An official distributor of a well-known passenger car brand filed a complaint with the Council regarding the results of a tax audit.
The tax authority concluded that the distributor had overstated the amount of VAT carried forward to the tax credit of subsequent periods and imposed penalties for failing to register tax invoices in the Unified Register of Tax Invoices.
The tax authority argued that the storage agreements concluded by the distributor with dealers were, in fact, commission agreements. Therefore, according to the tax authority, the distributor should have recognized tax liabilities on the date the cars were transferred to the dealers’ warehouses.
The Council established that the company imports cars and transfers them to dealers under responsible storage agreements, while the company sells the cars with VAT applied in the ordinary course. In turn, the dealers sell the cars to consumers independently and at their own expense, with the company providing certain support, including marketing and service assistance.
During the complaint review, which involved representatives of the State Tax Service of Ukraine, the company, and the Business Ombudsman Council, the Council’s inspectors supported the company’s position and emphasized that the responsible storage agreements concluded by the distributor did not bear the characteristics of commission agreements. The transactions were not performed at the distributor’s expense, the dealers did not receive any commission fees, and the distributor did not retain ownership of the vehicles. The Council also presented these arguments in an official letter to the State Tax Service of Ukraine.
As a result, the State Tax Service of Ukraine accepted the company’s position, supported by the Council, and canceled the additional tax assessments and penalties totaling nearly UAH 100 million.
