An IT company contacted the Council after the tax authority conducted a scheduled audit. Following its results, the tax authority additionally assessed personal income tax and military levy on the amounts the company had paid to individual entrepreneurs (FOPs) for services rendered during 2022–2024, and also imposed penalties. The total amount of the assessments reached almost UAH 1.5 million.
The tax authority based its conclusions on the fact that the FOPs to whom the company made payments had their tax address in the temporarily occupied territories (TOT). In the tax authority’s view, in such a case it was the IT company that should have withheld and paid taxes from the amounts paid.
The Council carefully analysed the applicable legislation and the circumstances of the complaint and concluded that the provisions of the Tax Code of Ukraine requiring taxes to be withheld when paying income to FOPs registered in TOT do not apply to territories that were recognised as occupied during martial law.
To clarify the situation, the Council sent a request to the State Tax Service of Ukraine (STS) regarding the number of FOPs to whom this rule applies. After receiving the response, the Council confirmed the correctness of its conclusions.
Subsequently, the Council sent a letter to the STS of Ukraine in support of the IT company’s position. In this document, the Council set out arguments based on the publicly expressed positions of the STS itself and on the response to its request. The Council also stressed that the complainant had provided convincing evidence that none of the FOPs to whom it made payments was actually located in TOT, even though their registered place of residence was there. Moreover, all of them duly and fully declared the income received and paid taxes on it.
During the complaint hearing, the Council’s investigator and representatives of the IT company also emphasised the importance of the State Tax Service of Ukraine interpreting tax legislation consistently.
As a result, the IT company’s complaint was upheld and the tax notices-decisions were cancelled.
The Council welcomes the consistent and well-balanced approach of the State Tax Service of Ukraine to the consideration of this complaint.
