Court confirmed legality of accrual totaling 16 million UAH for violation of tax legislation

Cassation administrative court as a part of the Supreme Court upheld conclusion of the Appellate court and position of the controlling body on the legality of additional accrual of the value added tax liability in the taxation of clinical research services in the international clinical trials sphere.

Cassation court stated that the content of services provided by the plaintiff essentially consisted of clinical observation of patients who were taking medications with an aim of assessing their safety and effectiveness. Data collected by the plaintiff was entered into individual registration cards (individual registration forms) of patients, which, although they are the result of the plaintiff's analytical work, do not meet the definition of data compilation (database) as an object of intellectual property rights according to Paragraph 3 Part 1 Article 433 of the Civil Code.

Provisions of the plaintiff's contracts with foreign companies on the settlement of relations between the parties regarding intellectual property rights to objects that may be created during clinical research do not give grounds for concluding that objects of intellectual property rights were created.

Cassation administrative court agrees with conclusion of the Appellate court that services provided by the plaintiff are subject to the value added taxation, as they were provided in the customs territory of Ukraine. Also, the Court correctly noted absence of the intellectual property right object, since Article 418 of the Civil Code defines that the intellectual property right is an individual’s right to the result of intellectual, creative activity or to another object of intellectual property right, defined by this Code and another Law. Intellectual property rights are personal non-property rights of intellectual property and (or) property rights of intellectual property, content of which in relation to certain objects of intellectual property rights is determined by this Code and another Law.

From the systematic analysis of norms of tax legislation, it can be seen that, depending on the content of economic operation for provision of services, services defined in Paragraph 186.3 Article 186 of the Tax Code of Ukraine are not subject to the VAT. In all other cases, place of provision of services is considered to be the supplier’s registration place, accordingly, such services are subject to the VAT.

Cassation administrative court summarizes that the nature of services provided by the plaintiff to non-residents does not allow them to be included in the list of services specified in Sub-paragraphs "a", "c" of Paragraph 186.3 Article 186 of the Tax Code, and therefore the contested tax notifications-decisions were lawfully adopted by the tax authority.

Violation of Paragraph 201.1 Article 201 of the Tax Code of Ukraine, which consists in not compiling tax invoices in the electronic form in compliance with conditions for their registration in manner specified by the law, and is derived from a violation of non-payment of the VAT liability.

The plaintiff was obliged to compile and register tax invoices according to provisions of Article 201 of the Tax Code of Ukraine.

Resolution of the Cassation administrative court as a part of the Supreme Court as of 08.12.2022 in case № 160/8533/20 dismissed the taxpayer’s cassation appeal; Resolution of the Third administrative appellate court as of 06.07.2021, which refused to satisfy claims for recognition of tax notifications-decisions for the total amount of 16 million UAH as illegal and their cancellation, was left unchanged.