When the Tax Service Requires to Report on the Income

Failure to confirm sources of income can lead to tax audits and fines. This article explains when the tax service may require reporting on sources of income and how to prepare properly for such a request.

What applies to income, expenses and property

Income of individuals

The income of individuals received from other persons, including foreigners, individual entrepreneurs and companies, is classified by the tax service as:

  • Money received by an individual, including loans.
  • Other property that an individual has received. 

Property of individuals

The property includes:

  • Movable property and real estate.
  • Property rights.
  • Securities.
  • Financial instruments of futures transactions: options, futures and others.
  • Digital signs (tokens).

Expenses of individuals

The tax service includes money and other property that: 

  • It is aimed at the purchase of property.
  • It is aimed at paying for the services of others.
  • Used for other purposes.

When it is necessary to submit a declaration to the tax service voluntarily

By March 31, 2024, some individuals need to submit an income tax return voluntarily.

The declaration has a section where you need to specify information about income: the types of income, the source from which the income was received, and the amount of income.

How does the tax office find out about your money spending and purchases

Banks and government organizations registering real estate and other property transactions transmit information about significant financial transactions and transactions to the tax authorities. This is a duty that cannot be circumvented. Such information always contains the amounts of your income and the monetary value of your purchases.

Therefore, the tax service can find out about your income not only from your tax return.

What can happen after the tax service finds out about your income and expenses

First, the tax service will compare your tax return information with your purchases and transactions. To do this, the tax inspector conducts an audit, which is called a “desk audit.” This means that the check is carried out according to the documents in the tax service. 

As a result of the audit, tax inspectors identify persons whose expenses exceed income and determine the costs and sources of income.

The tax service checks information on expenses not only for Belarusian citizens. Information is also checked for foreigners with a residence permit and stateless persons if information about their income is available in the tax service.

As a result of checking the documents in the tax service, a document is prepared to calculate expenses and income in Belarusian rubles.

An individual is not warned that an audit is being conducted regarding his expenses and income compliance.

For what period will the tax service check income and expenses

The tax service can check income and expenses for the current calendar year and for the past 10 years.

What can happen after checking the compliance of income and expenses

Option 1. Expenses did not exceed income

The tax service can ensure that an individual’s expenses do not exceed his income. In this case, the desk check for an individual ends in nothing.

Option 2. Expenses exceed income

In this case, an individual is usually called to the tax office for explanations about the sources of income in two cases:

  1. When the desk audit was conducted on the initiative of the tax inspectorate, an individual’s expenses exceeded his income by 1,500 basic units or more. This excess is 60,000 Belarusian rubles or more (the base value is 40 rubles).
  2. When the audit was carried out at the request of government agencies, including investigative and law enforcement agencies, regardless of the amount by which expenses exceed income.

What is the purpose of calling an individual to the tax service 

The tax inspectorate requests an individual explain his sources of income and requires him to report on them. A request is a paper document usually sent by mail to the individual’s home address or handed over personally under his signature.

The claim indicates the amount of excess of expenses over income in Belarusian rubles and the period in which the excess was allowed.

The calculation of excess expenses over income is applied to the request.

Usually, a phone number is written in the request, where you can find out more details.

What to do after the request is received

An individual who has received a request to provide explanations about the sources of income must submit information about the sources of income to the tax inspectorate in person, by mail or electronically within 30 calendar days.

Information can be submitted electronically if an individual has a personal account with the payer or the application “Professional Income Tax.” Otherwise, it is submitted in paper form.

It is necessary to confirm only those incomes at the expense of which the person made purchases (made expenses) named in the tax claim.

When will the deadline for submitting explanations be extended 

It may be that the individual who needs to bring the documents to the tax office is not in Belarus. In this case, he or his representative can contact the tax service at the number specified in the request, or the representative can come to the tax service and ask for an extension of the deadline for submitting information.

There are also cases when you can ask the tax service to extend the deadline for submitting explanations:

  • The period of illness.
  • The period of the business trip.

The tax service will extend the deadline for providing explanations only for the period of illness, absence from Belarus, business trip, and only if documents confirm these periods.

What to include in income information

  1. Information about the source from which the income was received: personal data of an individual, his place of residence, the company’s name, if the income was obtained from the company, and its address.
  2. Type of income (money, name of other property).
  3. The amount of income. If the income is in non-monetary form, you need to specify the property’s value and the securities’ nominal value.
  4. The date or period of receipt of income.

What can be omitted from income information

Suppose an individual is an individual entrepreneur or an artisan or pays a single tax as an individual. In that case, it is possible not to indicate in the information about the sources of income the personal data of individuals who bought goods, services or works from such an individual.

Individual entrepreneurs may not specify personal data of persons and information about companies that were sources of income from transactions concluded by a person as an individual entrepreneur in information about sources of income. 

When the tax service will not accept explanations about the sources of income

The tax inspectorate will not accept explanations if:

  • The deadline for submitting supporting documents has been violated, and there is no confirmation of absence from Belarus, being on a business trip, or having an illness.
  • The individual provided incomplete income information for the period for which the tax service requested it. If, during this period the tax service has information on the income of an individual that has been transferred by government agencies, companies, notaries, or individual entrepreneurs, then this information will be taken into account in addition to incomplete ones.

What to expect after checking your explanations about the sources of income

The tax service will accept your explanations and update the calculation of income and expenses. As a result, taxes may not be calculated. The individual will be given a document: a message that no excess of expenses over income has been detected.

If the expenses exceed the income, the tax service will draw up an inspection report. One copy of the act will be handed over to an individual. The act will write the amount of excess expenses over income, calculate the income tax at the rate of 26% of the excess amount, and specify the deadline for tax payment.

The inspection report is drawn up within three months, but usually earlier. 

How to contact us 

For more information or advice on issues related to providing information to the tax service about sources of income, do not hesitate to contact us. We are here to help and support you.

Phone and e-mail communication options are available for your convenience:

  • +375293664477 (WhatsApp/Telegram/Viber);
  • info@ambylegal.by.
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