An importing company filed a complaint with the Business Ombudsman Council regarding a tax notification-decision issued by the tax authority. The Main Department of the State Tax Service of Ukraine (STSU) conducted an unscheduled on-site documentary audit to verify the accuracy of the VAT refund claimed to the taxpayer’s current account. Although the audit did not reveal any actual violations of tax legislation, the tax authority still denied the company a VAT refund of over UAH 50 million.
The STSU argued that the input VAT should be “offset” in the future against the taxpayer’s VAT liabilities arising from the sale of the imported goods. However, the audit report clearly stated that the taxpayer had met all the conditions required for a VAT refund, and an inventory check (in the presence of an STSU representative) confirmed no discrepancies between accounting records and the actual stock of goods in the warehouse.
The company disagreed with this approach, having submitted all primary documentation proving the import of goods and payment of VAT, sufficient VAT registration limit, and documentary and physical evidence of the goods being in stock.
The Council supported the complainant, sent its legal opinion to the State Tax Service of Ukraine, and participated in the consideration of the complaint at the central level. During the review, it was possible to uphold the position that, in the absence of any specific facts or circumstances indicating tax violations that would cast doubt on the formation of the negative VAT value claimed for refund, there were no legal grounds to deny the VAT refund. Furthermore, the tax authority does not have the power to unilaterally decide to carry the negative VAT value forward to offset future tax liabilities without the taxpayer’s explicit consent.
In the course of the complaint review, the STSU failed to provide substantiated arguments in support of its position, whereas the complainant and the Council presented arguments that convinced the State Tax Service of Ukraine to uphold the complaint and cancel the disputed tax notification-decision.
