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STS drops additional payment worth UAH 2 mln for leading grain trader

17.03.2020

Subject of complaint:  Large Taxpayers’ Office (LTO) of the State Tax Service of Ukraine

Complaint in brief: In October 2019, a leading international grain trader approached the Business Ombudsman Council. The company disagreed with the unscheduled tax audit findings, according to which UAH 1.9 mln of the VAT taxation object negative value was not confirmed and, consequently, a penalty worth almost UAH 900k was imposed.

It is noteworthy, the company’s unscheduled tax audit related to circumstances already investigated by the LTO at the beginning of 2019. Then, in April 2019, with the Council’s facilitation, the State Fiscal Service of Ukraine cancelled tax notifications-decisions for the company because the respective tax audit report “neither reflected actual circumstances of the case nor contained a clear justification and evidence of violation” of tax law requirements regarding the company's relationship with three counterparties. 

The unscheduled tax audit, however, “recovered” for the Company the additional payment related to relationship with two counterparties, which had been cancelled by the supervisory authority as part of an administrative appeal six months ago. Therefore, seeking support, the Complainant turned to the Council again.

Actions taken: The Council’s investigator asked the company’s representative to make a visual textual comparison of the conclusions of the disputed unscheduled audit report and the initial tax audit report in part of legal relationship with two counterparties regarding which the LTO had new remarks. Thus, it was established that the unscheduled audit report did not contain any new evidence to support the company's tax offense. In fact, amendments to the unscheduled audit report text actually related to only a few descriptive paragraphs when specifying (i) the next counterparty in the supply chains and (ii) details of the Complainant’s another economic contract. 

Having examined the circumstances of the case, the Council addressed the STS in writing and upheld the company’s position. The Council added its own arguments and recommended the tax authority to consider the company’s case fully, comprehensively and impartially.

The Council’s investigator participated in the company’s complaint consideration with the participation of the Complainant's representatives at the STS. 

Result achieved: Having accepted the Council's arguments, the STS fully satisfied the company's complaint. Thus, the company managed to agree on the amount of a budgetary tax refund – it would be refunded over UAH 1.7 mln of VAT and allowed to transfer another UAH 166k of VAT taxation object negative value to the next periods. In addition, the STS dropped almost UAH  900k fine for the company. The case was closed successfully.