What is Due diligence?

A taxpayer's obligation to check a counterparty in advance when choosing it. The Tax Code lists what has to be checked: whether the counterparty is registered with the tax authorities as a taxpayer; its business reputation; whether it has a production base and employees; its financial condition; whether it is able to perform its obligations under the transaction. The tax consequence of this requirement is important: if the counterparty has failed to perform its obligation and the taxpayer did not exercise due diligence when concluding the transaction, the expenses (losses) under that transaction are not recognised for tax purposes. The tax authorities provide access to information on whether the counterparty is registered with a tax authority and to other information in the manner established by the State Tax Committee.

Source: Soliq kodeksi, 15-modda