Why Should a Bona Fide Taxpayer Evaluate a Potential Business Partner?

Business operations are subject to various risks, related both to the potential non-fulfillment of obligations by business partners and to potential tax consequences when engaging in fraudulent transactions to gain fiscal advantages in the form of value-added tax. Therefore, careful selection of business partners is one of the measures for reducing tax risks. It is in the taxpayer’s interest to obtain as complete information as possible about a potential business partner, which would allow for evaluating their reliability and responsibly making a decision on whether to proceed with or decline a transaction.

The evaluation of business partners is carried out by maximally utilizing publicly available online databases, assessing at least the following set of circumstances:

• Evaluate the business partner’s registration data, including beneficial owners, their residency, legal forms, board members, procurators, and related parties;
• Evaluate whether insolvency proceedings have been initiated or economic activity has been suspended;
• Evaluate whether the business partner has tax debts, and if so, whether they are overdue;
• Evaluate whether the business partner is a VAT payer;
• Evaluate whether the business partner has submitted the annual report for the previous period in a timely manner;
• Evaluate the financial information presented in the business partner’s annual report to determine if the financial indicators suggest an ability to fulfill assumed obligations;
• Check other possible public information about the business partner;

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