Webinar on Tax Initiatives in 2021

Holding webinars based on the "Liga-Zakon"  platform is always a day of pleasure for me. 

This time I was talking about tax initiatives in 2021, namely:

- tax amnesty;

- Bill No  5600; and

- the so-called tax "on Google".

As for the tax amnesty, those sufficiently lucky to have accumulated enough assets not to be automatically considered amnestied are advised to take a wait-and-see approach.

In particular, it will be expedient to wait for the Cabinet of Ministers of Ukraine to develop a Bill on strengthening control over personal income taxation. The existence of this Bill will make sure a more accurate assessment of the risks for those who do not want to apply the tax amnesty.

Speaking at the meeting of the Ukrainian Bar Association on tax litigation

It was my pleasure to speak at the meeting of the Committee on Tax and Customs Law of the Bar Association of Ukraine on the topic of court jurisprudence in tax litigation.

My speech was dedicated to:

1) The court jurisprudence in cases related to challenging the tax authorities' orders on appointing tax inspections in accordance with the Resolution of the Cabinet of Ministers of Ukraine (CMU) of 3 February 2021 No 89. This Resolution narrowed the scope of the moratorium on tax inspections set out for the period of the quarantine. The Resolution, among other things, allows carrying out scheduled tax inspections.

Court jurisprudence currently exists at the level of the courts of appeals at the maximum. Such cases have not yet been decided by the Supreme Court.

The court jurisprudence at the level of the courts of appeal is ambiguous. In some cases, the courts side with the taxpayers, recognizing that the CMU's resolution cannot narrow the scope of the moratorium provided for in the Transitional Provisions of the Tax Code of Ukraine. In other cases, on the contrary, the courts of appeal hold that the narrowing of the moratorium introduced by the CMU's resolution is legal. They refer to the fact that the CMU's resolution was adopted in accordance with the direct provision of the Law of Ukraine of 17 September 2020 No 909-IX (on amendments to the Law on State Budget of Ukraine for 2020).

It is interesting that, as a rule, the Sixth Administrative Court of Appeal (Kyiv) demonstrates a loyal approach to the taxpayers. The Fifth (Odessa) and Second (Kharkiv) Administrative Courts of Appeal, on the other hand, are more likely to share the logic of the tax authorities.

2) The court jurisprudence on the application of indirect methods of determining taxable income. 

This court jurisprudence has emerged in recent years in connection with the attempts of the tax authorities to issue additional tax assessments to statesmen when some discrepancies are found between their official income and the value of assets in the electronic declarations.

The relevance of this court jurisprudence has greatly increased in connection with the implementation of the tax amnesty in Ukraine starting from September 2021.

The court jurisprudence in this category of cases is already present at the level of the Administrative Court of Cassation (a division of the Supreme Court) and is absolutely favourable for the taxpayers. The court finds the use of indirect methods of determining income illegal.

Webinar on Court Jurisprudence in Tax Litigation

I was delighted to hold a webinar at the Business Consulting Academy, dedicated to the judicial practice of resolving tax disputes.

The webinar focused on exemplary tax disputes and tax disputes resolved by the Grand Chamber of the Supreme Court.

Among the important judgments rendered by the Grand Chamber in 2020, it is necessary to note the following three:

- The resolution of 7 April 2020 in case No 910/4590/19 initiated by LLC "Askop-Ukraine" => administrative courts have jurisdiction over the cases involving the recovery under section 625 of the Civil Code of Ukraine of annual 3% interest and inflation charges in case of the failure of the state authorities to provide VAT refund on a timely manner; 

- The resolution of 1 July 2020 in case No 804/4602/16 initiated by LLC “Salamandra Insurance Company” => the failure of a bank to remit a tax liability to the state revenues based on the payment instruction of a taxpayer exempts the taxpayer from penalties and daily default interest, but does not exempt him from paying to the state revenues the tax liability itself; and 

- The resolution of 18 November 2020 in case No 813/5892/15 brought by LLC “Yablunevyi Dar” => orders on appointing tax inspections issued by the tax authorities based on court orders in criminal cases cannot be challenged in any type of court proceedings in Ukraine.

Webinar on Taxation of Transactions with Non-residents in 2021

I was my pleasure to hold a webinar hosted by Liga-Zakon on the topic of: "Taxation of Transactions with Non-residents in 2021."

The main conclusions drawn from the webinar:

- It is very desirable during 2021 to decide on the retention / liquidation of foreign legal entities that could potentially fall under the Ukrainian CFC rules. The Tax Code of Ukraine exempts the receipts obtained in the aftermath of the liquidation of such legal entities in 2021 from personal income tax.

- When structuring transactions on the sale of Ukrainian legal entities through foreign holding companies (the sale of shares in a foreign company that controls a Ukrainian company), it may now be necessary to pay a withholding tax in Ukraine.

- It should be taken into account that the tax difference of 30% is now applicable not only to buying goods (works, services) from non-residents belonging to the "blacklisted” jurisdictions” or “blacklisted” entity types, but also to selling goods (works, services) to such non-residents.

- The deviation of prices in controlled transactions (transfer pricing) from the “arm’s length” prices now triggers not only additional corporate income tax charges, but also additional withholding tax charges in connection with the qualification of such a deviation as constructive dividends.

 

Court Jurisprudence in Tax Disputes Involving an International Element

I want to thank the Business Consulting Academy for the opportunity to speak at a webinar on the topic of court jurisprudence in tax disputes involving an international element. 

In the context of the webinar, I would like to point out that at the end of 2020, the Supreme Court published its Review of court jurisprudence in the field of transfer pricing and international taxation. The review (in Ukrainian) is available at this link: https://supreme.court.gov.ua/userfiles/media/new_folder_for_uploads/supreme/Ohliad_transfertne_tsinoutvorennia_1.pdf.

Unfortunately, I am supposed to say that the document does not live up to the expectations that arise from reading its name. It cannot be called even a more or less comprehensive review of the court jurisprudence of the resolution of tax disputes in the field of international taxation. 

In general, the review discusses only the topic of transfer pricing, including quoting a number of unnecessary, in my opinion, for such a review, court judgements on certain obvious and non-debatable issues. 

Other issues of international taxation are not covered in the review at all, except for the two judgements concerned with permanent establishments and one judgement concerned with a tax difference arising from purchasing goods from counterparties registered in low-tax jurisdictions.