Tax evasion criminal case is dropped as ungrounded 

Tax issues: Criminal proceedings against business initiated by State Fiscal Service Kharkiv region

Subject of complaint: State Fiscal Service (SFS), Large Taxpayers’ Office (LTO) 
Complaint in brief: On July 26, 2017, an official regional distributor of the international FMCG company applied to the BOC. The company complained about criminal case on tax evasion. 
Complainant sold baby diapers and women’s hygiene products. As these products were sold by the Complainant in July-September 2014, the State Service on Medicines registered as medical products, then a reduced VAT rate – 7%, instead of the standard 20% applied to this group of goods. Having purchased the products at a reduced rate, the company also sold them at a reduced rate. 
However, during tax audit, the SFS treated this as  tax evasion A criminal proceeding against the distributor was launched. 
A criminal case against the supplier was also initiated for similar reasons but then it was closed. Courts ruled in favor of the complainant and the supplier and refuted tax audit conclusions. Despite this, the criminal proceeding against the distributor still remained open. Active criminal proceedings not only damaged the business reputation of the Complainant, but also overwhelmed his economic activities.
Actions taken: The Council recommended that the Prosecutor General and the Head of the SFS observe reasonable timeframes and take the appropriate procedural decision. The Council’s investigator brought up a company’s issue at expert meetings at the Tax Police. In addition, he discussed the complaint with the First Deputy of Prosecutor General. At that time, law enforcement officers had already performed an economic examination, the conclusions of which evidenced in favor of the company. 
Result achieved: With the facilitation of the Council, the Tax Police closed dropped a criminal proceeding against the Complainant due to absence of a crime. 

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