The client, who is a legal entity, has received cash through the cash desk at the bank. During the inspection, representatives of the State Fiscal Service of Ukraine additionally accrued the personal income tax and the war tax to the amount of cash to the bank. Are the inspection officers’ actions legal?
Working situation
For banks, transactions for issuing cash to customers through a cash desk are typical, in particular, if such cash is issued from the accounts of legal entities to their authorized representatives - individuals. Such cash may be required by legal entities, for example, for purchasing agricultural products or scrap metal in the population.
Unfortunately, the SFSU has found the opportunity to additional accruing of PIT and the war tax even for such a seemingly ordinary transaction. In what way? We briefly describe the logic of inspection officers.
Logic of inspection officers
When checking the bank fiscal authorities study the status of its clients - legal entities who took cash through the cash desk. Under this condition, inspection officers are interested in:
- are there among those counteragents those who have criminal proceedings instituted, in particular for fictitious activities, tax evasion, etc.?
- have such persons submitted the tax calculations in form No.1DF, if so, whether they indicated transactions for which, in fact, cash was withdrawn from the account (in favor of individuals, payments of income from agricultural products, scrap metal, etc.).
If the fiscal authorities find counterparties with such signs, they are highly likely to record in the act that the documents on which the bank issued cash to their representatives are not legally valid and cannot be used as supporting documents for tax purposes (with reference to para. 44.1 of the Tax Code of Ukraine, hereinafter - TCU).
According to the inspection officers, the bank issued cash from the cash desk to unknown individuals. So it had to act as a tax agent for those amounts and accrue the personal income tax / the war tax.
Letter of the law
This fiscal logic is incorrect because:
- the bank during the issue of cash from the client’s account - a legal entity carries out a transaction only with this legal entity. In addition, the fact that cash is actually issued to individuals does not play a role, since they receive such cash exclusively as representatives of legal entities (that is, as persons acting on behalf of, in the interests and at the expense of such a legal entity);
- the bank issued funds through the cash desk that were on the client’s account, therefore, this money does not belong to the bank. The bank cannot pay any income at their expense;
- in general, such transactions do not have any subject to taxation of the personal income tax and the war tax, which is confirmed by Art. 164 of TCU;
- violations that a client of a bank could allow (this applies both to criminal proceedings against client officials and possible non-submission of tax reporting), cannot create negative tax consequences for the bank, for example, tax deductions of PIT / war tax;
- in such cases, the SFSU may also refer to a violation of the Bank’s profile legislation, in particular, the Guidelines for the conduct of cash transactions by the banks of Ukraine, approved by the NBU Board resolution dated 01.06.2011, No. 174. It should be note here that even if the bank violated such norms, the SFSU is not authorized to control them. Moreover, the violation by the bank of norms of profile legal acts (non-tax) is also not a sufficient reason for the calculation of tax liabilities.
Court rulings
Today, the unlawfulness of such actions of the SFSU is confirmed by court rulings, in particular:
- by the decision of the Supreme Administrative Court of Ukraine dated March 23, 2016 in the case No. К/800/40020/15: “<...> received by individuals as representatives of legal entities on the order of the last funds from accounts serviced by <...>, cannot be considered as incomes of these individuals, and therefore the plaintiff is not required to accrue and pay tax as a tax agent. <...>” ;
- by the decision of the Odesa Administrative Court of Appeal of April 5, 2017 in the case No. 815/4146/15: “<...> The above statement shows that the bank during the issuance of cash to individuals for the purchase of agricultural products, which are representatives of legal entities - clients, from the bank accounts of such legal entities is not a tax agent since the cash is issued not to individuals, but to a legal entity through its representatives, in connection with which these transactions cannot be taxed on the personal income tax. <...>”.
