Yuliia Kryvomaz spoke at the online meeting of the Ukrainian Bar Association on VAT problems
On February 09, 2023, the UBA Committee held an event dedicated to the discussion of problematic issues related to a value added tax (VAT).
Senior Of Counsel of Yuliia Kryvomaz spoke at the meeting on the topic “Non-European VAT in Ukraine”, within which she considered in detail the problem of rejection of VAT payer tables and some changes in the terms of registration of VAT invoices, as well as in the amount of fines for their late registration.
In accordance with the law, a registered VAT invoice shall be a sufficient basis for referring the respective VAT amounts to the VAT credit. However, as of today, the issue of VAT (and it is not only about VAT refunds) is managed “manually”. As Yuliia notes, the right to a VAT credit still has to be “conquered”. In fact, additional requirements are established: submission of the taxpayer data table, explanations, primary documents.
Taxpayers are forced to be proactive and submit “piles” of additional documents, and when the VAT invoice is still being blocked, the whole process of collecting and submitting documents has to begin over again. This all became possible because the Resolution of the Cabinet of Ministers of Ukraine No. 1165 provides tax authorities with a significant level of discretion, which creates a field for misuse of power. Potentially, if the tax authority has a principled position not to take into account the Table of one or another taxpayer, by using the criterion “other reasons”, it may refuse to take into account the taxpayer’s Table for basically any reason, sending such a taxpayer for a new round of collection and submission of documents, blocking the VAT invoices.
In order to somehow break the vicious cycle, as to our opinion, the buyers should stop being afraid of blocking VAT invoices. It is proposed to include to the contracts the provision that part of the final payment for the cost of goods in the amount corresponding to the amount of VAT should become subject to be paid to the counterparty after registration of the VAT invoice in the Unified Register of Tax Invoices. Suppliers, for their part, should not recognize VAT liabilities on blocked VAT invoices with reference to the fact that the VAT invoice is drawn up at the moment of tax liabilities’ arising. If the tax authority denies the legality of registration of the VAT invoice, then thereby implicitly it denies also the arising of VAT liabilities for the supplier.
This practice does not exclude risks, but with a mass approach, it would gradually shift the burden of proof onto the shoulders of the tax authority. In the future, it is essential to try to introduce positive changes at the level of legislation by joint efforts.
Yuliia’s presentation is available by the link.
Cases on blocking/additional requirements for the registration of a VAT invoice in view of the nature of VAT as an indirect tax.
Can the buyer appeal the blocking of the registration of the invoice?
The Judgement of the Court of Justice of the EU regarding the national practice of tax authorities on refusal of the right to deduct VAT in the event of improper conduct on the part of the issuer of the invoice
Review of VAT changes in Draft Law 4184, or not only Google
What do the VAT statistics show?
“Backdating” VAT exemption: what to do?