Business activities are subject to various risks related to both the possible default of counterparties and the possible tax consequences of engaging in fraudulent transactions in order to gain a fiscal advantage in the form of value added tax, so careful selection of counterparties is one of the measures to reduce tax risks. It is in the interest of the taxpayer to obtain as complete information as possible about the potential counterparty, which would allow to assess its reliability and make a responsible decision on whether to perform the transaction or to refuse it.
The assessment of counterparties shall be carried out using, as far as possible, publicly available databases on the Internet, assessing at least the following set of circumstances:
- Assess counterparty registration data, including beneficial owners, their residences, legal forms, board members, procurators and related parties;
- Assess if any insolvency has been initiated or if economic activity has been suspended;
- Assess whether the counterparty has any tax arrears, if any, or whether they are past due;
- Assess whether the counterparty is a VAT payer;
- Assess whether the counterparty has submitted the annual report for the previous period in a timely manner;
- Assess the financial information presented in the counterparty’s annual report whether the financial indicators reflect the ability to meet the commitments;
- Check other possible public information about the counterparty;
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