State Tax Service agrees to drop additional payments for FERRERO UKRAINE LLC worth UAH 3 mn

Complainee: Large Taxpayers Office of the State Fiscal Service (LTO)
Complaint in brief: FERRERO UKRAINE LLC, an official importer of well-known finished confectionary products of FERRERO Group turned to the Council. The Complainant disagreed with the tax audit findings, according to which he had to additionally pay UAH 3 mn in taxes.
The tax authority stated that the Complainant had understated his VAT and income tax liabilities. In particular, according to tax officers, the Complainant was provided with fictitious advertising services. The tax authority concluded thereon based on the audit scheduled following tax notifications-decisions administrative appeal outcome. Taking the opportunity, we would like to note the previous tax audit was also the subject of the Council’s investigation. The Council also upheld the Complainant’s position in the previous case. Then, having accepted the Complainant’s and the Council’s position, the SFS canceled tax notifications-decisions, yet decided to arrange a repeat audit, which resulted for the Complainant in the same way.
In the second complaint, the Council dealt with the conclusions drawn during the “re-audit”. Taxation based on the conclusions of business transactions fictitiousness is a fairly common practice among tax officers.
Actions taken: After reviewing the case file, the Council found out despite the additional audit, tax officers did not find any new violations, which would not have been previously denied by the Complainant. It should be pointed out the Audit Report of this “new” audit largely contained provisions of the previous one. During complaint investigation, the Council’s investigator in charge emphasized compliance with a good governance principle according to which government agencies’ decisions should be as consistent and predictable for business as possible. In addition, the Council asked the STS to take into account that in the administrative appeal procedure the burden of proof lies specifically on the supervisory authority rather than the taxpayer.
Result achieved: Following the case consideration outcome, the STS accepted the Complainant’s arguments and dropped additional payments worth about UAH 3 mn. The Complainant thanked the Council for assistance in resolving the case.