Court Jurisprudence on Procedural Aspects of Tax Audits

It was my pleasure to speak at the meeting of the Committee on Tax and Customs Law of the Ukrainian Bar Association on the topic: " Court Jurisprudence on Procedural Aspects of Tax Audits."

A key issue in the relevant field during 2022 was the issue of canceling tax assessment notices issued premised on the results of tax audits carried out on the basis of the Resolution of the Cabinet of Ministers of Ukraine dated 2 February 2021 No. 89 "On shortening the period of validity of the restriction regarding the moratorium on carrying out certain types of audits".

Currently, this Resolution continues to be reversed in accordance with the judgment of the Sixth Administrative Court of Appeal dated 5 July 2022 in case No. 816/228/17 brought by Prommetsplav, LLC. Furthermore, the jurisprudence of the Administrative Cassation Court (cases No. 640/16093/21 and 160/24072/21) shows that the very fact of conducting a tax audit on the basis of the said Resolution of the Cabinet of Ministers of Ukraine is sufficient for treating the relevant tax assessment notices as illegal.

Changes in VAT Regulation During the Period of the Application of Martial Law

I was glad to speak at the meeting of the committee on tax and customs law of the Ukrainian Bar Association on the topic: "Changes in VAT Regulation During the Period of the Application of Martial Law".

Since the beginning of the full-scale invasion of the Russian Federation into Ukraine on 24 February 2022, a large number of amendments have been made to the Tax Code of Ukraine regarding VAT. 

The following three are the most notable among those amendments:

1) Introduction of a temporary reduced VAT rate of 7% for motor fuels; 

2) Governing the issue of the enjoyment of input VAT deduction without a registered VAT invoice for February-May 2022; and

3) Suspension of the operation of the VAT refund procedure for the period until July 2022.

The Court Jurisprudence in Cases Involving the Sale of Apartments via Individuals

The resolution of the "Tax Chamber" of the Cassation Administrative Court of 23 May 2022 in case No 810/3116/18 has really made a great gift to real estate developers that had been selling apartments through individuals.

In this resolution the justices concluded that the sellers of real estate that are not registered as individual entrepreneurs (IEs) cannot be taxed as IEs, even if they carry out systematic sales of real estate, which "de facto" make up an entrepreneurial activity. 

This resolution also came in handy for us. Using it as one of the key arguments, we managed to win the case in the Sixth Appellate Administrative Court in August 2022.

However, in my opinion, it is too early to "chill out" in this category of cases and rely solely on the said resolution of the "Tax Chamber". 

A very large percentage of the justices (six justices out of fifteen) did not agree with the majority and expressed a dissenting opinion. So, if such a case is assigned to the dissenting justices, there is a great chance that they will direct the case to the Grand Chamber.

If this happens and the Grand Chamber accept the case for its consideration, it is possible that the approach can change radically.