Tax officials additionally accrued 19.93 million UAH for violation of tax legislation to the company

Cassation Administrative Court within the Supreme Court upheld position of Main Directorate of the STS in Kyiv city and concluded any documents (including contracts, invoices, bills, payment orders, etc.) have the force of primary documents only in the case of actual implementation of business operation. If actual implementation of business operations wasn’t done, the relevant documents cannot be considered as primary documents for purposes of tax accounting, even in the presence of all formal details of such documents required by the applicable law.

According to above specified, the Supreme Court disagrees with position of the Courts of previous instances, which actually agreed with reality of business operation between the taxpayer and counterparties without examining primary documents, their content, existence of criminal proceedings against counterparties of the LLC "Systema", without assessing the absence and possibility of payer’s provision of the specified documents during audit, reasons for such non-provision.

Panel of judges drew attention to circumstances of the absence of withdrawal or seizure of documents by the law enforcement agencies. Demand for documents, seizure and withdrawal are various procedural actions and in conjunction with established fact of their receipt by the payer’s representative may indicate their intentional failure to provide during the audit. No evidence as of the date of their receipt or the impossibility of obtaining them for submission to the Court was provided.

Cassation Court takes into account fictitious of economic activity of payer’s counterparties, as status of a fictitious enterprise is incompatible with legal business activity, even with formal confirmation of its primary documents and gives grounds to conclude that primary documents that became the basis for formation of tax credit, issued by the counterparty, fictitiousness of which is established by a court decision, cannot be considered properly executed and signed by authorized persons reporting documents certifying the purchase of products, works or services, and therefore reflection of consequences of such business operation in tax accounting is unfounded.

Cassation Administrative Court summarized that business operations for formation of tax credit must be actually carried out and confirmed by appropriate and admissible primary documents that reflect reality of business operations of the LLC "Systema" with the counterparty and are the basis for formation of the taxpayer’s tax accounting.

Administrative Cassation Court within the Supreme Court made a Decision to partially satisfy cassation appeal of Main Directorate of the STS in Kyiv city, to cancel Decision of the Court of first instance and Decision of the Appellate Court in satisfaction of claims for recognition of notifications-decisions for the total amount of 19.93 million UAH as illegal and their cancellation, in this part the case was sent for a new trial to the Court of first instance.

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