Tax officials proved legitimacy of additional accruals specified in tax notifications – decisions totaling 16.4 million UAH

Court confirmed legitimacy of tax notifications – decisions for the total amount of 16.4 million UAH issued by Main Directorate of the STS in Kyiv region.

Board of judges of the Sixth Administrative Court of Appeal supported position of Main Directorate of the STS in Kyiv region and concluded that the resale price method should not be used in analysis of the payer’s controlled operations carried out in 2015 – 2016 for compliance with principle of an “outstretched arm”, so the controlling body correctly established impossibility of using the latter on a basis of external sources of information, namely financial reporting indicators of comparable enterprises.

Court of Appeal noted that although the taxpayer does not object application of the net income method in 2017, but according to analysis of the taxpayer’s documentation, functions, assets and risks compared to 2015 and 2016 in controlled operations have not changed.

Sixth Administrative Court of Appeal summarized that payer in controlled operations for 2015 – 2017 not only prepared products for the resale and transportation (division of products into batches, formation of supplies, sorting, repackaging) but also its processing and production (from imported raw materials), so characteristics of the final product differ significantly from characteristics of imported products and raw materials before processing.

As follows, the Sixth Administrative Court of Appeal made a Decision fully satisfy appeals of Main Directorate of the STS in Kyiv region and to cancel Decision of Court of first instance on satisfaction of claims on recognition of tax notifications – decisions as illegal and their cancellation.

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