An agriprocessing company approached the Business Ombudsman Council after the tax authority, following an unscheduled documentary off-site audit, issued two tax assessment notices (tax notices-decisions). Under one notice, the tax officials reduced the company’s negative VAT balance by almost UAH 35 million; under the other, they imposed more than UAH 17 million in penalties for allegedly failing to issue and register VAT invoices.
The tax officials assumed that, as a result of processing sugar beets, the company obtained a larger quantity of sugar than it had recorded in its accounts and allegedly sold this sugar to unidentified parties. At the same time, the audit report lacked the necessary specifics: it did not establish either the actual receipt of a larger quantity of sugar, or any transactions for the supply of such sugar, or the dates of such transactions, or their price, or the persons to whom it was allegedly supplied.
Disagreeing with the audit findings, the complainant filed an administrative appeal with the central office of the State Tax Service (STS) and also contacted the Council.
Having reviewed the materials, the Council addressed the STS of Ukraine in support of the complainant and pointed out that neither the primary accounting documents nor the inventory check confirmed the existence of surplus sugar that had not been recorded. The tax authority also failed to substantiate the existence of such surplus and its sale to other parties. The Council further noted that the tax authority’s calculations of sugar output are inconsistent with the generally accepted methodology for calculating sugar yield from sugar beets, and were also refuted by a court decision that had entered into legal force and concerned a previous audit on a similar issue.
A Senior Inspector of the Council also participated—together with the complainant—in the consideration of the administrative appeal at the STS of Ukraine. An important role in resolving the dispute was played by the complainant’s proactive approach to collecting evidence, as well as the court decision in the complainant’s favor in the previous audit on the same issue.
As a result, the central office of the tax service upheld the company’s appeal and cancelled both tax assessment notices.
After the dispute was resolved, the complainant shared feedback on the cooperation with the Council: “Thank you very much for the fruitful cooperation in reviewing the complaint, preparing for and participating in the consideration of the complaint before the STS of Ukraine, and, as a result, for the cancellation of the tax assessments totaling UAH 53 million. Special thanks to the Senior Inspector for the direct support of our case during the appeal process.”
