Court supported position of tax authorities regarding additional accrual of 51 million UAH to enterprise

Cassation administrative court as a part of the Supreme Court supported position of Main Directorate of the State Tax Service in Odesa region in case № 420/9587/20 and concluded that there are no grounds for granting a deadline for renewal of lost documents to the taxpayer in case of failure to take appropriate measures in case of disappearance (destruction) of primary documents.

Panel of judges drew attention to the fact that according to prescriptions of Paragraph 44.3 Article 44 of the Tax Code of Ukraine, it is established that taxpayers are obliged to ensure storage of documents specified in Paragraph 44.1 of this Article, as well as documents related to fulfillment of legal requirements, control over compliance with which is entrusted to the controlling authorities, not less than 1095 days from the date of submission of tax reporting, for preparation of which the specified documents are used, and in case of non-submission – from a deadline for submission of such reporting provided by this Code.

In addition, the need to keep documents is also provided for in Paragraph 6.2 of Regulation on documentary support of records in accounting, approved by the Order of the Ministry of Finance № 88 as of 24.05.1995 (hereinafter – Regulation № 88), namely: primary documents and accounting registers that have undergone processing, accounting and other reports before transferring them to the archive of an enterprise, institutions must be stored in the accounting service in special rooms or locked cabinets under the responsibility of persons authorized by the chief accountant.

Algorithm of actions in case of loss of documents is determined by Regulation № 88 and Paragraph 44.5 Article 44 of the Tax Code of Ukraine.

Paragraph 6.10 of Regulation № 88 (in edition valid at the time of dispute) in case of loss or destruction of primary documents, accounting and reporting registers, the head of enterprise or institution must notify the law enforcement authorities in writing form and by order appoint a commission to establish list of missing documents and investigation of reasons for their loss or destruction.

Representatives of investigative bodies, security and state fire supervision are invited to participate in the commission work.

Results of the commission's work are formalized by act approved by the head of enterprise or institution. Copy of act is sent to the body in whose sphere of management enterprise, institution is located, as well as to the territorial bodies of the central executive body, which implements state tax policy, state policy in state customs affairs, state policy on the administration of  single contribution to obligatory state social insurance , state policy in combating offenses during the application of tax, customs legislation, as well as legislation on the payment of single contribution by enterprises and local financial bodies by institutions within the 10-day period.

Cassation court stated that from the above specified norm, it is clear that the taxpayer’s obligation in case of loss or destruction of primary documents is to notify the law enforcement authorities and to establish the fact of loss of documents to conduct official investigation, about which the head of this enterprise issues order authorizing commission to conduct it.

In addition, Paragraph 44.5 Article 44 of the Tax Code of Ukraine (in force at the time of occurrence of disputed relations) stipulates that in case of loss, damage or premature destruction of documents specified in Paragraphs 44.1 and 44.3 of this Article, the taxpayer is obliged within five days from on the day of such event to notify in writing form the controlling body at the registration place according to procedure established by this Code for submission of tax reporting and the controlling body that carried out the customs clearance of relevant customs declaration.

Taxpayer is obliged to renew lost documents within 90 calendar days from the day following date of receipt of notification by the controlling body.

Court stated that the plaintiff notified tax authority of the loss of current record keeping and financial and economic documents of the business entity on 16.04.2020 according to stamp of the incoming correspondence on 22.04.2020, i.e. after expiration of five-day period, which is a violation of Paragraph 44.5 Article 44 of the Tax Code of Ukraine.

In addition, before the start of investigation and during its conduction, the plaintiff did not provide report of commission on the investigation results, which is also absent from the case file.

Cassation administrative court summarizes that since the plaintiff's letter does not contain reference to information on taking appropriate measures, namely act of commission on the disappearance (destruction) of primary documents, the controlling body had no legal grounds for postponing deadlines for the unscheduled on-site audit of documents and providing deadline for renewal of lost documents.

Therefore, by decision of the Cassation administrative court as a part of the Supreme Court as of 07.04.2023 in case № 420/9587/20, cassation appeal of Main Directorate of the State Tax Service in Odesa region was satisfied, decision of the Appellate court as of 02.06.2021 was annulled and decision of Odesa district administrative court as of 19.01.2021, which refused to satisfy claims for recognition of tax notifications-decisions for the total amount of 51 million UAH as illegal and their cancellation remained in force.