UAH 1.5 mn tax debt for spoiled grain canceled

Complainee: The State Tax Service (STS), Main Department of the State Tax Service in Kyiv (MD STS) 
Complaint in brief: The Business Ombudsman Council received a complaint from a large agricultural company. The company disagreed with the tax audit findings. According to the tax service, the company did not tax grain purchase transactions worth UAH 1.5 mn and, as a result it had overstated the VAT negative value amount for Q3 2019 by UAH 3 mn. The tax authority fined the agricultural company UAH 36 k. The company submitted objections to tax audit findings to the MD STS, however additional documents were not taken into account. The company tried to explain that it had lost some of its grain reserves due to their drying (spoiling). Therefore, as the grain was actually spoiled, it could not be used. The agricultural company turned to the Business Ombudsman Council for assistance.
Actions taken: Having examined the circumstances of the case, the investigator found the complaint substantiated. The Council recommended that the STS ensure a full, comprehensive and impartial consideration of the agricultural company’s case. The BOC found out that the company did not tax grain because its total volume decreased due to weight loss during drying. According to tax legislation, due to natural reasons, spoiled grain was not subject to use, especially in business transactions.
Result achieved: The tax authority satisfied the agricultural company’s complaint with the Council’s facilitation and canceled the debt.