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Systemic issue with non-return of foreign exchange earnings from different jurisdictions is fixed

20.08.2018

Subject of complaint: Poltava Oblast General Directorate of the SFS (SFS) 

Complaint in brief: On June 17, 2017, an exporter of corn from Poltava approached the BOC. The Complainant challenged fines imposed by the SFS worth UAH 60 mn for a failure to return foreign exchange earnings.
According to the company, it has been exporting corn to Belarus for many years and quite often has to deal with indebted buyers. Since 2015, it has become procedurally simpler to collect a debt in Belarus, as debts can now be confirmed by a notary rather than through the courts, as in Ukraine.
When a Belarusian buyer owes the company, the Complainant applies to a notary to forcibly collect the debt under Belarus law. This action became the subject of an SFS inspection. According to the tax authority, the Complainant violated foreign exchange earnings rules, because the company hadn’t appealed to a court on time, leading to a fine of over UAH 60 mn. 
All the Complainant’s and the Council’s arguments concerning legality of the company’s actions and lack of justification for the fines were ignored by the SFS. The exporter then decided to challenge the SFS decision in court.

Actions taken: After reviewing the case materials, the BOC investigator found the company’s complaint substantiated. In his opinion, it was inappropriate to apply penalties to the company, since it had taken all possible measures to return foreign exchange earnings to Ukraine in accordance with the legislation of the debtor’s country. 
This problem is systemic, so the Council recommended that the Ministry of Finance amend domestic legislation, specifically to not impose fines in cases where Ukrainian companies have appealed not only to the courts, but also to agencies qualified to resolve cases of non-resident debt collection.
During the past year, the Council monitored the progress of recommendation and bill with the proposed amendments. 

Result achieved: On July 4, 2018, the President signed the Bill “On Currency” into law, which fully implemented the Council’s recommendations. This systemic problem was resolved.
On July 10, the Council’s investigator was present in the Complainant’s court hearing. The Court of Appeals ruled in favor of the company and found the decision of the SFS and the Court of the First Instance to be unsubstantiated. The case was closed successfully.