List of documents necessary for safe execution of a contract with counterparty

The lack of due diligence on the part of a taxpayer by choosing of counterparties can be followed by submission of claims on the side of tax authorities in execution of contracts with fly-by-night company. And, as a consequence - additional charge of tax and holding liable for a tax offence. 

Following features of fly-by-night companies are singled out:

• registration at «mass» address,
• mass» founder or executive,
• lack of information on a company in open data sources,
• communication through representatives and refusal on the part of potential partner in the establishment of contacts with the management.

However, not always the presence of those or other listed criteria points to a fly-by-night company. But if there is a combination of features, then it is a serious pause for thought about the due diligence of potential counterparty.

The criteria, upon which tax authorities rely by planning of field tax audits, are presented in the order of the Federal Tax Service from 30.05.2007 № MM-3-06/333 «On approval of the concept of planning system of field tax audits».

In order to make ourselves and your business safe from possible claims on the side of taxation bodies, there are a lot of ways to make certain of trustworthiness of potential counterparty. First of all, it is required to request a number of documents by the contractor before closing of a deal. The standard minimum includes certificates of state registration, of registration with tax authorities and articles of incorporation. Besides, an extract from EGRUL (the Uniform State Register of legal entities) should be requested, as well as certificate of no arrears in tax payments. The term between getting of the extract and the moment of its presentation to a taxpayer is not prescribed by the law, but the less is the term, the better.

Also it wouldn't go amiss to test the counterparty for license for business activity (if its availability is obligatory) and its status, to be acquainted with annual accounting reports of the contractor, with the existence of arbitration cases, where he/she/it is a defendant, and to test if company is listed in the register of bad-faith suppliers.

It is considered also as a discretion, when it is got more specific information about the staff size of counterparty, his/her/its property status, about composition and value of fixed assets, reputation on the market and work experience in that or another industry.

As practice shows, verification and collection of data, confirming the trustworthiness of a potential contractor, require efforts of an interested party, as companies also provide such information to potential partners not always willingly. Information and analytical system Globas-I, in online mode, can help to get necessary information on a counterparty (registration data, availability of licenses, court proceedings, information about composition of the management), and Reliability index will easy help to find out a fly-by-night company.

See also: How to check the counterparty before signing the contract