“Risky” supplier – buyer’s tax credit saved

Tax issues: Inspections by state tax and fiscal agencies Kyiv

An agricultural company from Kyiv Oblast disagreed with the tax audit findings and complained to the Business Ombudsman Council. According to tax officials, the company allegedly overstated the tax credit amount worth almost UAH 1 mn. That was because of a “risky” supplier and failure to confirm the reality of sunflower seed supply operations, based on the documents provided by the agricultural company.

As it turned out, due to the supplier’s being “risky”, tax authorities had already suspended tax invoices registration for transactions involving sunflower seeds supply before. However, the supplier applied to the Central Level Commission under the STS of Ukraine and provided documents to confirm the supply reality. As a result of such a supplier’s appeal, the Commission registered respective tax invoices within the framework of procedures provided for by Procedure No. 1165. At the same time, the buyer’s attempt to create a tax credit against such tax invoices encountered resistance from tax officials on the same grounds.

In a letter to the STS of Ukraine, the Council upheld the agricultural company’s position and noted the need for forming a unified approach to the “riskiness” of the supplier both during the tax invoice monitoring procedure within the procedures provided for by Order No. 1165, and during the tax credit legality verification from the buyer. In addition, the Council noted inadmissibility of ignoring facts confirming the economic transaction as well as sufficiency of documents established as part of procedures under Procedure No. 1165 during tax audits.

The Council also took part in complaint materials review with the participation of the complainant and the STS of Ukraine. Thanks to the successful mediation of the BOC, the STS of Ukraine agreed with all the arguments and canceled the contested tax notification-decision.

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