Use of cash register equipment: Reporting exemption

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Companies switching to online cash registers will be “exempted” from tax reporting. Elena Rybnikova, head of quality control and methodology department at Intercomp, tells us about this new development.

Elena Rybnikova
Head of Internal Audit, Expertise and Methodology Department
New changes concerning cash register equipment use provide for electronic exchange of information between taxpayers and the Federal Tax Service (Federal Law No. 290-FZ dated July 03, 2016). Previously, at the end of their shift, cashiers issued a Z-report for recording into a log (Form No. KM-4) and statement-reports (Form No. KM-6). Then companies and individual entrepreneurs submitted this documentation to the Federal Tax Service for control of their revenues.
Today, those who are legally required to use online cash registers no longer submit such reports to the Federal Tax Service and are no longer required to store them in paper form. All bill details and shift reports are stored in the fiscal storage of cash register equipment, in a fiscal data operator (monitoring through a user account) and in the Federal Tax Service, and the law requires that all information be reflected online in all three systems simultaneously.

Burden reduction

Given the aspiration of the Federal Tax Service to control online all businesses in the country, the Federal Tax Service is planning to reform the reporting system which would entail a reduced reporting burden for taxpayers. For example, it is planned to expand the functionality of online cash registers so that they can generate final documents based on data transferred by online cash registers to the Federal Tax Service. As a result of this reform, taxpayers will no longer need to issue reports. They will be able to see returns already prepared on the site of the Federal Tax Service and to pay their taxes “in one-click”. The Federal Tax Service considers that these changes will simplify the life of businessmen while also reducing the workload of accountants.

Pros and cons

This solution cannot, in my opinion, be applied to most business participants. For example, it is not possible to prepare income returns based on online cash register data and downloading of banking operations when applying the accrual method for calculation of profit tax. This calculation method is legal as it is provided for in Chapter 25 of the Russian Tax Code and is not tied to actual movement of cash.

The proposed reform undoubtedly presents some advantages insofar as it would decrease the number of inspections as stated in the order issued by the Prime Minister Dmitriy Medvedev (the number of inspections should decrease until 2020). It would also lighten the workload of accounting departments while increasing the control of state authorities over all spheres of business.

The disadvantages of this reform would be greater for small and medium businesses as they would no longer be able to regulate the tax amounts payable to the budget because taxes would be paid as soon as customers pay.

As a result of this reform, taxpayers will no longer need to issue reports. They will be able to see returns already prepared on the site of the Federal Tax Service and to pay their taxes “in one-click”. The Federal Tax Service considers that these changes will simplify the life of businessmen while also reducing the workload of accountants.

Moreover, the workload of accounting departments would not be reduced that much. Online cash register data is not sufficient to prepare returns. Settlements between legal entities are usually cashless so online banking is also necessary, which entails a code classification of all payments because without classification it is not possible for a software to understand whether a payment is an income or expense. For example, a loan neither an income nor an expense.

The work to be performed by accounting departments will therefore be more complex at least as far as payments are concerned.

Sensitive issues

The issue of submission of revised returns also arises as it is not possible to generate such returns automatically without an accountant and the head of the organization submitting them. There are also issues related to online exchange of information in case of connection failure. Even the most secure mobile communication systems and internet connections are indeed not protected from the mistakes of poorly qualified electricians or a hacker letting out a virus blocking the work of large operators. What should companies do in such cases?

Having not received reporting in a timely manner, will the Federal Tax Service impose penalties and block the settlement accounts of the organizations that fail to report in due time?

Another disadvantage of the proposed reform is that the government wants to control companies totally as this will give rise to methods of avoiding monitoring and could result in the withdrawal of small and medium businesses to the “shadow economy”. Yes, it will be much more difficult, but when there are no legal ways of optimization, illegal ones replace them.

Tax authorities have not yet outlined the mechanism for the proposed reform as all related changes are at that stage only “ideas”. Many issues still need to be resolved, and tax authorities still need to weigh the pros and cons of this reform. It would be very good if the legislators working on this reform would consider not only state interests, but also the development and support of small businesses.