It should be recalled that from 2018 the position of the SFSU on the taxation of designated expenses by the personal income tax and the war tax changed for fiscal
In particular, controllers with no apparent cause began assuming that when designated expenses are compensated for an employee after he/she has acted upon a specific action (for example, he/she bought office supplies), then such amounts are subject to the taxation of the personal income tax and the war tax on a general basis. Is that opinion is legal? And what is the situation on the issue today?
Appeal to court
There is no doubt that such an approach of the SFSU is unlawful. At the same time, not all except that approach. Individual taxpayers preferred not just to criticize the tax approach, but to defend its illegality through the court - by obtaining individual tax advice from the SFSU (as you know, with a fiscal statement), with subsequent appeals of such consultations in administrative courts.
The courts in this regard defended the position of the taxpayers (in particular, the decision of the Kharkiv Administrative Court of Appeal from July 12, 2018 in case number 816/909/18). It should be noted that while it is only an appellate instance, while the position of the Supreme Court is still unknown. In view of the fact of obvious absurdity of the SFSU approach, this is not surprising. The other thing is interesting - the arguments that formed the basis of court decisions. We propose to get acquainted with them in the following with the fact that they can be used in the event of disputes with the SFSU on other issues.
Arguments in favour of the payer
What is the PIT base? In general, this is a total taxable income. And what is the income? The Tax Code of Ukraine (hereinafter - TCU) is unclear on this issue. According to para. 164.1, the total taxable income is any taxable income subject to the taxation, accrued (paid, provided) in favour of the payer during the reporting period. However, the TCU does not specify what is “income” - neither in the mentioned paragraph, nor in any other. In view of this, the administrative court went beyond the TCU and applied to the Accounting Standard 15. It describes the income characteristics in more detail. That Accounting Standard indicates that the income is recognized in the event of an increase in the asset or a reduction in the liability. Based on these features, the court issued its own income formula for the purposes of PIT. It came to the conclusion that:
- the decisive feature of the income in the sense of PIT is the growth of financial and/or property status of the payer;
- the additional benefit associated with the production forces and which does not set its economic purpose as satisfying individual needs of the individual, but is essentially the cost of maintaining the company (in particular, the cost of payment for communication), is not subject to the taxation of the personal income tax, the war tax and USC.
Surely, you can immediately recall that in pars. 2 of the Accounting Standards 15 in black and white it is written that the norms of this provision are applied to enterprises, organizations and other legal entities. Moreover, it does not apply to individuals. All is correct, it should be. On the other hand:
- the court did that only because the TCU did not give a more detailed definition of income;
- in this case, the Accounting Standards were used only for the purpose of defining the term “income”, which in general is included in para.5.3 of TCU, according to which the other terms used in TCU and not defined by it are used in the sense prescribed by other laws (although this argument is not entirely accurate, since the Accounting Standards are not to be a law).
Conclusions
Summarizing the above, it should be mentioned that the SFSU continues to issue letters on the issue with a fiscal opinion (in particular, the letter of the SFSU dated July 16, 2018, No. 3136/6/99-99-15-02-01-15/ІПК). As you can see, the decision of the first and the appellate instance is not a decree to the controllers. It’s a different matter when the legal position of the SCU will appear on this issue. In this case, the SFSU will be obliged to submit to it, because in accordance with Part 5 of Art. 13 of the Law of Ukraine “On the Judicial System and Status of Judges”, the legal positions of the SCU are mandatory for all subjects of authority (including SFSU), which use the relevant legal act in their activities. Therefore, we look forward to the prompt appearance of the liberal position of the SCU on this issue.
