Tax dispute resolution

Jan, 18 2021


Tax-related disputes arise between individuals, legal entities and public bodies at times. As a rule, entrepreneurs and business companies have to promote their interests. In such cases we mainly refer to tax disputes.

The procedure for tax dispute resolution is regulated by law. Tax dispute can be settled in court and in pre-trial detention. As tax dispute is between a citizen, an organization and the state, disagreements over tax accrual are associated with difficulties for one of the parties.

Tax dispute features

Tax Code of the Russian Federation defines ‘tax dispute’ as a taxpayer-state body conflict. A taxpayer is considered to be an individual, an organization, business and non-profit companies. The violation of rights in this case may be real or alleged. Anyway, this dispute type necessarily affects the correctness of tax calculations and payments.

The dispute basis may also be the government actions affecting the taxpayer’s interests. As a rule, we imply tax inspection employees. The law proposes to resolve such a tax dispute administratively or judicially.

As we have mentioned, the main tax dispute resolution feature is that one of the parties to the conflict is always the state: the Federal Tax Service of Russia. Hence the case is being complicated. No doubt, only qualified lawyers with competence in tax law and related areas deal with such cases.

Administrative procedure for tax dispute resolution

Do not rush to file a lawsuit if you have any doubts in terms of the correctness of the government actions and are sure the tax inspectors illegally fined your company. Resort to an experienced lawyer or a law firm to resolve the tax dispute in a pre-trial detention.

First, most disputes are resolved amicably, without legal recourse. Secondly, such an action strategy is more profitable in terms of financial and time expenditures. You should think about going to court only if you cannot settle the case in peace.

Some tax dispute types allow the parties to choose their own strategy of action. That is, you can decide for yourself which dispute resolution order is preferable. However, there are dispute types requiring the plaintiff to first try to settle the case administratively. Otherwise, the law does not allow you to go to court.

So, the administrative or pre-trial procedures imply that you contact a higher authority with a complaint or an allegation. Meanwhile judicial tax dispute resolution requires that you defend your rights and interests in court.

When is it necessary to resolve the issue in a pre-trial detention?

If the tax dispute subject is the tax inspection decision based on the audit results, the law requires that the parties first try to resolve the conflict in a pre-trial detention. Otherwise, you need to go to court. If you want to challenge the results of an in-house or on-site inspection, the court will not examine the claim without the evidence that you did not manage resolve the case administratively.

In other words, when the audit results are the tax dispute subject, you should first contact a higher authority with a complaint. At the same time, the complaint can be ordinary/regular/common and appeal, there is a big difference between these two document types.

An appeal is filed to challenge the decision to bring or refuse to bring to justice for an offense. We imply the decision made by the tax authority on the audit results. An appeal can be sent to a higher authority if the decision has not yet entered into force. A common complaint is an appeal that appeals against a non-normative tax act entered into force.

The law also provides for other cases where you should first try to solve the problem administratively, and only then file a lawsuit in court. For example, this applies to disputes related to the appeal of non-normative tax acts, government actions or breach of their duties.

Taxpayer-inspector disputes, such as disagreement with the imposed fine, recovery, government suspension of account operations, are resolved administratively. If the inspection employees refuse tax deductions, this issue is also the easiest to solve without legal recourse.

Advantages of pre-trial tax dispute resolution

Most of the tax law related disputes are resolved administratively. However, it is hardly superfluous to consult lawyers and entrust them to conduct the case. Pre-trial tax dispute resolution is the optimum solution:

  • Short terms of the complaint review. A higher authority where you file a complaint will be required to review your application within a few days or weeks. Meanwhile a lawsuit can last for years.
  • Absence of state fees and court fees. Resolving the issue in court is always more expensive. When you go to court, you must first pay the legal fee. The costs of legal representation in court are higher than for advice and support in administrative tax dispute resolution. 
  • Easy document registration. It is quite simple to make a common or appeal complaint, whereas a statement of claim is a task for an experienced professional. In addition, you must collect evidence to support own position in court.

After reviewing your complaint, the higher tax authority has the right to dismiss it or rule in your favor. In this case, the higher tax authority has the right to cancel the non-normative act or the tax authority decision (completely or partially). Also, officials can make a new decision, recognize the actions of the tax authorities as illegal.

It could be impossible to resolve the conflict administratively. If the decision of a higher instance does not suit you, you can file a statement of claim to the arbitration court. It will be examined by the general rules established by the Arbitration Procedure Code.

Legal recourse terms

Any individual or legal entity who disagrees with the non-normative acts, government actions or decisions has the right to file a claim against the tax inspection. When the tax inspection unlawfully creates obstacles to business activity, this could also become a lawsuit subject.

The terms for filing a claim are limited. You have 3 months since you are aware of the violation of your rights and interests. After this period, the arbitral tribunal will not accept the claim. In turn, the arbitral tribunal must both review the application within 3 months after filing the claim and make a certain decision. The decision of the trial court is unlikely to suit one of the parties. Then the party has the right to appeal it to the Court of Appeal.

Stages of judicial tax dispute resolution

  • Receipt of a written copy of the decision by the higher authority to which you filed your complaint.
  • Preparation of the claim with evidence and its submission to the arbitral tribunal.
  • Case review by the court and decision making, its handing over to both parties to the tax dispute.
  • Appeal to the Court of Appeal if the results do not suit one of the parties.

Peculiarities of tax dispute court resolution

There is a significant advantage to examining a case in court: an unbiased view of the situation and the evidence of the parties. The higher authority is not a neutral party to the conflict anyway, so its decisions may be biased. In this case legal recourse increases the taxpayer’s chances for justice. 

However, it is also important to be aware of the principles by which the cases are under the arbitration court review. In fact, the judicial body works with the documents and evidence provided by the parties. It examines the disputed decision or the tax inspection act, checks the evidence. In this case the verdict could be completely opposite to the one by the tax officers.

Before legal recourse you should consult a lawyer. Drafting a claim should also be entrusted to a professional, because it must 100% comply with the arbitration law norms. Equal attention should be paid to the documents attached to the statement of claim.

The claim should be accompanied with papers substantiating your position, all the necessary evidence, as well as the documents to proceed with the claim. This is a receipt confirming the legal fee payment for the case review in the arbitration court, a power of attorney or a contract that confirm the lawyer’s authority to represent the interests of the taxpayer. This category also includes a certificate of registration as a legal entity and an extract from the register with the plaintiff-defendant information.

When applying to the court, you must confirm that you have sent a copy of the claim to other case participants. Finally, the statement of claim is accompanied with papers confirming that you have resorted to an administrative tax dispute resolution.

Author of the article
Tax dispute resolution
Valentina Khlavich
Managing Partner
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