LLC “C” appealed to the court with an administrative lawsuit to the Main Departmant of the State Tax Service, requesting to declare illegal and cancel the tax notices-decisions (hereinafter – TND), issued as a result of an unscheduled documentary on-site inspection of LLC “C” on compliance with tax legislation on relations with contractors. The MD STSU’s TND did not recognize the tax credit with certain counterparties. The courts of first and appellate instances upheld the claim. The MD STSU filed a cassation appeal. What decision was made by the Supreme Court of Ukraine?
The arguments of the tax authority were that, first, the company's counterparties do not have sufficient material and labor resources, and this made it impossible for them to actually perform business transactions. Second, as the subject of the supply contracts were chemicals, the tax authority noted that there were certain requirements for their quality and transportation, and referred to certain inaccuracies in filling in the consignment note. The tax authority also stated that it had not been provided with a declaration of conformity, quality passports, and related documents for the transportation of goods.
Satisfying the claims, the courts concluded that the primary documents attached to the case file are properly executed, contain information on the scope, content and cost of business transactions and fully confirm the fact that the plaintiff purchased goods from contractors. The court also examined the primary documents confirming the further sale of the goods purchased by the plaintiff, and pointed out that as a result of the disputed business transactions in the period under review, the plaintiff received a profit. The court also took into account the plaintiff's allegation that the controlling body, examining the primary documentation submitted for inspection, did not indicate
According to the court, the lack of taxpayers' counterparties of sufficient material and labor resources does not make it impossible to actually perform business transactions and does not indicate the receipt of unreasonable benefits by the buyer. After all, the involvement of employees is possible subject to the conclusion of a contract of a civil nature, outsourcing and outstaffing. Provided that the fact of transportation of goods during its delivery from contractors is established, the procedure for filling in the consignment note is not crucial for determining the tax consequences of the business transaction.
Any tax information available in the information and analytical databases regarding the contractors of the entity in relation to supply chains, as well as tax information provided by other regulatory authorities, among other things and compiled due to the impossibility of conducting documentary audits, is purely informative and not is proper evidence within the meaning of procedural law.
Thus, the Supreme Court of Ukraine by its decision of August 13,2020 in case No. 520/4829/19 passed the following decision: the conclusions of the courts of previous instances on the confirmation of the right of LLC “C” to form tax accounting indicators for business transactions with counterparties the court considers as based on factual circumstances established in accordance with the requirements of procedural law. The cassation appeal of the State Tax Service is dismissed.
