Complainee: The State Tax Service (STS)
Complaint in brief: The Council received a complaint from an enterprise engaged in electricity projects development and implementation. For a long time, the tax authority failed to enforce the court decision on the company’s tax invoices registration. It turned out that in the spring of 2019, the regional office included the company in the VAT risky taxpayers list and it was the starting point of a chain of further events that eventually ended up successfully only in early 2021.
Firstly, the tax authority suspended the complainant’s tax invoices with VAT being worth almost UAH 15 mn. The company then managed to prove it was risk-free. However, within the administrative appeal procedure, the STS refused to register suspended tax invoices in the Unified Register of Tax Invoices. Then the company seeked protection in court. The court upheld the complainant’s claim and, inter alia, obliged the STS to register the respective tax invoices. Despite the fact that the court decision came into force in early July 2020, the tax authority did enforce it for several months. Therefore, in October and November 2020, a public enforcer issued two resolutions imposing a fine on the STS amounting to UAH 5.1k and 10.2k respectively for non-enforcement of a court decision with no due reasons. However, these also failed to stop the inaction of the state body. At the same time, the lack of the company’s tax invoices registration meant that the buyer of the goods still did not have the right to a tax credit totaling almost UAH 15 mn. This fact did only complicate further business relations prospects, but also negatively affected the tax planning of such a counterparty. Hoping to resolve the disputed situation with the STS, the complainant turned to the Council for assistance.
Actions taken: The investigator supported the company’s position and found the complaint substantiated. The Council asked the STS to eliminate the alleged malpractice and immediately enforce the court decision in question by registering the relevant tax invoices. In particular, in a letter to the tax authority, the Council reminded that a court decision is binding and current legislation sets rather short deadlines for execution of this category of court decisions. Having sent three formal appeals to the STS just within the first month of investigation, the Council brought up the subject matter of the complaint for discussion at the permanent expert group meeting between the STS and the Council according to the Memorandum of Partnership and Cooperation. Following the expert group meeting, the STS assured the Council that the court decision would be strictly enforced in the nearest future.
It is also important to point out that at the end of December 2020, the complainant managed to establish a judicial control over enforcement of this decision. In particular, the STS was obliged to submit a report to the court on the decision’s enforcement within 30 days upon the relevant ruling receipt.
Result achieved: The STS followed the Council’s recommendations and, based on the results of its fourth appeal in January 2021, had registered the relevant tax invoices for a total amount of VAT equal to over UAH 14.5 mn. The company thanked the Council for support: “We would like to express our appreciation and deep gratitude to the Business Ombudsman Council for fruitful and effective cooperation. It was thanks to the BOC representatives involvement that the court decision was enforced by the STS of Ukraine. Our company is convinced of the effectiveness of such a mechanism as the Business Ombudsman Council, the purpose of which is to protect small and medium-sized business, as well as to assist businesses affected by malpractice, to protect their right to free enterprise or against illegal interference with their economic activities”. The case was successfully closed.
Victory for solar panels manufacturer – tax invoices for UAH 14.5 mn registered
Complainee: The State Tax Service (STS)