Counterparty Good Faith: Problems in Determining the Limits of Due Diligence

This article considers the topical issues of due commercial diligence by taxpayers when selecting counterparties. Particular attention is paid to the analysis of judicial practice under Article 54.1 of the Tax Code of the Russian Federation, the problem of “technical companies” and standards for checking counterparties. On the basis of letters and clarifications of the Federal Tax Service of Russia, as well as arbitration cases, key risks are identified and directions for improving due diligence activities are proposed. Conclusions are drawn as to how commercial due diligence affects risk mitigation when choosing a counterparty in order to ensure economic and tax security of business entities.