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| Co-authored by Anton Havryk |
Foreword
Apparently, the only lazy did not hear about the
deprival of the local tax offices of
their powers to audit taxpayers since 2017. As of now, only the tax authorities
of regional (oblast) and central levels can perform tax audits. Such an
official clarification has been provided
by the State Fiscal Service of Ukraine in its
letter dated 17 January 2017 "On Carrying out of Tax Audits in
2017".
This is an undeniable fact widely explored by hardly
all specialised media in Ukraine. However, what powers have the local tax
offices been additionally deprived of during the minor tax reform of 2017 and
how may this affect the tax litigation
in Ukraine?
Redistribution of
functions
Since 1 January 2017 there has been a serious
redistribution of powers among the
different levels of the State Fiscal Service of Ukraine. The powers of local
tax offices have been narrowed in the most severe manner. The exhaustive list
of these powers are now set out in section 19-3 of the Tax Code of Ukraine. New
functions of local tax offices are as follows: (і) servicing taxpayers and (іі) doing registration work (registering taxpayers and keeping registers
related to taxation).
Local tax offices
do not retain any other functions.
As we can see, the narrowing of the powers of local
tax offices go far beyond the deprival of the power to carry out tax audits. Below, we will discuss what exactly functions the
local tax offices have been deprived of and what functions they have kept.
Acceptance of tax
returns
Section 19-3 of the Tax Code of Ukraine does not specify anything about the acceptance of tax
returns. However, the practice has
already been established under which the
local tax offices continue accepting tax
returns of taxpayers.
It is likely that the acceptance of tax returns is
considered as part of servicing taxpayers or part of registration work (namely,
registering the objects related to taxation).
Notices of tax
assessment
Local tax offices are no more in charge of issuing notices of tax assessment. As of now,
the only tax authorities of regional (oblast) and central levels can issue such
documents.
Notices of tax assessment issued by local tax offices
following 1 January 2017 must be revoked. We faced this situation by our own.
Some notices of tax assessment issued to our clients by local tax offices after
1 January 2017 have been revoked by the tax authorities of regional (oblast)
level. The reason for the revocation was that the local tax offices had no more
right to issue such documents.
Repayment of tax debt
This is also now exclusively within the powers of tax
authorities of regional (oblast) or central level to enforce a tax debt. From
our own experience, following 1 January 2017 one of our clients was issued a
tax demand. It was signed by the deputy head of the tax authority of regional
(oblast) level. The local tax office was indicated in the tax demand as a
recipient of the tax demanded only.
Refund of
erroneously and/or excessively paid taxes
It is unlikely that
the refund of erroneously and/or
excessively paid taxes still belongs to the functions of local tax offices related to servicing
taxpayers or doing registration work.
It is quite logical
that local tax offices are
no more in a position to sign documents authorizing the refund of erroneously
and/or excessively remitted taxes to taxpayers and to hand over those documents to the State Treasury
Service of Ukraine. It can be assumed that tax authorities of regional (oblast)
level must sign the
above documents and pass them to the State Treasury Service of Ukraine.
However, as of the date of the publication of this
article the unofficial position of the State Fiscal Service of Ukraine is that
the signing of documents authorizing the refund of erroneously and/or
excessively remitted taxes to taxpayers still rests within the powers of local
tax offices. What were those arguments used by the State Fiscal Service of
Ukraine to bolster this position remains a major mystery for us.
VAT refund
It is logical that
desk and documentary tax audits in the
course of providing VAT refund must be carried out by tax authorities of regional (oblast) level.
The situation is
not clear enough with regard to entering data to the Register of VAT Refund Applications,
including data on “approved” VAT refund. However, it is most probably that tax authorities of regional
(oblast) level must enter these data to the Register of VAT Refund Applications.
According to section 19-3 of the Tax Code of
Ukraine the powers of local tax offices in respect of doing registration work
do not extend beyond the registers administered by the bodies of the State
Fiscal Service of Ukraine. Yet, in this case the Register of VAT Refund
Applications is administered by the
Ministry of Finance of Ukraine, rather than by the State Fiscal Service of Ukraine.
Influence on tax
litigation
Taking account of the redistribution of the functions
between the authorities of the State Fiscal Service of Ukraine of different
levels, we can provide the following recommendations for the purposes of tax
litigation:
- If a tax audit or a notice of tax assessment was
carried out/issued following 1 January 2017 by the local tax office, the
notices of tax assessment can be well reversed because of the excess of powers
on the part of the local tax office.
- If a tax demand or any other contested decision
associated with the collection of tax debt was
adopted after 1 January 2017,
those decisions can be well reversed because of the excess of powers on
the part of the local tax office.
- In the cases concerned with the refund of erroneously
and/or excessively remitted taxes and VAT refund a serious thought should be
given to the replacement of defendants from local tax offices
to tax authorities of regional (oblast) level.
* Photo from https://steptohealth.com/
