“All because of square brackets “: technical error due to which importer lost money during customs clearance was detected

Complainee: The State Customs Service (SCS), Kyiv Customs of the State Customs Service (Kyiv Customs), State Tax Service of Ukraine (STS) 
 
Complaint in brief The Business Ombudsman Council received a complaint from one of the largest retail chains in the country also importing food products to Ukraine. 
 
When making customs clearance of goods, the company paid significant VAT amounts at the customs. These amounts, however, were not lost forever. After all, they increased the company’s registration limit in the VAT electronic administration system (SEA VAT) at the expense of “ΣCust” component. In future, the company could include these VAT amounts in the tax credit when selling goods to consumers.
 
Meanwhile, after analyzing SEA VAT data in its e-office, the company found that in some cases the VAT paid at customs was not pulled in to the registration limit. It was about situations when the customs authority adjusted (increased) the customs value of imported goods. In such situations, the company usually challenged the decision on adjusting the customs value to a higher level of customs authority or court. At the same time, to release goods for free circulation as soon as possible, the company paid VAT amounts additionally accrued by the customs as a financial guarantee. Upon expiration of a 90-day period established by law, if at that time the customs decision on adjusting the customs value of goods had not yet been cancelled, the paid financial guarantee amount was transferred to the budget. At the time of such transfer, the registration limit in the SEA VAT should be automatically increased by the transferred amount. However, judging by archival records found by the company in the taxpayer’s e-office, it often did not happen. The total amount of funds lost for this reason, according to the company’s estimates, could exceed UAH 2 mn.
 
The company asked the tax authority where it was registered to explain this problem, but did not receive a clear response. The company turned to the BOC for help.
 Actions taken: After examining the materials of the complaint, the Council’s investigator found that the problem was at the intersection of the of the STS and the SCS powers. Therefore, a letter was sent to both bodies with a request to establish reasons for the error by joint efforts of the authorities. 
The STS immediately confidently replied that the problem was on the customs side. Thus, it was the customs turn to solve the issue. However, at first glance, they failed to establish causes of the problem. A working meeting in the SCS office was arranged with the Council’s facilitation to investigate the unusual situation in more detail. It was attended by employees of various departments of this body, as well as representatives of Kyiv Customs, the Complainant and the Council. Brainstorming paid off.  It turned out that certain amounts were not pulled in to the complainant’s in SEA VAT registration limit due to technical errors in the drawing up adjustment sheets to customs declarations. In particular, the reason was an absence of square brackets, provided by the methodology of filling out the appropriate forms, around relevant amounts of VAT. Such a trifle thing, at first glance. Following the meeting, it was agreed that the Complainant, jointly with Kyiv Customs, would correct these errors. In addition, the SCS will draw attention of all customs to the need to take into account these nuances of adjustment sheets drawing up to prevent similar cases in the future.
Result achieved: As a result of measures taken, the Complainant recovered about UAH 500k of registration limit in SEA VAT. The rest of the lost amount, unfortunately, was no longer recoverable due to statutory 1095-day period expiration. At the same time, from now on, the Complainant and the Customs have drawn attention to due filling of the respective fields (columns) of adjustment sheets, which will help avoid similar cases in the future. The case was successfully closed.