Life after tax inspection — a fine dropped

Tax issues: Inspections by state tax and fiscal agencies Kyiv

Complainee: the State Tax Service (STS), Main Department of the STS in Kyiv city (MD STS)
Complaint in brief: An international logistics company complained to the Business Ombudsman Council about the tax audit results. According to the State Tax Service, the company violated tax legislation that resulted in understatement of the amount of VAT tax liabilities. Thus, the company reflected in the VAT tax credit for the purchase of fuel for an amount of UAH 226k. The tax authorities argued their position with the fuel consumption norms foreseen by the Resolution of the Ministry of Transport of Ukraine dated 10.02.1998 №43 (Resolution No.43). Therefore, the company had to pay a fine of almost UAH 57k. The complainant lodged an objection with the MD STS, explaining that he had used fuel to provide business operations for international carriage. However, the tax service did not accept the company’s arguments and provide comprehensive answers based on the results of the complaint’s consideration. At the same time, the company decided to turn to the BOC for help.
Actions taken: The investigator examined the case file and found the complaint substantiated. The Council recommended the STS to ensure a comprehensive and impartial consideration of the company’s complaint. During the case consideration the BOC drew attention of the tax authorities to the fact that the complainant had correctly reflected in the VAT tax credit for fuel purchase transactions. The Council stressed that the Tax Code and the Law of Ukraine “On Accounting and Financial Reporting” do not oblige to apply the provisions of the Resolution №43  for accounting or tax purposes, which was referred to by tax inspectors. The company has its own orders on the rules for writing off of fuels and lubricants developed taking into account transportation peculiarities depending on the car brand, its technical characteristics, seasons etc. Therefore, it remained unclear why the inspectors did not take these documents into account during the inspection and charged the company a fine.
Result achieved: Thanks to the BOC participation the tax service satisfied the complaint of the logistics company and canceled the inspection results. The case was successfully closed.

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