The KURGAN risk analysis system we covered in an earlier article doesn’t just monitor invoices and e-ledger records — it also closely tracks spending on corporate credit cards. Banking transactions (POS, EFT/wire transfers, credit card payments) are evaluated by risk analysis centers and compared against a company’s commercial activity. In this article, we explain why corporate credit card spending has become such a critical area of scrutiny, and what precautions taxpayers should take.
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Why Credit Card Spending Is at the Center of Tax Audits
According to data from the Interbank Card Center (BKM), domestic and international spending on credit cards shows a striking increase every year. Such a large, fully digitally traceable dataset naturally becomes a priority for the tax administration’s risk analysis. Every credit card transaction implies the existence of income that financed it — so inconsistencies between spending and declared income stand out directly in KURGAN’s risk scoring.
Which Expenses Create Risk?
In practice, the most common risk area is recording personal expenses made on company-issued credit cards as business expenses. It is particularly conspicuous when company partners purchase luxury vehicles, home goods, or similar assets for themselves or family members in a manner disproportionate to their official commercial activity. This type of spending can create two distinct risks:
- Tax risk: If the partners have no other income, these amounts may be treated as profit distributed by the company under Article 94/15-b of the Income Tax Law — resulting in a significant tax base adjustment and penalties on both the corporate tax and withholding tax fronts.
- MASAK risk: Acquiring assets disproportionate to one’s official commercial activity may be evaluated under anti-money laundering legislation; if the source of the transaction cannot be established, the Financial Crimes Investigation Board (MASAK) may launch an investigation, and the relevant assets may be seized.
Why Reconciliation with Accounting Records Is Critical
KURGAN cross-checks credit card activity against a company’s e-invoice, e-ledger, and tax return data. For an expense to be accepted as a legitimate business expense, it must:
- Be directly related to the company’s line of business,
- Be supported by a legal document such as an invoice or receipt,
- Be recorded in the accounting books fully and on time.
When these three conditions are not met, the expense may be disallowed and the related VAT deduction rejected; recurring inconsistencies can trigger an Explanation Letter process.
Why Timely Submission of Statements Matters
Submitting corporate credit card statements and related expenditure documents to your CPA within the first week of each month is critical — both for keeping accounting records accurate and timely, and for being prepared in case of a potential Invitation to Explain. Statements submitted late or without adequate supporting documents create time pressure during month-end filing and increase the risk of reconciliation gaps.
Recommendations for Taxpayers
- Use corporate credit cards only for expenses directly related to the business; strictly separate personal spending.
- Obtain an invoice or receipt for every expense and keep these documents together with your statements.
- Submit credit card statements and supporting documents to your CPA within the first week of each month.
- Make sure partners use their personal cards, not the company card, for personal spending.
- Consult your CPA before making large or unusual purchases.
At Mete CPA & Auditing, we help you assess whether your corporate credit card spending is reconciled with your accounting records and identify potential risk areas in advance. Contact us to review your situation.
