VAT and discounted goods: minus UAH 5 mn. of company’s fine

Tax issues: Inspections by state tax and fiscal agencies Kyiv

An electrical goods distributor complained to the Business Ombudsman about Kyiv Tax Service. According to the tax audit findings, tax officers charged the company with tax liabilities amounting to almost UAH 5 mn.
According to the tax authority, the company understated the VAT amount and did not register tax invoices. It’s all because the company allegedly sold the goods below the purchase price and did not accrue VAT on discounted goods.
The company denied the Tax Service’s claims by noting violation of the inspection procedure. In particular, the company stressed it did not sell the cut-price goods, so they did not include VAT, and, at the same time, registering tax invoices was not required.
During the investigation, the Council’s investigator participated in the discussion of the enterprise’s administrative complaint together with tax officials and the company itself. In addition, the Business Ombudsman Council turned to the State Tax Service of Ukraine (STS of Ukraine) with a letter in which it upheld the complainant’s position. BOC noted the Tax Code of Ukraine norms did not provide for the obligation of the payer to accrue tax liabilities in connection with goods valuation, nor did they stipulate charging VAT on the discounted part of such goods value. Thanks to the Council’s mediation in the case, the STS of Ukraine canceled the company’s tax liabilities worth UAH 5 mn.

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