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VAT limit arrest for cooperation with suspicious counterparty

23.09.2019

Subject of complaint: The State Fiscal Service of Ukraine (SFS) 

Complaint in brief: The company from Kharkiv turned to the Council with a complaint about non-enforcement of the court decision by the tax service. As a result of the SFS omission, the Complainant was unable to fulfill its commitments to counterparties and register tax invoices. 
 
After one of the Complainant's counterparties became involved in the criminal proceedings, and the SFS initiated an arrest of UAH 1.6 mn. from its SEA VAT (VAT electronic administration system) limit. The company challenged this decision in the appellate court. The Court of Appeal overturned the petition for arrest because SEA VAT amount limit couldn’t be considered material evidence.
 
However, even after the decision came into force, the SFS was slow on unblocking the limit. The tax authority insisted the court order should appear in the Unified State Register of Court Judgments (USRCJ) first, as such decisions were often forged. The tax authority ignored the fact that the decision had already entered into force and the legislation did not provide for appearance of a court decision in the register for its enforcement.
 
By coincidence or not, the court decision would not appear in the register for a long time. The company tried to speed up publication of the ruling, however, faced with the unusual situation where the investigator in criminal proceedings (which, by the way, had to do not with the enterprise itself but its counterparty ruled to prohibit publication of the court decision online in order “not to disclose the pre-trial investigation secret”. After having been trapped in a vicious circle, the Complainant appealed to the Business Ombudsman Council.
 
Actions taken:
The investigator examined the circumstances of the case and asked the SFS in writing to comply with the appeal decision. He stressed the legislation does not provide for publication of a judgment is the Unified State Register of Court Judgments as a condition for its enforcement. The Council helped arrange a conference call during which the Complainant and the SFS discussed the unusual situation with the SFS of Ukraine . 

Result achieved: The parties agreed the Complainant would send the SFS a reply from the USRCJ on the court ruling publication prohibition. Two days later the SFS unblocked the Complainant's VAT limit. The case was closed successfully.