In April 2023, the tax service annulled a company’s VAT payer registration. Tax officials cited that the company had been submitting declarations with zero indicators throughout the year.
The company challenged the tax authority’s actions in court, explaining that it could not operate fully due to the declaration of martial law and the departure of its director abroad. Specifically, due to the onset of the full-scale invasion, plans for leasing premises were postponed until 2023. It was then that the company signed a lease agreement and was just beginning to deploy its activities.
In August 2023, the court declared that the tax authority’s decision was illegal, stating that the zero-revenue declarations did not indicate passive behavior by the taxpayer but were caused by objective circumstances. The court ordered the tax authority to reinstate the VAT registration and maintain the company’s tax indicators. This decision was upheld by the appellate court, while the cassation court twice refused to initiate proceedings for the State Tax Service (STS).
However, the victory in court was only the beginning of the story. The tax authority was slow to comply with the court’s decision, citing various bureaucratic reasons. Among these obstacles, the regional tax office even noted that the case materials were under review by the central apparatus of the STS. At the same time, the tax authority could not provide specific reasons for not executing the decision. The company turned to the Enforcement Service in an attempt to assert its rights.
When these steps yielded no results, the company sought assistance from the Business Ombudsman Council. The Council carefully examined the case and presented it for discussion to the Expert Group of the State Tax Service of Ukraine. During this meeting, the Council supported the complainant’s position, emphasizing in discussions with tax officials that the court decision, which had come into legal force, was mandatory for execution.
As a result, success was achieved in this case: the tax authority executed the court decision, restoring both the company’s VAT registration and indicators in electronic VAT administration system (SEA VAT).
It is worth noting that, despite the norms of the tax legislation of Ukraine, the technical possibility of restoring indicators in the SEA VAT after the court’s cancellation of the decision to annul VAT payer registration was developed by the State Tax Service only at the end of last year, in response to numerous appeals by the Council over more than two years in the case of another complainant.
