Court upheld legality of 28.77 million UAH of fines applied to individual – entrepreneur

Sixth Administrative Court of Appeal confirmed validity of conclusions of Main Directorate of the State Tax Service of Kyiv region regarding illegality of inclusion of expenses incurred for the purchase of inventory in the gross expenses by individual – entrepreneur.

In violation of Sub-paragraph 177.4 Paragraph 177 of the Tax Code of Ukraine, the entrepreneur included amount of expenses totaling 24.90 million UAH excluding the VAT incurred for the purchase of inventory in the gross expenses for 2017 without reflection of received income; amount of expenses incurred for the purchase of inventory for 2018, without received income, amounted to 20.14 million UAH without the VAT.

Also, the Court of Appeal concluded that individual – entrepreneur violated Sub-paragraph 177.4 Paragraph 177 of the Tax Code of Ukraine due to the overstatement of costs referred to in Column 7 of Section 1 “Other expenses” of the property and income tax declaration for 2018 in the amount of 0.97 million UAH without the VAT in connection with failure to provide documentary evidence of incurred expenses.

Sixth Administrative Court of Appeal took into account argumentations of Main Directorate of the State Tax Service of Kyiv region, which are set out in the appeal and additional explanations, which drew the court’s attention to the Supreme Court’s practice.

Panel of judges of the Court of Appeal reasonably concluded that the plaintiff unreasonably included cost of goods that were not sold, ie not received income in property and income tax declarations for 2017 and 2018. Also, the plaintiff did not use purchased inventory in entrepreneurial activity and overstated expenses in connection with the failure to provide verification of documentary evidence of incurred expenses.

Decision of the Sixth Administrative Court of Appeal satisfied appeal of Main Directorate of the State Tax Service of Kyiv region to the taxpayer in full, annulled Decision of Kyiv District Administrative Court and made a new decision to deny claims of individual – entrepreneur to Main Directorate of the State Tax Service in Kyiv region regarding cancellation of tax notifications-decisions, debt repayment requirements and decisions on the application of penalties totaling 28.77 million UAH.

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