Chronicles and faces

On February 6, 2024, an online event of the UBA Committee on Tax and Customs Law was held. The following issues were discussed:

• top 10 rulings of the Supreme Court in tax disputes for 2023;
• court practice in tax cases in 2024;
• practice of the Supreme Court regarding the right to appeal against orders on the appointment of tax audits and effects of their application by courts of first instance.

At the event, Senior of Counsel of and member of the Council of the UBA Committee Yuliia Kryvomaz focused on the Resolution as of September 8, 2021, in which the Supreme Court outlined a position on the right to appeal against orders on the appointment of tax audits. The decision is not new, however, we would expect that, following the recent resumption of tax audits, in practice, such a position will acquire special relevance, considering the practical application of this position by courts of first instance.

According to the text of the Resolution in case No. 816/228/17, the plaintiff appealed against the order on the appointment of an on-site audit, which had already been implemented at the time of the submission of the claim (the tax audit had been carried out and according to its results an audit act had been drawn up). In the Resolution, the Grand Chamber of the Supreme Court derives its conclusions precisely from the fact of admission of the tax authority to conduct an on-site tax audit.

But in addition, the Grand Chamber of the Supreme Court expresses an opinion quite harmful to judicial practice that “such a dispute is not subject to consideration under the rules of administrative procedure”.

As a result, the courts of first instance  without going into details about the factual circumstances of the case refer to the decision of the Supreme Court and note that ALL orders on the appointment of the tax audit cannot be appealed, regardless which type of audit is assigned: on-site or off-site, whether the order has already been implemented: whether the tax authority has been authorized to conduct the audit, or in principle whether the taxpayer can exercise the right to protection of his rights by non-admission (especially relevant for off-site audits), whether the taxpayer filed a lawsuit for the annulment of the order before the starting of the audit.

Does this mean the taxpayer cannot defend his rights at the stage of illegally appointment of audits and prevent further violation of his rights?

Is that not a violation of the Constitution of Ukraine?

If the taxpayer at the stage of appointment of the illegal audit cannot ensure the restoration of his already violated rights and protection of his rights against further violations by the tax authority through the appeal of the relevant order on the appointment of the audit, in such a scenario, the taxpayer is compelled to undergo a knowingly illegal audit, initiate legal disputes to appeal the results of these illegal audits, which are more costly for taxpayers and, consequently, in case the claims are satisfied, it becomes more resource-intensive for both the state and the parties involved in the dispute, as well as for the court itself.

An effective defense in the present case should be recognition of the order on the appointment of audit as unlawful and its cancellation. The refusal to initiate proceedings and, as a result, the impossibility of judicial revocation of the order on the appointment of audit violates the principle of the rule of law and contradicts the Constitution of Ukraine, which guarantees everyone the right to appeal to the court for protection, legitimizes the illegal behavior of the tax authority,  in fact forcing taxpayers into actions not prescribed by law (undergoing a knowingly illegal audit).

Yuliia’s presentation is available by the link.

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