Making advance payments on CPT by means of set-off against the overpayment on this tax
Starting from the year 2013, the taxpayers (except for the newly established enterprises, enterprises specializing in production of the agricultural products, non-profit organizations, and enterprises the income of which does not exceed 10 million UAH) are obliged to make the monthly advance payments on CPT.
Due to the introduction of a radically new approach to payment of CPT, quite a topical issue arose which refers to situations when the taxpayer wants to make the advance payment of CPT by means of set-off against the overpayment on this tax. Representatives of the local tax authorities affirm that this is impossible and require making the advance payment irrespective of the overpayment.
Because of a large number of questions from the taxpayers on the introduction of the new order of payment of CPT, the State Tax Service of Ukraine (hereinafter – “STSU”) published the Generalized Tax Consultation1. Namely, on the question “17. Whether the taxpayer has the right to use the overpaid amounts of CPT in payment for the advance payment?” the STSU did not provide the clear-cut answer. However, the STSU did not say a direct “no” in the answer to this question.
Paragraph 87.1 of Article 87 the Tax Code of Ukraine directly stipulates that the amount of monetary liabilities on certain tax may be paid at the expense of the overpayment on such tax. Moreover, the Article clear stipulates that such payment shall be done without any applications of the taxpayer, i.e. automatically.
Since the advance payment of CPT is “the monetary liability” referring to the definition of the terms in the Tax Code of Ukraine, the said rule on automatic set-off is applied to it under the general procedure.
However, the probability of the disputes with the tax authorities cannot be excluded due to the fiscal position of the tax authorities, as well as taking into consideration the absence of monetary funds in the budget. Therefore, regardless of lawfulness of the position of the taxpayers having the overpayment of CPT, the tax authorities may not accept the aforementioned set-off with respective consequences for the taxpayers.
For those taxpayers who plan to fight for the legal right for the set-off of CPT, we recommend to use the following algorithm of actions in practice:
- To make a reconciliation of the settlements of the taxpayer with the budget on CPT for the accounting period in order to get confirmation of the overpayment. According to the Instruction on the order of keeping the record of the payments by the state tax authorities2, the aforementioned reconciliation shall be confirmed by a respective act which is issued to the taxpayers in accordance with their written application.
- To submit the letter to the tax office with reference to Article 87 of the Tax Code of Ukraine stating that the advance payments of CPT will be done at the expense of overpayment of CPT, availability of which is confirmed in the reconciliation act on CPT. The said letter shall be submitted to the tax authorities not later than the deadline term of making the advance payments of CPT established by the Tax Code of Ukraine.
The aforementioned algorithm provides a certain degree of protection against the claims of the tax authorities in respect of the order of making the advance payments. We note that the said approach is lawful and fully corresponds to the provision of the tax legislation, and the dispute with the tax authorities is possible only due to their fiscal position.
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.
1 Generalized Tax Consultation approved by the order of the State Tax Service of Ukraine as of 21 December 2012 № 1171.
2Instruction on the order of keeping the record of the payments by the state tax authorities approved by Order of the State Tax Administration of Ukraine on July 18, 2005 № 276.