The capital’s tax authority conducted an audit and denied the IT company’s expense claims for profit tax amounting to more than UAH 15.5 mn. As a result of the audit, the complainant also received a fine of UAH 315k.
The tax officials refused to recognize software development expenses and the purchase of other services from individual entrepreneurs.
The tax authorities stated that the IT company had not obtained a software copyright certificate and had also sold the piece of software. Therefore, in their opinion, the company could no longer continue to attribute the cost of such software to expenses. As for other services from individual entrepreneurs, the tax officials noted that the company did not provide documents to confirm cooperation with these contractors.
Having taken up the complaint, the Business Ombudsman Council (BOC) sent a written request to the State Tax Service of Ukraine (STS) and supported the complainant’s position.
The Council pointed out that the IT company rightfully continued to attribute the cost of the software to expenses for tax records, as the company did not transfer exclusive intellectual property rights for the software to anyone. The legislation does not require obtaining an intellectual property rights certificate for software to attribute its cost to expenses. The Council also supported the complainant regarding filling in documents correctly and cooperation with individual entrepreneurs.
The BOC investigator participated in the administrative review of the complaint on tax notifications-decisions (TNDs), involving tax officials, the complainant, and his lawyer. As a result, the STS agreed with the IT company’s right to account for software development expenses in tax records and canceled the company’s fine.
Thus, according to the Council’s calculations, it managed to defend more than 60% of the expenses amount previously disputed by the capital’s tax officials.
