Cancellation of the decision of State Tax Inspection regarding accrual of over UAH 6 million of income tax and penalties

Complainee: State Tax Inspection of Holosiivskyi district; Main Department of State Fiscal Service of Ukraine
Complaint in Brief: The Complainant is a Company founded by four major state banks with the aim to set up classical mortgage refinancing scheme by issuing mortgage-backed bonds.
During February-March 2015, the STI of Holosiivskyi district conducted the tax inspection of the Company and issued the act, according to which the Company operations, which are financial loan essentially, were recognized as not subject to p.30 p.4 of Tax Code Transitional Provisions, as if due to absence of condition to repurchase the liabilities, therefore subject to taxation on a common basis.
As a result, additional UAH 4.8 million of income tax and UAH 1.2 million of penalties were accrued by STI decision and demanded for payment by the Complainant.
Additionally, STI violated the Tax Code condition regarding maximum allowed duration of the tax inspection.
Actions taken: BOC thoroughly analyzed the decision in question, corresponding transitional provisions of Tax Code of Ukraine, standard agreements of the Company, met with Complainant’s tax advisor and SFS representatives and received confirmations from the Company counterparties regarding disputed operations reflection in their financial statements. BOC recommended SFS to recognize the facts provided and satisfy the inquiry of our Complainant.
Result achieved: As a result, SFS of Ukraine decided to cancel STI decision notice and decision of first level appeal, which save the Complainant over UAH 6 million.