Over UAH 2 mn of fine for an agricompany dropped

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

An agricultural company from Chernihiv region turned to the Business Ombudsman Council. As a result of the audit, tax officials imposed UAH 1.7 mn of  VAT to the company as well asa fine of almost half a million hryvnias for allegedly violating the Tax Code.

According to the tax authority, the company artificially overestimated the cost of growing grain crops in 2019, which affected the obligation to pay VAT. The tax authority claimed that the company deliberately involved another related company in the sowing campaign in order to overestimate its costs for growing agricultural products and thus reduce the VAT paid to the budget.

The Council’s investigator carefully examined all the circumstances of the case. He sent a request to the Main Department of the State Statistics Service in Chernihiv region and checked the average indicators of costs for the production of one quintal of agricultural products in Chernihiv region in 2019. Having compared the data with the complainant’s production costs, BOC supported the company and shared the results of its research on the costs of growing grain with the tax office. According to the information provided by the State Statistics Service, the complainant’s expenses for growing agricultural products were close to the average expenses of other agricultural companies in Chernihiv region, and the tax department mistakenly did not check this information during the audit.

Also, based on the statistical reporting of the agricultural company, the investigator was able to prove that for many years the company incurred comparable expenses for growing agricultural crops, but for some reason the tax office had questions about only one year of its activity – 2019. This further confirmed the illogic audit conclusions.

BOC took part in the company’s administrative complaint consideration by the State Tax Service of Ukraine. In the end, the STS of Ukraine canceled the disputed tax notifications-decisions for a total amount of  over UAH 2 mn.

Next case:: How the company's VAT payer's registration was restored