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Checking the counterparty – a widely recognized term that refers to the collection and analysis of information about any companyand.Checking the counterparty allows you to draw the right conclusions about the prospects for cooperation.

There can be severalin checking a counterparty: 

objectives1. Checking a counterparty in order to minimize tax risks; 

  1. Checking the counterparty in order to minimize credit and financial risks. 
  2. Checking the counterparty in order to avoid the fictitiousness of the contract and fraudulent schemes.

Having ascertained the reliability of the business partner, the company minimizes the risks of making claims on the validity of a tax credit in terms of VAT deductions and expenses that reduce the tax base for income tax. 

Counterparty verification is an important process that includes an algorithm of actions:

  • Electronic verification. First you need to use electronic public services on the website of the Tax Service, the State Executive Service, the website of the Ministry of Justice and the like.
  • Checking the counterparty in the Unified State Register of court decisions on the absence / presence of court disputes, seizures of property, participation in investigative actions and the like.
  •  Document request. In order to minimize tax risks, before the conclusion of a transaction, the taxpayer is advised to ask for documents confirming legal capacity, the counterparty is checked and the opportunity to fulfill the obligations undertaken. 
  • The validity of the choice. In addition, do not forget about the validity of the choice of this particular counterparty. In this case, it will be necessary to save information about the counterparty received from the Internet, for example, printouts of screenshots of advertisements. Commercial offers, price lists and business correspondence should also be kept. In addition, it is advisable to make sure that the counterparty is not a part of persons whose communication, according to the tax authority, is absent through a legal address. Along with this, it is desirable to have copies of the passports of the head or of persons who sign the primary documents. 
  • Other verification methods. In addition to obtaining information about a potential partner on all of the above issues, you need to make sure that he has: no accounts with doubtful credit institutions; there are all necessary conditions for fulfilling contractual obligations, such as retail outlets, warehouses, transport; it is possible to fulfill an order for a trial, a small volume of a batch of goods. 

This way you can verify the importance of the issues to be checked, and therefore a systematic and professional approach to this is important. Prikhodko&Partners Law Firm provides legal support services for businesses. Contact us, we will be happy to help you.

Author: Ivan Ischuk

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