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Using “standard prices” for VAT charge 

23.10.2019

Subject of complaint: The Main Department of the State Fiscal Service in Kyiv (SFS) 

Complaint in brief: An agricultural trader from Kirovohrad Oblast approached the Council. The Complainant disagreed with the tax audit findings, according to which he had to additionally pay UAH 8 million in taxes. 

The tax authority stated that the Complainant had understated its VAT liabilities because it sold its agriproducts at below-market prices. Instead, the Complainant insisted that the sale price was based on certain market conditions and was determined based on delivery terms. In its conclusions the tax authority referred to statistical information from local government’s ’ websites. According to the Complainant, the tax authority did not take into account that the published prices related to other commercial delivery terms different from the Complainant’s case.

The practice of the Council shows that the use of the so-called “regularprices” for VAT charge purposes  is a commonly used approach applied in the SFS. Therefore, this case can be considered a kind of positive precedent. 

Actions taken: After reviewing the case file, the Council upheld the company’s position in the part that sample pricing made by the SFS refers to irrelevant delivery basis, so during price analysis the SFS did not follow such a requirement as pricing comparability. The Council’s investigator also noted that price information the State Tax Service referred to was refuted by the State Statistics Service official information. In addition, the legislation does not currently regulate price comparison methodology and the price bench-mark calculations for VAT. In view of this, standard prices calculation cannot be treated as sufficient and admissible evidence. 

Result achieved: Having considered the case, the SFS satisfied the company’s complaint and dropped additional payment worth over UAH 8 mn. The Complainant thanked the Council for assistance in resolving the case.