Court upheld position of tax authorities regarding issuance of tax notifications-decisions for 16.37 million UAH

Court confirmed legality of tax notifications -decisions for the total amount of 16.37 million UAH issued by the Main Directorate of the STS in Zaporizhzhia region.

Cassation administrative court as a part of the Supreme Court upheld position of the Main Directorate of the STS in Zaporizhzhia region in case № 280/597/19 and concluded that according to provisions of Paragraph 44.6 Article 44 of the Tax Code of Ukraine  in case that before the end of audit or within terms specified in Clause 2 of Paragraph 44.7of this Article, the taxpayer does not provide documents to officials of the supervisory authority conducting the audit (regardless of reasons for such non-submission, except in cases of seizure of documents or other seizure by the law enforcement agencies) that confirm indicators shown by such taxpayer in tax reporting, it is considered that such documents were absent from such taxpayer at the time of compiling such reporting.

Panel of judges draws attention to the fact that according to Paragraphs 44.1, 44.2 Article 44 of the Tax Code of Ukraine for taxation purposes, the taxpayers are required to keep records of income, expenses and other indicators related to determination of taxation objects and/or tax liabilities, on the basis of primary documents, accounting registers, financial reporting, other documents related to calculation and payment of taxes and levies, maintenance of which is provided for by the law.

Taxpayers are prohibited from forming indicators of tax reporting, customs declarations on the basis of data not confirmed by documents specified in Clause 1 of this Paragraph. In cases provided for in Article 216 of the Civil Code of Ukraine, the taxpayers have a right to make appropriate changes to tax reporting in manner specified in Article 50 of this Code.

To calculate taxation object, the income tax payer uses data of accounting and financial reporting on income, expenses and financial result before taxation.

At the same time, the taxpayer provided documents regarding detected violations of tax legislation only during the court proceedings.

Court stated that since the plaintiff did not provide documents for audit, the supervisory authority had legal grounds to conduct audit using tax information available to it regarding amounts of taxes declared by the plaintiff and to recognize these amounts as not documented.

Cassation administrative court summarizes that the taxpayer's provision of financial and economic documents during the audit is a necessary condition for confirming legality of tax accounting indicators declared by the taxpayer. Taxpayer’s obligation to keep documents and provide them during the audit to the supervisory authority corresponds to competence of the supervisory authority to carry out audit on the basis of documents. Taxpayer’s failure to provide documents to confirm declared tax accounting indicators is equated to their absence according to provisions of Paragraph 44.6 Article 44 of the Tax Code of Ukraine.

This norm requires availability of documents at the time of compiling tax reporting, establishes a rule regarding the taxpayer’s provision of documents for verification, as well as legal consequence of non-compliance with this rule as exclusion of the fact of having documents at the time of compiling tax reporting. It is a component of mechanism of legal regulation of tax accounting and does not enter into any competition with the procedural norms that establish rules of evidence in administrative proceedings.

Therefore, Resolution of the Cassation administrative court as a part of the Supreme Court as of 01.06.2022 in case № 280/597/19 dismissed the taxpayer’s cassation appeal and Resolution of the appellate instance, which refused to satisfy claims for recognition of tax notifications-decisions as illegal and their cancellation for the total amount of 16.37 million UAH.