A well-known manufacturer of household and professional equipment approached the Business Ombudsman Council after the tax service, following an unscheduled on-site audit, issued tax notices-decisions. These decisions reduced the company’s negative VAT balance, adjusted the amount of VAT budget refund, and imposed penalties — totaling nearly UAH 8 million.
The tax authority disagreed with the way the company reflected services received from non-residents in its tax accounting, questioning whether those services were genuine, and also referred to allegedly insufficient detail in the service acceptance reports (acts). The tax officials also disagreed with the manufacturer’s approach to accounting for scrap metal generated in the course of producing household appliances.
The manufacturer did not agree with these claims and challenged the additional assessments, since the company had in fact received the services from non-residents; those services were related to its business activities and were supported by primary and other documents. The company also substantiated the lawfulness of its approach to accounting for production waste.
In parallel with the administrative appeal, the manufacturer submitted a complaint to the Business Ombudsman Council. The Council analyzed the arguments of both parties, supported the complainant’s position, and sent a letter to the central office of the State Tax Service.
In its letter, the Council emphasized that formal remarks about the level of detail in the acts cannot automatically refute the reality of the services, and that the assessment of primary documents must comply with legal requirements and the declared intentions to simplify documentation for services received from non-residents. Separately, the Council drew attention to the need for a consistent approach to tax consequences: in the disputed transactions the company reported not only input VAT (a tax credit), but also VAT liabilities, which should likewise be taken into account when assessing the impact of transactions with non-residents on the company’s tax accounting. As for the scrap-metal episode, the Council pointed to relevant Supreme Court conclusions in similar legal relations.
A senior inspector of the Council joined the review of the administrative appeal together with the company and its lawyers to help ensure a substantive and constructive consideration of the case during the administrative review.
As a result of the administrative review, the central office of the tax service upheld the company’s appeal and cancelled the tax notices-decisions.
