishment for the tax offense?
Punishment for tax offense can be as follows:
· penalties;
· penal labour;
· arrest;
· imprisonment.
Ban on conduction of certain activities or holding certain positions may be applied as an additional sanction.
For instance, in case of tax evasion by an organization on a particularly large scale (more than 45 million rubles within three financial years), a person faces imprisonment for up to 6 years. Often, a citizen is simultaneously accused of committing other offenses (for instance, failure to pay wages to his employees); in this case, the risk of actual imprisonment increases.
Initiation of tax offenses cases
In March 2022, amendments were made to the Criminal Procedure Code of the Russian Federation: criminal cases on tax offenses can now be initiated solely on the basis of evidence provided by the tax department. According to the authors of these amendments, they will help protect entrepreneurs from unjustified criminal prosecution, since even the preliminary investigation can have a negative impact on business.
According to paragraph 3 of Article 32 of the Tax Code of the Russian Federation, in case if within 2 months from the expiration of the period given to the taxpayer to repay all arrears, the funds have not reached the budget, tax inspectors shall send the relevant documents over to the investigative authorities (if there are signs of offense). They shall proceed accordingly within 10 days.
As for the preliminary investigation, the articles in question have been removed from the jurisdiction of investigators of the internal affairs bodies. Investigation of tax crime is conducted by the Investigative Committee of the Russian Federation.
Criminal cases on tax offenses are most often initiated without specifying certain suspect. However, if the role of the head of the legal entity obviously has a significant influence over it, or if he is being the sole founder, a criminal case may target a certain person.
Is it possible to be exempted from criminal liability for tax offenses?
Based on the provisions of Part 1 of Article 76.1 of the Criminal Code of the Russian Federation, a citizen who has committed tax offense for the first time shall not be criminally liable if he/she fully reimburses the damage caused, namely, pays the outstanding taxes, fines and penalties. Certificate from the Federal Tax Service will be a sufficient confirmation of the repayment of debt.
There are times when the settlement of taxe arrears does not prevent the initiation of criminal case based on the relevant article of the Criminal Code of the Russian Federation, so it can be used as a "show case". Despite the fact that such cases will not reach the court, the business may face a large number of negative consequences, for instance:
· application of preventive measures against managers (including placement in a pre-trial detention center);
· high risk of imputation of different tax periods and detection of signs of other crimes by the law enforcement authorities;
· business reputation risks.
It is for the lawyer to eliminate or minimize such risks.
A criminal case on tax offence may be closed due to the expiration of the statute of limitations. For instance, tax evasion under Part 1 of Article 199 of the Criminal Code of the Russian Federation is a minor offense, respectively, the statute of limitations for respective criminal liability is two years.
Defence in tax crime case
As mentioned earlier, a preliminary investigation of tax offenses can significantly affect the company activities: it brings interrogations of management and employees, seizure of accounting documents and computer equipment, property arrest, etc. Therefore, it is highly recommended to contact a tax lawyer at this stage. The lawyer will analyze the case proceedings and then will do the following:
· find out whether it is possible to terminate via the payment of all arrears and penalties;
· determine the list of persons who require legal protection;
· assess the prospect of appealing the tax audit act or decision;
· instruct employees and management of the company on how to behave in terms of investigative measures;
· prepare the company for the upcoming searches and seizures.
In cases where it is impossible to repay the tax arrears, or where the taxpayer refuses to terminate the criminal case on non-sufficient grounds, the lawyer will proceed with collection of evidence in favor of his/her client. For instance, a lawyer may engage an independent specialist, in order to study the case facts, determine and interview witnesses, etc.
Specific tactics of defense will depend on the circumstances of the case, namely, on the manner the illegal act was committed.
1. In case if a citizen fails to pay taxes, fees or insurance contributions (Article 198 of the Criminal Code of the Russian Federation).
2. In case if a legal entity fails to pay taxes, fees or insurance contributions (Article 199 of the Criminal Code of the Russian Federation).
3. In case if a tax agent fails to fulfill its duties (Article 199.1 of the Criminal Code of the Russian Federation).
4. Concealment of assets by an organization or an individual entrepreneur, taxes, fees, and insurance contributions shall be deducted from (Article 199.2 of the Criminal Code of the Russian Federation).
5. Evasion of an individual acting as an insurer from paying insurance contributions to the state off-budgetary fund for compulsory social insurance against industrial accidents and occupational diseases (Article 199.3 of the Criminal Code of the Russian Federation).
6. Evasion of a legal entity acting as an insurer from paying insurance contributions to the state off-budgetary fund for compulsory social insurance against industrial accidents and occupational diseases (Article 199.4 of the Criminal Code of the Russian Federation).
The most "popular" articles are and remain the Articles 198 and 199 of the Criminal Code of the Russian Federation, implying liability for tax evasion. They have been included in the Criminal Code of the Russian Federation back in 1997, and have undergone many changes since then.
It should be noted that tax offenses can be committed solely with direct intent; all irremediable doubts should be interpreted in favor of the taxpayer: this condition was pointed out by the Supreme Court of the Russian Federation in itsResolution of the Russian Federation No. 48 of November 26, 2019.
What is the punishment for the tax offense?
Punishment for tax offense can be as follows:
· penalties;
· penal labour;
· arrest;
· imprisonment.
Ban on conduction of certain activities or holding certain positions may be applied as an additional sanction.
For instance, in case of tax evasion by an organization on a particularly large scale (more than 45 million rubles within three financial years), a person faces imprisonment for up to 6 years. Often, a citizen is simultaneously accused of committing other offenses (for instance, failure to pay wages to his employees); in this case, the risk of actual imprisonment increases.
Initiation of tax offenses cases
In March 2022, amendments were made to the Criminal Procedure Code of the Russian Federation: criminal cases on tax offenses can now be initiated solely on the basis of evidence provided by the tax department. According to the authors of these amendments, they will help protect entrepreneurs from unjustified criminal prosecution, since even the preliminary investigation can have a negative impact on business.
According to paragraph 3 of Article 32 of the Tax Code of the Russian Federation, in case if within 2 months from the expiration of the period given to the taxpayer to repay all arrears, the funds have not reached the budget, tax inspectors shall send the relevant documents over to the investigative authorities (if there are signs of offense). They shall proceed accordingly within 10 days.
As for the preliminary investigation, the articles in question have been removed from the jurisdiction of investigators of the internal affairs bodies. Investigation of tax crime is conducted by the Investigative Committee of the Russian Federation.
Criminal cases on tax offenses are most often initiated without specifying certain suspect. However, if the role of the head of the legal entity obviously has a significant influence over it, or if he is being the sole founder, a criminal case may target a certain person.
Is it possible to be exempted from criminal liability for tax offenses?
Based on the provisions of Part 1 of Article 76.1 of the Criminal Code of the Russian Federation, a citizen who has committed tax offense for the first time shall not be criminally liable if he/she fully reimburses the damage caused, namely, pays the outstanding taxes, fines and penalties. Certificate from the Federal Tax Service will be a sufficient confirmation of the repayment of debt.
There are times when the settlement of taxe arrears does not prevent the initiation of criminal case based on the relevant article of the Criminal Code of the Russian Federation, so it can be used as a "show case". Despite the fact that such cases will not reach the court, the business may face a large number of negative consequences, for instance:
· application of preventive measures against managers (including placement in a pre-trial detention center);
· high risk of imputation of different tax periods and detection of signs of other crimes by the law enforcement authorities;
· business reputation risks.
It is for the lawyer to eliminate or minimize such risks.
A criminal case on tax offence may be closed due to the expiration of the statute of limitations. For instance, tax evasion under Part 1 of Article 199 of the Criminal Code of the Russian Federation is a minor offense, respectively, the statute of limitations for respective criminal liability is two years.
Defence in tax crime case
As mentioned earlier, a preliminary investigation of tax offenses can significantly affect the company activities: it brings interrogations of management and employees, seizure of accounting documents and computer equipment, property arrest, etc. Therefore, it is highly recommended to contact a tax lawyer at this stage. The lawyer will analyze the case proceedings and then will do the following:
· find out whether it is possible to terminate via the payment of all arrears and penalties;
· determine the list of persons who require legal protection;
· assess the prospect of appealing the tax audit act or decision;
· instruct employees and management of the company on how to behave in terms of investigative measures;
· prepare the company for the upcoming searches and seizures.
In cases where it is impossible to repay the tax arrears, or where the taxpayer refuses to terminate the criminal case on non-sufficient grounds, the lawyer will proceed with collection of evidence in favor of his/her client. For instance, a lawyer may engage an independent specialist, in order to study the case facts, determine and interview witnesses, etc.
Specific tactics of defense will depend on the circumstances of the case, namely, on the manner the illegal act was committed.
