Signify Ukraine defends right to tax credit 

Tax issues: Inspections by state tax and fiscal agencies Kyiv

Subject of complaint: General Directorate of the State Fiscal Service of Ukraine (SFS) in Kyiv City 
Complaint in brief: On October 22, 2018, Signify Ukraine LLC (until January 24, 2019 Philips Lightning Ukraine), a world’s LED lamps manufacturer turned to the Council. The company did not agree with the tax audit conclusions, according to which it had to additionally pay over UAH 1 mn. 
During the company’s operations audit in September 2018, the SFS found a violation of the tax law. In the SFS’s view, the company engaged promoters to boost their products in distribution networks without proper reasons, as the goods no longer belonged to the Complainant. The SFS concluded that after goods had been purchased by partners for distribution in network, it was economically inexpedient to spend money on its promotion. Because of this, in the tax authority’s view, the company did not have the right to attribute such services to costs, thus reducing the tax basis. 
The Complainant disagreed with the SFS position. It insisted it was the one and only distributor of the brand, and any promotion activities had a direct economic effect both for the company and the trademark. Considering that the SFS did not investigate all the circumstances of the company’s activities and groundlessly concluded on the tax law violation, the Complainant approached the Council. 
Actions taken: After examining case materials and analyzing the provisions of the law, the Council upheld the company’s position in writing. In addition, the Council’s investigator participated in the consideration of the case at the GD SFS in Kyiv, SFS in Kyiv and the SFS of Ukraine. In particular, he presented judicial practice with similar cases involving retail networks, which testified in favor of the Complainant. 
Result achieved: The SFS accepted the Council’s arguments and cancelled audit conclusions. It allowed the Complainant to avoid unreasonable additional charges of over UAH 1 mn. The case was closed successfully. 

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