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Never give up! Or can you go on with the struggle with additionally assessed tax liabilities after criminal proceedings’ closure under para. 4 Article 212 of the Criminal Code of Ukraine?

29 May, 2013 Newsletters

Criminal proceeding is a substantial burden for officials of taxpayers. Not everyone is ready to go through a protracted and overstrained way from the beginning of a criminal proceeding to its closure on the grounds of the absence of corpus delicti or to verdict of non-guilty, which never can be granted as it stands today. That is why it is totally understandable, when an official of a taxpayer, even though sure in righteousness of his position, however conforms to relief of criminal responsibility under para. 4 of Article 212 of the Criminal Code of Ukraine (hereinafter – ‘CC of Ukraine’).

At the same time a process of court challenging of the tax notification-decision, which defines respective tax liability, usually endures simultaneously with the criminal proceeding. Therefore, the question arises, whether the closure of the criminal proceeding under provisions of para. 4 of Article 212 of the CC of Ukraine will have effect on the result of court challenging of the tax notification-decision?

To remind of that in accordance to dispositions of para. 4 Article 212 of the CC of Ukraine ‘one, who committed a tax evasion is relieved from criminal responsibility, if one paid all taxes and fees (obligatory payments), and also if one made compensation of the lesion, which was caused to the state through its delayed payment (financial sanctions, fine), before the moment of bringing to criminal responsibility’. The relief from criminal responsibility is executed in a form of court determination on the criminal proceedings’ closure.

Formally one should understand that only a guilty person, who committed a crime in from of a tax evasion, can be relieved from liability. Thereafter, there is a perception that by the application of the relief from criminal responsibility under provisions of para. 4 Article 212 of the CC of Ukraine the person does not deny one’s guilt, however is exempted from liabilities due to the compensation of the lesion to the state in a form of the payment of the tax liabilities.

However the effective legislation gives sufficient grounds to affirm that even in case of the closure of the criminal proceeding due to exemption from criminal liability under the para. 4 Article 212 of the CC of Ukraine the taxpayer has a chance to prove the illegality of the additionally assessed tax liabilities before the court.

So, under the provision of para. 4 Article 72 of the Administrative Court Proceedings’ Code of Ukraine (hereinafter – ‘ACPC of Ukraine’), which rules regulate the process of court challenging of the tax notification-decision, stipulates the following:

‘The verdict in a criminal case or court award in case of administrative delinquency, which entered into the force, are binding for an administrative court, which is considering the case on the legal consequences of action or lack of action of the person, as to whom the verdict or court award, only in the matter, whether such an action took place or whether it was occurred by this very person’.

As was mentioned above, the court provides relief from criminal responsibility under para. 4 Article 212 of the CC of Ukraine by delivering its decision in the form of determination on criminal proceeding closure. Actually the verdict under provisions of the Article 369 of the Criminal Proceedings Code of Ukraine is a judgment, in which the court decides disputes on the merits. Judgments on other matters are made in a form of the determination.

As a result, the determination on criminal proceedings closure due to relief from criminal responsibility under para. 4 Article 212 of the CC of Ukraine does not have any prejudicial effect for an administrative dispute on tax notification-decision challenging. In other words, such a determination cannot be used as a ground, which avouches the recognition by the taxpayer of the legitimate character of the tax liability determined by contested tax notification-decision.

The Higher Administrative Court of Ukraine follows the same logic, when in its Letter № 2379/12/13-12 of 14.11.2012 states the following:

‘Still the binding character of the prejudicial circumstances, which is foreseen by the para. 4 Article 72 of the ACPC of Ukraine, corresponding to the literal interpretation of the aforementioned rule is expanded only to circumstances, which were established directly by: 1) the verdict in criminal case; 2) the court award on the administrative infringement.

Thereafter the circumstances, that were established in other procedure acts in criminal cases or in cases on administrative offences (for example, in a resolution about the criminal proceeding’s closure), cannot be considered as binding corresponding to the part 4 Article 72 of the ALPC of Ukraine’.

Thereby the court determination on criminal proceedings’ closure due to relief from criminal responsibility under para. 4 Article 212 of the CC of Ukraine will not become an apparent obstacle for a taxpayer in a process of challenging of the tax notification-decision within administrative proceedings.

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.

Kind regards,

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