Analytics

Is the problem of tax losses of previous years decided? Part II

19 November, 2012 Newsletters

That is how the tax authorities fulfill the requirements of legislation as well as the given promises

According to the data of the Ministry of Economic Development and Trade of Ukraine, received from the State Tax Service of Ukraine (the Letter of October 31, 2012 No. 3911-04/40997-11) at the moment of August 01, 2012, 1401 cases related to tax losses carried forward from the 1^st quarter to the 2^nd at the total amount of $ 30 billion hryvnias are under consideration of the courts. Among them 251 cases have been decided in favor of the State Tax Authorities of Ukraine for the total amount of 7.8 billion hryvnias.

That is, notwithstanding the changes in legislation of July 2012, the existing court practice and the explanations of the Supreme Administrative Court of Ukraine, as well as the explanations of the State Tax Service of Ukraine, litigations on tax losses are going on.

Local tax authorities, acting as the representatives of the party to a lawsuit, continue to insist on “unlawfulness” of the position of the taxpayers in the course of the court proceedings and refuse to recognize claims on tax losses of previous periods. In this case those court cases are concerned, in which the question of the legality of formation of such tax losses was not raised, and which is based on different interpretation of the provisions of para. 3 of subsection 4 of section XX «Transitional Provisions” of the Tax Code by the parties of the case.

And that is taking into consideration the verbal assurances of the head of the State Tax Service of Ukraine A. Klymenko that (excerpt from the citation of 05.07.2012):

” … we will reach an amicable agreement. <...> The task is to stop the litigation“.

It seems that the task of the tax authorities is absolutely different, as evidenced by the statistics of the tax authorities. 7.8 billion hryvnias have been already “collected” to the state budget, despite of the groundless additional tax assessments under such disputes. Those taxpayers who were “lucky to burst” and to prove the legitimacy of their actions, need to overcome the deferred period with the right of recognition of 25% of the tax losses of previous period in each year (by 4 equal installments within 4 years).

That is how the State Tax Service Authorities of Ukraine solve problematic issues created by themselves … But the biggest surprise in this issue is the position of the judges, who dismiss the claims of the taxpayers in such disputes.

History of the issue, please see here.

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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