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The Tax Code of Ukraine sets
forth two limitation periods in respect of challenging tax assessments in
courts. The general rule is that a lawsuit against the tax assessment should be
brought with 1095 days after the deadline established for the payment of the
underlying tax liabilities (paras 56.18 and 102.1 of the Tax Code of Ukraine).
However, where the taxpayer has already resorted to the administrative
proceedings conducted by the tax authorities of the higher level, this period
is reduced to one month after the cessation of such administrative proceedings
(para 56.19 of the Tax Code of Ukraine).
Nonetheless, in practice, it is
strongly recommended to challenge the tax assessments in court with
10 calendar days upon either (i) the receipt of the tax assessment or (ii)
the receipt of the decision of the tax authorities of the higher level issued
pertaining to the taxpayer’s appeal.
The point here is that after the
expiration of the above 10 days term the tax liability becomes overdue (tax
debt). Although the consequent filing of the action with the administrative
court should result in the tax liability is no more considered to be overdue
(para 56.18 of the Tax Code of Ukraine), this provision is very difficult to
rely on in practice. If the action is not filed within the aforesaid 10
calendar days, the tax authorities may treat the tax liabilities overdue (tax
debt) and take steps towards the collection of the tax debt.
What does it mean for the
taxpayer?
First, the assets of the taxpayer
(to the extent to which their book value is compatible with the amount of the
tax debt) is subject to tax pledge. Accordingly, the taxpayer faces significant
obstacles related to the disposal of his property.
Second, the taxpayer is deprived
of the entitlement to an automatic VAT refund. The availability of the tax debt
is sufficient ground for moving the taxpayer outside the scope of this
simplified procedure (para 200.19.7 of the Tax Code of Ukraine).
Finally, the taxpayer may experience certain
problems while applying for labour permits required for the employment of foreign people in
Ukraine. In order to obtain such a permit the employer should summit the tax
compliance certificate issued by the tax authorities*. It can be assumed that
the indication of the tax debt in the certificate may be viewed as a hindrance
for receiving the labour permit.
How to act if you see that you
cannot manage to prepare and file the high quality lawsuit with the
administrative court within 10 days after the receipt of the tax assessment?
The usual practical solution is
as follows. The taxpayer lodges the “formal” administrative claim with the tax
authorities of the higher level. At the time when the tax authorities are
considering your claim (at least 20 days), you are preparing and filing the
high quality lawsuit with the administrative court.
*- Para 5 of the Procedure for
Issuance, Prolongation and Cancellation of Labor Permits for Foreigners and
Stateless Persons approved by the Resolution of the Cabinet of Ministers of
Ukraine of 8 April 2009 No 322.
