Article 86.3. Tax Control over the Expenses of a Natural Person

1. If administered expenses exceed the incomes stated by a natural person in his declaration over the previous tax period, or is tax bodies do not possess information about the incomes of a natural person over the previous tax period, the tax bodies shall be obliged to make out a report on the revealed inconsistency and shall send within a month to the natural person a written demand for explanations about the sources and amounts of the monetary funds which were used to acquire property.

2. Upon the receipt of the written demand of a tax body, based on available data the natural persons shall be obliged to submit during 60 calendar days a special declaration with an indication of all sources and amounts of monetary funds used to acquire property indicated in the tax body's demand.

3. A person submitting a special declaration shall have the right to append to it copies of documents certified in the statutory order and confirming the data indicated in it.

On the demand of tax bodies the drawer of a special declaration or his representative shall be obliged to submit for perusal the originals of documents whose copies were appended to the said declaration.

4. The form of a special declaration shall be worked out by the Ministry of Taxation of the Russian Federation by agreement with the Ministry of Finance of the Russian Federation.

Article 87. Tax Checks

The tax bodies shall carry on chamber and field tax checks of taxpayer, payers of dues and tax agents. A tax check may cover only three calendar years of the activity of the taxpayer, the payer of the due and the tax agent, which directly precede the year of the respective check.

If during cameral or field audit the tax authority finds that it needs additional information on taxpayer's operations with third parties, the tax authority can request the documents that have to do with the operations of the audited taxpayer (the payer of the due) from these third parties (cross-examination).

Tax authorities are forbidden to do repeated field audits of the same taxes that are either due for payment or were paid by the taxpayer (the payer of the due) for the already audited tax period, except for cases when such an audit is conducted in connection with re-organisation or liquidation of the corporate taxpayer (organisation paying the due) or is conducted by a higher-level tax authority as means of exercising control over the operation of the tax authority that conducted the first audit.

A second field audit conducted for the purposes of exercising control over the tax authority shall be conducted by the higher-level tax authority based on a motivated resolution of that authority and in compliance with the provisions of the present Article.

Article 87.1. Tax Checks by Customs Agencies

The customs agencies shall conduct chamber and field checks of the taxes to be paid in connection with the movement of goods across the customs border of the Russian Federation in accordance with the rules provided for by Articles 87-89 of this Code.

Article 88. Cameral Tax Audit

A cameral audit is an examination conducted in the office of the tax authority of the data contained in tax returns and other documents filed by the taxpayer that serve as the basis for computing and paying taxes, as well other documents concerning the taxpayer that the tax authority has in its possession.

Cameral audits shall be conducted by authorized tax officials as part of their routine duties within 3 months after the taxpayer has filed a tax return and other documents that serve as a basis for assessing and/or paying the tax, unless another deadline has been set forth in legislative or other regulatory acts on taxation, and no specific decision of the head of the tax authority shall be required to conduct such a audit.

If the audit revels mistakes made when in filling out the forms or inconsistencies in reported data, the taxpayer shall be notified and requested to make the appropriate corrections within the established time limit.

During cameral audit the tax authority is entitled to request additional data from the taxpayer, to receive explanations and documents that confirm the correctness of assessment and timeliness of tax payment.

For the underpaid amount of taxes revealed by cameral audit, the tax authority shall send out a demand for the payment of the tax and interest amount in question.

Article 89. Field Tax Audit

Field tax audits shall be conducted on the basis of a decision made by the head of a tax authority or deputy thereof.

A field tax checks may be carried out in respect of one taxpayer (the payer of the due or the tax agent) for one or several taxes. The tax body shall not be entitles to carry on during one calendar year two and more field tax checks of the same taxes over one and the same period. A field tax check may not last for more than two months, unless otherwise stipulated by this Article. In exceptional cases the higher tax body may extend the duration of field tax check up to three months. When field checks are carried out with regard to the organisations having branches and representative offices, the term of checks shall extended by one month in order to verify each branch and representative office. The tax bodies shall have the right to check the branches and representative offices of a taxpayer (a tax agent or a payer of dues), regardless of the conduct of checks of the taxpayer (tax agent or payer of the due) himself. The time of a check shall include the time of the actual stay of the checking officials on the territory of the verified taxpayer, the payer of the due or the tax agent. The said periods of time shall not include the periods between the service of the demand for the submission of documents on the taxpayer (tax agent) in accordance with Article 93 of this Code and the submission by him of the documents questioned during the conduct of the check.

A field tax audit conducted in connection with a reorganisation or liquidation of a corporate taxpayer, duty-paying organisation, or by a higher tax authority for the purpose of exercising control over the operation of the tax authority that conducted the original audit can be conducted regardless of the time of the previous audit.

If necessary, authorized tax officials conducting the field tax audit can take inventory of taxpayer's property, and also conduct visual examinations of production, storage, trade and other premises and grounds used by the taxpayer for earning profit or for keeping objects of taxation; this visual examination shall be done in accordance with the procedures determined under Article 92 of the present Code.

If officials of the tax authority conducting the audit have sufficient grounds to believe that documents evidencing transgressions can be destroyed, hidden, altered or substituted, such documents shall be seized in accordance with the procedure in Article 94 of the present Code, and on the basis of an act drafted by these officials. The Deed on the seizure of documents shall state the grounds for the seizure and include the list of the documents removed. During the seizure of documents, the taxpayer (tax agent or duty-payer) is entitled to make comments that shall be entered into the Act upon his request. The documents seized shall be numbered, sawn together with a string and stamped or signed by the taxpayer (tax agent or duty-payer). If the taxpayer (tax agent or duty-payer) refuses to put his stamp or signature on the Act, a special note of this shall be made. The taxpayer (tax agent or duty-payer) shall be served a copy of the Act.

The form of the decision by the manager (deputy manager) of a tax body on the conduct of a field tax check shall be worked out and approved by the Ministry of Taxation of the Russian Federation.

At the end of a field tax check the checking official shall draw up a reference on the carried check in which he fixed the subject of the check and the time for its conduct.

Article 90. Participation of a Witness

1. Any natural person who may have knowledge of any facts that have significance for exercising tax control can be summoned to testify as a witness. Witness testimony shall be entered into a protocol.

2. The following persons may not be interrogated as witnesses:

1) persons who by reason of their small age, physical and psychic drawbacks are unable to correctly perceive circumstances of relevance to tax control;

2) persons who have received information needed to exercise tax control in connection with the discharge by them of their professional duties, and similar information shall refer to the professional secret of these persons, in particular a lawyer and an auditor.

3. A natural person can refuse to testify only on the grounds provided for by the legislation of the Russian Federation.

4. A witness can testify at the place where he is situated, if due to illness, old age or disability he cannot come to the tax office, and in other cases as decided by the tax official.

5. Before hearing the witness testimony, the tax official shall warn the witness of the liability for refusal or avoidance to testify or perjury. This shall be entered into the protocol and certified with the signature of the witness.

Article 91. Access to Grounds or Premises by Tax Officials for the Purposes of Exercising Tax Control

1. Access to the grounds or premises of a taxpayer, a duty payer and a tax agent shall be granted to official of the tax authority directly involved in conducting the tax audit upon presentation of their official heads and a resolution of the head of the tax authority (or his deputy) on conducting a field audit of the taxpayer.

2. Officials of the tax authority directly involved in the tax audit shall have the right to examine the grounds or premises of the taxpayer used for business operations, or examine objects of taxation to establish whether the actual parameters of these objects match the parameters reported by the taxpayer (or another obligor).

3. Should access to such grounds or premises (except for living quarters) be impeded for tax officials conducting the tax audit from getting, the head of the audit team (unit) shall draw up a Deed to be signed by him and the taxpayer (or another obligor), based on which the tax authority shall be entitled to assess the tax liability from the data on the taxpayer (or another obligor) that the tax authority has, or by analogy.

Should the taxpayer refuse to sign the said deed, a note of this shall be made in the deed.

4. Unlawfully impeding access to the grounds or premises of a taxpayer to tax officials conducting the tax audit shall constitute a tax offense and entail a liability stipulated in Article 124 of this Code.

5. Access of tax officials conducting the tax audit to living quarters against the will or without the consent of the natural persons who live there differently as in cases established by the federal law or on the basis of a court decision shall not be permitted.

Article 92. Examination

1. In order to clarify circumstances that are of relevance for the comprehensiveness of the audit, officials of the tax authority conducting the field audit shall have the right to examine grounds or premises of the taxpayer being audited, as well as documents and objects.

2. Examination of documents or objects outside the framework of a field tax audit shall be allowed, if the documents or object have been received by tax officials as a result of earlier actions performed in exercise of tax control, or if the owner of these objects gives his consent to their examination.

3. Examination shall be conducted in the presence of attesting witnesses.

The person being audited or a representative thereof, as well as experts shall have the right to assist in conducting the examination.

4. If necessary, photograph-taking, filming, video recording, making copies of documents and other actions can be undertaken at the time of the examination.

5. A protocol of examination shall be drawn up.

Article 93. Requests for Documents

1. An officer of the tax authority conducting the tax audit has the right to request that the taxpayer, the duty-bound payer or the tax agent being audited provide the documents needed for the audit.

The person to whom the request for information is addressed shall send or turn over such documents to the tax authority within five days of the request.

Documents shall be provided in the form of duly certified copies.

2. Refusal of the taxpayer, the duty-bound payer or the tax agent to produce the documents/records requested during the conduct of a tax audit, or failure to present them within the fixed terms, shall constitute a tax offence and shall be liable under Article 126 of the present Code.

In the event of such refusal the tax officer that conducts the tax audit shall seize the needed documents pursuant to the procedure provided for in Article 94 of this Code.

Article 94. Seizing Documents and Other Objects

1. Seizure of documents and objects shall be performed on the strength of a motivated seizure ruling made by an official of the tax authority conducting the field audit.

The said ruling shall be subject to approval by the head or deputy head of the tax authority in question.

2. Seizure of documents or other objects cannot not be carried out at night time.

3. Seizure of documents or other objects shall be made in the presence of attesting witnesses and of the person who has the documents and other objects to be seized in his possession.

Before starting the seizure, the tax official shall present the seizure ruling and brief those present at the seizure on their rights and duties.

4. The tax officer shall than suggest that the person in possession of documents and other objects to be seized surrender them voluntarily. Meeting with a refusal to voluntarily surrender the documents or objects, the officer shall carry out an enforced seizure.

Meeting with refusal, on the part of the person from whom documents and other objects are to be seized, to provide access to the premises or other possible locations of documents or objects to be seized, tax officers shall be entitled to obtain access on their own trying to avoid causing unnecessary damage to locks, doors and other objects.

5. The documents and objects that are not related to the object of the tax audit, shall not be subject to seizure.

6. Seizure of documents and other objects is recorded in a protocol as prescribed by Article 99 of this Code and the present Article.

7. Seized documents and other objects shall be listed and described in the seizure protocol or in an attachment thereto, indicating the exact name of every item, its quantity, measures, weight and individual characteristics, and if possible, its value.

8. In cases when seizure of copies of taxpayer's documents is insufficient for conducting control measures and tax authorities have sufficient grounds to believe that the original documents shall be destroyed, hidden, modified or replaced, the tax officer shall have the right to seize the original documents in accordance with the provisions of this Article.

When such documents are seized, copies thereof shall be made and certified by a tax officer. Such copies shall be handed over to the person whose documents were seized. If copies cannot be produced or delivered at the time of the seizure, they shall be handed over by the tax authority to the person whose documents were seized within five days of the date of the seizure.

9. All seized documents and objects shall be demonstrated to the attesting witnesses and other persons participating in, or attending, the seizure, and, if necessary, packed at the site of the seizure.

10. A copy of the protocol of seizure of documents/objects shall be served against subscription or mailed to the person from whose possession these documents or other objects were seized.

Article 95. Expert Examination

1. In cases of necessity for the participation in concrete actions of tax control and in field tax checks an expert may be attracted on a contractual basis.

Expert examination shall be conducted in cases when clarification of questions at hand requires specialized knowledge in science, arts, technology or craft.

2. The questions put before an expert and the assessment that the expert delivers cannot go beyond the scope of his/her expertise. Experts shall be recruited on a contractual basis.

3. An expert examination shall be ordered by a ruling of an officer of the tax authority that conducts the field audit.

The ruling shall specify the reasons for requesting an expert examination; the name of the expert or the name of the organisation where expert examination is to be conducted, questions that put before the expert, and materials made available to the expert.

4. The expert has the right to examine the materials of the audit that relate to the subject of the expert examination and submit requests for additional materials.

5. The expert has the right to refuse to deliver expert opinion if the materials made available to him/her are insufficient , or if he/she does not possess the knowledge required to carry out the expert examination.

6. An officer of the tax authority that has issued the ruling on conducting the expert examination shall present the ruling to the person being audited and brief that person on his rights under Item 7 of this Article.

7. When expert examination is ordered and during its conduct, the taxpayer being audited has the right to do the following:

1) to challenge the expert;

2) to request that the expert be appointed from among the persons that he himself suggests;

3) to put additional questions to the expert to provide his/her opinion on them;

4) to be present , subject to permission of the tax officer, at the expert examination and offer his/her explanations to the expert;

5) to familiarize himself/herself with the expert's opinion.

8. An expert shall deliver his/her opinion in writing in his/her own name. This opinion shall include the description of the research conducted, the findings and responses to the questions that were asked. Should the expert establish any material facts that lie outside the scope of the original inquiry, the expert has the right to include such findings into his/her opinion.

9. Expert opinion or his statement of the impossibility to deliver one shall be presented to the audited taxpayer who shall have the right to present his own explanations or counter-arguments, request that additional questions be put or request an additional or repeated expert examination.

10. An additional expert examination shall be ordered if the outcome of the first one lacks clarity or is incomplete; the assignment to conduct it can be given to the same or a different expert.

A repeated expert examination shall be ordered if the first one is invalid or inconclusive and the assignment to conduct it shall be given to a different expert.

An additional and new expert examination shall be ordered in compliance with the provisions of the present Article.