SFS drops UAH 194 mn of additional payment for shopping center developer 

Tax issues: Inspections by state tax and fiscal agencies Kyiv

Subject of complaint: The Main Department of the State Fiscal Service (MD SFS) in Kyiv city of the SFS of Ukraine 
Complaint in brief: A developer building a shopping centerin Kyiv on the order of the international megastores network turned to the Council. The complainant disagreed with the tax audit findings, according to which he had to additionally pay almost UAH 200 mn. Having checked the company’s compliance with tax legislation in 2011-2018, the supervisory authority made a conclusion that the company inflated a tax credit under an investment agreement. The tax authority insisted the investment contract was a long-term one and, therefore, the tax credit for it should have been formed according to long-term contract rules. 
The complainant disagreed with this position, so it turned to the Business Ombudsman Council for help. 
Actions taken: The Council’s investigators carefully studied case materials and relevant legislation provisions. They found out investment agreement conditions clearly stipulated a step-by-step delivery of performed works and their phased financing, thus, for the purposes of VAT taxation, an investment contract cannot be considered as a long-term one and it was necessary to apply the general rules for formation of tax liabilities and the tax credit before transactions taxation under it. 
The Business Ombudsman Council upheld the company’s position and recommended to drop tax notifications-decisions. In addition, the Council’s investigator participated in the consideration of the developer’s complaint at the SFS of Ukraine, during which he emphasized the legality of the tax credit formation regarding operations of step-by-step construction works performance.
Result achieved: The SFS of Ukraine accepted the Council’s arguments and dropped the additional payment worth UAH 194 mn. The complainant thanked the Council for facilitation in solving the case.

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