Bank manages to avoid income tax repayment

Tax issues: Inspections by state tax and fiscal agencies Odesa region

Complainee: Large Taxpayers’ Office (LTO) of the State Tax Service of Ukraine (STS)
Complaint in brief: A Ukrainian bank turned to the Business Ombudsman Council with a complaint about LTO actions. The institution disagreed with the tax audit findings according to which it had to pay additionally UAH 1 mln in taxes. 
At the end of 2018, the Complainant acquired another bank and thus inherited all the rights and obligations of the latter. Both institutions paid taxes for 2018. However, following the tax audit, the LTO concluded that the Complainant had understated its financial result before taxation and had not paid an income tax for the affiliated bank.
Actions taken: The Council’s investigator carefully investigated the materials of the complaint, as well as the Complainant’s tax reporting. The Council found out the LTO conclusions on the financial result understatement before taxation was not true, because they did not take into account that the respective part of the financial result was shown in the affiliated bank’s tax declaration for the last reporting period before acquisition. This institution, in turn, properly paid all the necessary taxes. If the tax decision was left in force, it would require the income tax to be re-paid. 
The Council’s investigator participated in the complaint materials review at the STS. The Council also asked the tax authority in writing to properly consider the bank’s complaint and consider Council’s proposals.
Result achieved: The STS accepted the Council’s arguments and cancelled the decision in favor of the Complainant. The institution managed to avoid double income tax payment. The case was closed successfully.

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