Court supported position of tax officials regarding legality of increasing amount of monetary liabilities

Cassation court supported the controlling body’s cassation regarding legality of increasing amounts of the personal income tax monetary liabilities and military levy from income received as additional benefit in the form of individually assigned discount of the regular price.

Sub-paragraph 164.2.17 Paragraph 164.2 Article 164 of the Tax Code of Ukraine stipulates that income received by the taxpayer as additional benefit is included in the total monthly (annual) taxable income (except for cases provided for in Article 165 of this Code).

Sub-paragraph 168.1.1 Paragraph 168.1 Article 168 of the Tax Code of Ukraine stipulates that tax agent who accrues (pays, provides) taxable income for the taxpayer’s benefit is obliged to withhold tax from amount of such income at his/her expense, using tax rate specified in Article 167 of this Code.  

At the same time, the taxpayer acquires the tax agent’s status in all cases when pays income to individual (buys products, orders service, pays salary) in monetary form (cash or non-cash) or non-monetary (for example, barter).

As follows, in disputed legal relations, the courts of previous instances found that only documentary evidence of the estimated cost of sold Mercedes-Benz GLC 250 d4MATIC Coupe, sold by the company of individual PERSON_1, is its balance cost on the date of sale, which, according to the company, was 1 491 547.56 UAH (without the value added tax). Therefore, alienation of vehicle by the company in favor of individual at the price of 100 000 UAH (without the value added tax) indicates that the plaintiff provided PERSON_1 with additional benefit in the form of a discount from the normal product cost, individually assigned to such taxpayer.

Taking into account above specified, the Supreme Court agrees with conclusions of the courts of first and appellate instances, since, as stated above, the fact that legal entity (seller) provides individual discount to individual (buyer) is additional benefit that must be included in the total taxable income and properly to be taxed. This presupposes the plaintiff’s obligation as legal entity (seller) to accrue and pay necessary taxes and levies on the individual’s behalf (buyer), which the plaintiff did not do.

At the same time, the cassation court considers the claimant's statement about his exemption from taxation on the basis of provisions of Article 173 of the Tax Code of Ukraine to be erroneous, given that the specified norm regulates taxation procedure of income from the sale of vehicle, and not income in the form of individual discount upon purchase vehicle, which is the case subject. That is why the specified norm is not relevant to disputed legal relations and is not applicable.

So, for its part, in the case under consideration, the fact of providing additional benefit in the form of discount was properly established, and balance cost of sold vehicle is significantly higher than the actual contract price.

Cassation administrative court as a part of the Supreme Court on 02.05.2024 in case № 320/3024/22 dismissed the plaintiff’s cassation appeal;  decision of the Kyiv district administrative court as of 09.02.2023 and decision of the Sixth administrative court of appeal as of 14.06.2023 in case №320/3024/22 were left unchanged.