Review of the court practice in cases on cancellation of the local councils’ decisions on establishment of tax on immovable property other than a land plot in 2016
At the beginning of this year we have published some arguments in favor of the fact that after July 15, 2015 local councils can`t establish local taxes for 2016. Due to that establishment, in our opinion, the relevant decisions of local councils will contradict to the law, and taxpayers will not have a legal obligation to fulfill them.
In practice, some local councils were still trying to establish local taxes for 2016 after 15 July 2015. For example, the decision of Brovary City Council of Kyiv region as of January 29, 2016 No. 115-07-07 “On the establishment of local taxes and fees, land rates and excise tax in Brovary for 2016”.
As a result, lawyers of KM Partners Attorneys at Law managed to convince the court that this decision is illegal because the local council adopted it with the breach of the terms and procedure. The corresponding Resolution of Brovary District Court of Kyiv region as of September 20, 2016 can be found by link.
Furthermore, at the moment we can talk about some general trends in the court practice concerning decisions of local councils about the establishment of tax on immovable property other than a land plot.
There are no decisions of the Higher Administrative Court of Ukraine (regarding the local taxes namely for 2016) in public access. However, according to the Unified State Register of Court Decisions, the courts mostly sustain the taxpayers on this issue.
In particular, the Kyiv Administrative Court of Appeal has twice sustained the taxpayers in its Court ruling as of September 1, 2016 and in the Resolution as of June 07, 2016. Both decisions concern to the establishment of tax on immovable property other than a land plot in Cherkasy for 2016.
On June 6, 2016, the Zaporizhzhia District Court of Zaporizhzhia region has passed a similar Resolution concerning the Provision on tax on immovable property other than a land plot, approved by the Decision No. 1 of Dolyna Village Council of Zaporizhzhia district of Zaporizhzhia region as of January 28, 2016 regarding the establishment of tax rate on immovable property, owned by legal entities, for the first half of 2016.
For completeness, we note, that there were several cases of court decisions not in favor of taxpayers. This is, for example, concerning the decisions of courts of first instance according to the tax on immovable property for 2016 in Cherkasy (the Resolution as of April 21, 2016 and the Resolution as of April 25, 2016). However, as mentioned above, at the level of appeal the relevant decision of Cherkasy City Council was declared unlawful and invalid.
Satisfying claims of the taxpayers, the courts have recognized, that the references of the defendants to para. 4 of the Concluding provisions of the Law of Ukraine as of December 24, 2015 No. 909-VIII, which established: “to establish that in 2016 the requirements, specified in subpara. 12.3.4 of para. 12.3 of Article 12 of the Tax Code of Ukraine and Law of Ukraine “On fundamental principles of state regulatory policy in economic activities” are not applicable to the decisions of the local authorities on establishment of local taxes and fees for 2016”, are ungrounded.
According to the courts, this law has not directly amended the Tax code of Ukraine, and therefore it cannot be considered as a part of the tax legislation. In addition, the abovementioned paragraph relates only to subpara. 12.3.4. of the Tax code of Ukraine, however, it does not cancel the effect of subpara. 4.1.9 and 12.4.3 of the Tax code of Ukraine, which also (including subpara. 12.3.4) entitle the local councils to change local taxes only in advance – before the beginning of the respective budget year.
The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.