Analytics

In light of the recent court practice regarding sham transactions: what evidence should be collected?

authors: Alexander Shemiatkin, Tetiana Poberezhska

05 July, 2023 Exclusive

The analysis of the recent court practice in disputes regarding sham transactions, in which tax authorities used as evidence the verdict against the director of the counterparty accused in sham business (Article 205 of the Criminal Code of Ukraine), shows that the cassation court pays great attention to the additional evidence, which indirectly proves the reality of the business operation.

For example, the court examines the circumstances of establishing connections and cooperation between the taxpayer and the counterparty, whether the taxpayer has been prudent while choosing a certain counterparty, whether there is evidence from third parties proving the reality of the business operation etc.

Recently many court cases were sent by the cassation court for the reconsideration to the court of first instance as the above-mentioned circumstances weren’t determined by the courts during the initial consideration.

This additional evidence is not something the taxpayer is obliged to have or make according to the law, however, to win the case and cancel tax surcharges the cassation court’s position should be taken into consideration.

In the article KM Partners shares its experience regarding the evidence in disputes on sham transactions.

The full version of the article is available in Ukrainian by the link.

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