Overview of the New Tax Code
We hereby present for your attention an overview of the key changes introduced by the new Tax Code.
I. General Provisions
Principle of Transparency
A new principle has been introduced – the principle of transparency: taxation rules and actions of tax authorities must be clear, open, and accessible to taxpayers. Taxpayers have been granted the right to demand clear, reasoned, and exhaustive explanations from tax authorities, both regarding the application of the Code’s provisions and with respect to specific actions or omissions. If this requirement is violated, for example in the case of an incomplete response or concealment of the grounds for decisions, the taxpayer is entitled to appeal such actions.
Expansion of the Principle of Good Faith
The content of the principle of good faith has also been expanded: the Code explicitly defines cases that are recognized as manifestations of bad faith. These include misrepresentation of data on business activities, taxable objects, accounting and reporting, conclusion of sham transactions for the purpose of tax evasion, as well as the performance of obligations by “front” persons who are not parties to the agreement. At the same time, an important guarantee has been established: non-payment of tax by a supplier cannot serve as an independent ground for denying the purchaser the recognition of expenses.
Introduction and Control of Tax Benefits
In the area of tax benefits, a procedure for their codification in the Tax Code and annual effectiveness analysis has been introduced. In addition, an aggregate cap on benefits has been established — not more than 10% of GDP.