Resolutions of the Supreme Court in tax disputes // selected cases for 2019-2020

The Supreme Court has been pursuing to continuously strengthen positions of the taxpayers in the course of resolving tax disputes for several years at a row. In 2019 the Supreme Court continued the tendency on a revision of court practice of the preceding years and creating new approaches to dispute resolution in tax cases. It is worth noting that the Supreme Court increasingly more has been upholding the positions of the taxpayers and heading to logic and justice, in numerous cases departed from the position of its predecessor – the Supreme Court of Ukraine, having created new positions, and generally carrying out the unification of existent approaches to resolving tax disputes.

We selected the following positions of the Supreme Court established in the tax disputes during 2019:

1. An offset of counterclaims may be applied in the foreign economic activity; provided such transaction is formalized through proper documentation it shall be a ground to deregister by the relevant servicing bank from the list of controlled operations (resolution of 31.01.2020, case no. 1340/3649/18).
2. Customs authorities are empowered to require additional documents to support the declared customs value of the imported goods in case of justified doubts in the accuracy of the information filed by the declarant.
3. Original method of determining customs value shall be ‘transaction value; in case of its contesting the burden of proof lies on the customs authorities. The transaction value method in relation between affiliated parties applies if these relations do not impact the value of imports; the declarant is required to justify the accuracy of the applied method of customs value in such case (resolution of 19.02.2019, case no. 804/1316/16).
4. Inventory control as requested by the tax authority within tax audit shall be deemed as a proper means to confirm in accordance with the law shortage or availability of goods at the possession of the taxpayer (resolution of 06.02.2020, case no. № 807/1556/17).
5. Lack of seal of the tax authority on the information request sent in accordance with Article 73 of the Tax Code of Ukraine, failure to indicate grounds for a request of failure to comply with other requirements specified in Article 73 of the Tax Code of Ukraine shall result in the right of the taxpayer not to provide requested info (resolution of 26.02.2019, case no. 826/9082/15).
6. As an efficient means of protection of taxpayer’s right in cases on VAT refund shall be deemed recovery from the State Budget of Ukraine in favor of the taxpayers’ indebtedness on VAT refund and penalties accrued on the amount of the debt (resolution of 12.02.2019, case no. 826/7380/15).
7. The substance of a business transaction shall be confirmed in accordance with tax, accounting reports of a taxpayer, and their compliance with real economic substance. Availability or missing of certain documents shall not be deemed as a ground to conclude the absence of a business transaction. Further, violations of the applicable laws made by certain counterparty within supply chain shall not result in recognition of violations of the tax laws by the purchaser and leading to negative tax implications (resolution of 16.04.2019, case no. 804/6909/17).
8. Untimely response to an administrative claim by the tax authorities shall be deemed as its satisfaction and result in cancellation of tax notification-resolutions (resolution of 24.01.2019, case no. 826/500/15).

A more detailed overview of the above cases is provided in Ukrainian version of the alert. Upon your request, we will be glad to elaborate on the topic.