The term “tax benefit” was introduced by the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation #53 on October 12, 2006.
Reasonable tax benefit is the lawful reduction of the amount of tax liability due to one of the circumstances:
– reduction the tax base;
– receipt of tax deduction, tax benefits;
– applying a lower tax rate;
– obtaining the right to refund or tax refund from the budget.
The concept is actively used by the tax authority during tax audits. Obtaining tax benefits may be deemed unreasonable and entail the imposition of a fine.
The tax benefit is recognized to be unreasonable on the basis of a number of facts. For example, when the operations conducted by the firm did not have economic feasibility, or when the firm physically could not conduct the declared activities (there were no necessary material resources, personnel, technical capabilities, etc.).