Court supported the controlling body’s position regarding legality of increasing monetary VAT liability

Cassation court supported the controlling body’s position regarding legality of decision, which increased monetary value-added tax liability.

To confirm actual implementation of business operations, the payer must have relevant primary documents, which must be properly compiled, contain all necessary requisites, be signed by authorized individuals and which, in combination with established case circumstances, in particular, in relation to possibilities of conducting relevant operations by business entities, taking into account time, property’s location, amount of material and labor resources economically necessary to fulfill conditions stipulated by the contracts, must testify to the undeniable fact of actual performance of economic operations, which is basis for formation of payer’s tax records.

Cassation court indicates that the court of first instance assessed primary documents available in the case file and based on results of their combined assessment, the court of first instance concluded that the latter do not reveal content of business operations, do not contain information about freight unloading operations, working place, their scope, executor, as well as information on the use of fuel and lubricants and transportation of product and material values, consistently taking into account circumstances established in judgments of the Sykhiv District Court of Lviv as of 17.06.2015 in case № 464/3740/15-k and Zaliznychnoho District Court of Lviv as of 24.09.2015 in case № 162/6935/15-k.

Panel of judges draws attention to the fact that circumstances established by court the verdicts regarding the plaintiff's official counterparties and actually the plaintiff’s director (PERSON_4), assessed by the courts in combination with provided primary documents, refute argumentations of cassation appeal in that periods and economic operations are different than those assessed in judgments.

Cassation court draws attention to the fact that possibility of clarifying tax reporting indicators for periods that have already been checked by the controlling body is provided for in Paragraph 50.3 Article 50 of the Code of Ukraine, according to which, if the taxpayer submits clarifying calculation to tax declaration submitted for the audited period, or does not submit clarifying calculation within 20 working days after the date of compiling certificate on conducting electronic check, which establishes violation of tax legislation, relevant controlling body has a right to conduct unscheduled audit of the taxpayer for relevant period.

Therefore, as correctly determined by the courts of previous instances, submission of clarifying calculation after tax notification-decision has been issued by the controlling body cannot be perceived by the court as a proper correction of error in the understanding of provisions of Article 50 of the Tax Code of Ukraine, and therefore serve as the basis for a lawsuit in substantiating legality of the taxpayer's position.

Cassation administrative court as a part of the Supreme Court on 15.03.2024 in case № 813/1956/16 dismissed the plaintiff's cassation appeal; ruling of Lviv district administrative court as of 10.10.2016 and ruling of Lviv administrative court of appeal as of 28.11.2016 in case № 813/1956/16 were left unchanged.