On March 28, 2015 the Law of Ukraine \u201cOn Ensuring the Right for Fair Trial\u201d, that, in particular, amended the Code of Administrative Legal Proceedings of Ukraine in the part of the authorities of the Supreme Court of Ukraine (hereinafter \u201cthe Supreme Court\u201d), came into force.<\/p>\n
The primary amendment is the possibility to apply directly to the Supreme Court. According to the previous version of the Code the Higher Administrative Court of Ukraine (hereinafter \u201cthe Higher Court\u201d) decided on case referral to the Supreme Court and that was the cause of certain conflict between the mentioned judicial bodies.<\/p>\n
This leads to considerable increase of the number of applications submitted to the Supreme Court regarding review of judicial decisions and correspondingly of the number of rulings delivered by it. But the analysis of these rulings makes obvious the beginning of unfavorable tendency according to which the Supreme Court \u201cbreaks down\u201d the established and, what is important, entirely justified practice of the Higher Court in number of points of principle.<\/p>\n
First of all such situation appears in result of inconsistency of practice of the Higher Court which applies the same legal norms regarding similar cases in different ways without any grounds for that. Moreover, it seems that in such a way the Supreme Court shows to the Higher Court whose word is decisive in administrative proceedings and tries to draw a line under this issue. We would like to remind that the legal opinion of the Supreme Court is mandatory for lower instances and for all subjects who use legal norm,\u00a0<\/span>analyzed by it, in their activity. That is why the Higher Court is starting to change its practice according to the position of the Supreme Court.<\/p>\n However, the position taken by the Supreme Court in the discussed cases, as opposed to the position of the Higher Court, is obviously not in favor of the taxpayers and at least disregards the principle of lawfulness of the taxpayer\u2019s decision.<\/p>\n Here below there are a number of the most interesting rulings of the Supreme Court starting from March 28, 2015 which arouse doubts whether they are in compliance with the legal norms as well as others which shall be considered while deciding analogous cases by the courts of Ukraine and applying respective legal norms.<\/p>\n I. RULINGS OF THE SUPREME COURT OF UKRAINE WHICH AROUSE DOUBTS REGARDING THEIR COMPLIANCE WITH THE NORM OF LAW<\/strong><\/p>\n 1. On VAT credit declaring based on temporary customs declaration<\/strong><\/p>\n For a long time the Higher Court has been forming unambiguous position regarding the fact that the temporary customs declaration gives the right to credit the input VAT. The Higher Court stated that the Tax Code of Ukraine (hereinafter \u2013 \u201cthe Tax Code\u201d) does not distinguish the type of customs declaration giving the right to credit VAT and clearly defines the moment of such right arising \u2013 the moment of payment (accrual) of the tax under the tax liabilities.<\/p>\n At the suggestion of the tax body which managed to find the decision of the Higher Court with opposite application of the norm of law (what is not a problem as it was stated there) the Supreme Court revised the practice formed by the Higher Court. Thus, in its Decision as of June 23, 2015<\/span><\/span><\/span><\/a><\/span> the Court comes to the following conclusions:<\/p>\n \u201c \u2026 temporary or incomplete declaration is not a final document, and its submission is not a moment of declaring completion, it only envisages the simplified procedure of goods release for free circulation. Such simplification imposes on customs applicant a liability to submit customs declaration in regular order within 30 days from the day of goods release for free circulation and in such a way the completion of declaring procedure shall be provided. Acceptance of such declaration by the customs bodies is considered as a moment of completion of customs clearance legal relations.<\/p>\n The abovementioned gives grounds to conclude that after the submission of temporary customs declaration it is possible to change information indicated in it, in particular, information on the cost of goods imported to the customs territory which is the basis of VAT taxation. Final information on such goods will be indicated in the customs declaration filed in regular order. Therefore, in case of goods release for free circulation under simplified order after submission of the temporary customs declaration by the taxpayer the amount of paid VAT shall be deducted on the basis of the tax declaration filed in regular order, then submitted by the taxpayer and accepted by the customs body, which contains the required volume of information and confirms completion of declaring of goods imported to the customs territory (upon condition of compliance with other requirements for VAT crediting)\u201d.<\/p>\n Such interpretation of legal norms by the Supreme Court raises a set of questions seeing that the temporary customs declaration: 1) is a customs declaration, 2) confirms the payment of VAT to the budget, and therefore corresponds to the requirements established in the Tax Code.<\/p>\n Adoption of such decision by the Supreme Court at least contradicts the principles of legal certainty and of legitimacy of the taxpayers\u2019 decisions, creating the basis for new wave of tax bodies activity regarding taxpayers, who have credited the input VAT on the basis of the temporary customs declaration proceeding from legislative regulations and from already formed practice of the Higher Court.<\/p>\n 2. On the amount of land lease payment<\/strong><\/p>\n Quite a number of the Supreme Court resolutions adopted since March 28, 2015 are devoted to the issue of revising the established amount of land lease payment after the Tax Code of Ukraine came into force. And after all, these resolutions contain conclusions which contradict not only the well-established practice of the Higher Court but the practice of the Supreme Court itself.<\/p>\n Thus, since before the adoption of the Tax Code (the period when the Law of Ukraine \u201cOn Land Payment\u201d was effective) both the Supreme Court and the Higher Court stated that the land lease agreement is a civil agreement and therefore it has such criteria as freedom of contract, its binding character for the parties etc. The state body, which is not a party of the agreement, is not entitled to carry out its authoritative functions by intrusion into the relations of the parties of the agreement. Hence the change of the amount of land tax shall not entail automatic change of the lease payment and, correspondingly, additional charge of tax liability amount on lease payment by tax bodies (see, for example, the Regulation of the Higher Court as of June 11, 2013<\/span><\/span><\/span><\/a><\/span>).<\/p>\n The Higher Court has legally taken the analogous position even after the Law of Ukraine \u201cOn Land Payment\u201d had lost its effect, seeing that normative regulation of this issue did not change.<\/p>\n However the Supreme Court in all its resolutions regarding legal relations under discussion after the adoption of the Tax Code formulated the following legal position:<\/p>\n \u201cThe legislator by subpara. 288.5.1. of para. 288.5 of Article 288 of the mentioned Code [the Tax Code of Ukraine] \u2026 defined the lower threshold limit of annual payment amount for land lease irrespective of whether this amount coincides with that specified in the agreement.<\/p>\n \u2026<\/p>\n Considering the abovementioned, the judicial panel of the Litigation Chamber on administrative cases of the Supreme Court of Ukraine arrived at a decision that as far as the Tax Code has come into force the annual amount of payment for land lease under the state and municipal ownership which is the subject to transfer to the budget shall comply with the requirements of subpara. 288.5.1 of para. 288.5 of Article of this Code and is the basis for reconsideration of the amount of lease payment.<\/p>\n Herewith, proceeding from the principle of priority of the Tax Code norms over the norms of other acts in case of their contradiction, which is established by para. 5.2 of Article 5 of the Tax Code, by the moment of amending of such agreement the amount of land lease payment shall be not less than the amount established by the subpara. 288.5.1 para. 288.5 Article of the Tax Code\u201d (see the Decisions of the Supreme Court as of July 14, 2015<\/span><\/a><\/span>, April 7, 2015<\/span><\/a><\/span>, April 14, 2015<\/span><\/a><\/span>, April 21, 2015<\/span><\/a><\/span>).<\/p>\n Such change of the position by the Supreme Court was not substantiated. The Court outlines the priority of the Tax Code norms over the norms of other acts. Para. 5.2 of the Tax Code actually establishes that provisions of the Tax Code have a priority in regulation of relations in tax area.\u00a0However, the lease payment amount is determined by leasing agreement, therefore this issue shall be regulated, first of all, by civil legislation and legislation regarding land lease. In particular, regardless of the Tax Code coming into force the provisions of Article 629, part 3 of Article 653 of the Civil Code are still in force and stipulate that agreement is a subject for mandatory execution by the parties, namely in case of amending the agreement, liabilities are to be changed from the moment of achieving engagement by the parties if other is not stipulated by the agreement or its amendments. The provisions of Articles 21, 30 of the Law of Ukraine \u201cOn Land Lease\u201d also define that change of terms and conditions of the agreement shall be carried out by mutual consent of the parties. The Supreme Court does not give grounds for its conclusion that the norms of the Tax Code have a priority in contractual relations over the norms of the Civil Code and special Law \u201cOn Land Lease\u201d.<\/p>\n Delivery by the Supreme Court of negative decisions for taxpayers regarding topical issues causes lowering of trust level of citizens and businesses to the judicial authority, deprive legal certainty and leave much to be hoped that both the Higher Court and the Supreme Court will act only within the framework of tasks and principles of administrative proceeding following all the requirements of the legality and reasonable substantiation of court decisions.<\/p>\n \u0406\u0406. THE DECISION OF THE SUPREME COURT OF UKRAINE THAT WILL EFFECT THE FORMATION OF COURT PRACTICE AND APPLICATION OF LAW<\/strong><\/p>\n 1. Regarding imposition of penalty for the late transfer of agreed tax liability to the budget.<\/strong><\/p>\n The Supreme Court in Regulation as of June 16, 2015<\/span><\/span><\/span><\/a><\/span> according to Article 126 of the Tax Code has settled issues as regards legitimacy of imposition of fine for the delay in transfer of agreed tax liabilities to the budget, which occurred due to the mistake, made by the taxpayer upon filling in the payment order (in this case \u2013 the taxpayer indicated another account of the State Treasury Service).<\/p>\n The Court has decided that in such situation imposition of penalty on the taxpayer is illegal due to several reasons:<\/p>\n \u201cJudicial panel of Litigation Chamber on Administrative Cases of the Supreme Court of Ukraine considers that the mistake, made upon transfer of agreed sum of tax liability to the budget in term envisaged by para. 57.1 of Article 57 of the Tax Code shall be classified as an action, although mistaken. Thus, actions which have no evidence of omission on the part of the taxpayer upon payment of agreed sum of tax liability cannot be deemed as a ground to imply the fine envisaged by para.126.1 of Article 126 of the Tax Code.<\/p>\n Besides, to the opinion of judicial panel, in order to prove the fact of failure to pay agreed sum of tax liability, it is necessary to define that in term, envisaged by para. 57.1 Article 57 of the Tax Code, the taxpayer had taken no actions to transfer the agreed sum of tax liability to the budget. And since such sums are being set off on single treasury account, then improper determination of budget classification code in payment order upon payment of agreed sum of tax liability cannot be deemed as sufficient legal ground to conclude the failure to pay required sum of tax liability in term, defined by the abovementioned norm, and, consequently, to apply fine under para. 126.1 of Article 126 of the Tax Code\u201d.<\/p>\n 2. Regarding the possibility to perform unprofitable transactions by enterprises<\/strong><\/p>\n The Supreme Court has examined the situation upon which the right of the taxpayer for VAT credit was disputed due to realization of manufactured goods by the price lower than the net cost. Tax body was considering that under such circumstances a part of tax credit, formed by the taxpayer, was used in not taxable transactions and has to be reduced.<\/p>\n The Court has emphasized that the taxpayer in the course of his\/ her activity could have unprofitable transactions since economic activity is being performed on the taxpayer\u2019s own risk.<\/p>\n However, the Court has pointed out that \u201c\u2026such transactions can be classified as economic in case the taxpayer provides justification of economic reasons or business aim (taking into account risks of economic activity) for execution of agreements by the price lower than the net cost\u201d (Regulation of the Supreme Court as of June 9, 2015<\/span><\/span><\/span><\/a><\/span>).<\/p>\n The abovementioned regulation can be applied in disputes with tax authorities, who still correct indexes of the taxpayers\u2019 accounting in case they make certain unprofitable transactions; however, such regulation prescribes to ensure the preparation of proper evidential base in order to justify such transactions.<\/p>\n 3. Regarding the beginning of the time-limit for payment of individually agreed sum of tax liability<\/strong><\/p>\n By this decision the Supreme Court has supported its position, formed in Decision as of June 26, 2014 as regards the enterprise whose interests were represented by law firm WTS Consulting (see this publication by the link).<\/p>\n In this situation the taxpayer, according to the tax body, has missed the last day of tax liability payment, defined in tax declaration. Thus, the taxpayer proceeded from the fact that time-limit for submitting tax declaration had been on non-working day, and, therefore, this had delayed the beginning of the time-limit for payment of agreed tax liability.<\/p>\n The Supreme Court in Regulation as of June 9, 2015<\/span><\/span><\/span><\/a><\/span> has reconfirmed legitimacy of the taxpayer position:<\/p>\n \u201c\u2026 para. 49.20 of Article 49 of the Tax Code clearly defines that in case the last day of time-limit for submitting tax declaration is on non-working day or holiday, then operational (banking) day, which follows non-working day or holiday, shall be considered as the last day of time-limit.<\/p>\n The notion \u201cpostpones\u201d is absent in the abovementioned paragraph of Article 49 of the Tax Code, instead the term \u201cis considered\u201d is used, excluding any ambiguous interpretations.<\/p>\n \u2026<\/p>\n Pursuant to the abovementioned, Judicial panel of Litigation Chamber on Administrative Cases of the Supreme Court of Ukraine has concluded that in case the last day of time-limit for submitting tax declaration, envisaged by subpara. 49.18.1 of para. 49.18 of Article 49 of the Tax Code, is on non-working day or holiday, then time-limit for submitting such declaration shall be the first working day that follows. Thus, the beginning of defined by para. 57.1 Article 57 of the Tax Code five-day term for payment of tax liability, stated in declaration, is connected exactly with such working day\u201d.<\/p>\n 4. Regarding the occurrence of liability of land tax payment<\/strong><\/p>\n The Supreme Court has viewed the situation in which individual received the right of ownership of real estate, however had not registered the right on the land under such real estate. Accordingly, this individual did not consider himself obliged to pay the land tax.<\/p>\n The Court has supported the position of the tax body in this matter and has pointed the following:<\/p>\n \u201cIn the case under consideration the courts have established that the plaintiff is the owner of nondomestic premises for land area under which the State Tax Inspection had charged the land tax by disputed tax notification-decision. Herewith, according to Articles 182, 334 of the Civil Code and provisions of Law No. 1952-IV the right of ownership of real estate occurs from the moment of state registration.<\/p>\n Under such circumstances, to the opinion of Judicial panel of Litigation Chamber on Administrative Cases of the Supreme Court of Ukraine, notwithstanding that the plaintiff did not register the ownership or right of use of the land under his beneficially owned nondomestic premises, since provisions of the Tax Code take precedence over any other provisions of other acts in case they contradict, that is defined in para. 5.2 of Article 5 of the Tax Code, INDIVIDUAL_10 became obliged to pay the land tax from the date of state registration of right of ownership of real estate\u201d (Regulation of the Supreme Court as of\u00a0July 7, 2015<\/span><\/a><\/span>)<\/a><\/span><\/span>.<\/p>\n 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.<\/strong><\/em><\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" <\/p>\n August 17, 2015<\/em><\/span><\/p>\n <\/p>\n On March 28, 2015 the Law of Ukraine \u201cOn Ensuring the Right for Fair Trial\u201d, that, in particular, amended the Code of Administrative Legal Proceedings of Ukraine in the part of the authorities of the Supreme Court of Ukraine (hereinafter \u201cthe Supreme Court\u201d), came into force.<\/p>\n The primary amendment is the possibility to apply directly to the Supreme Court. According to the previous version of the Code the Higher Administrative Court of Ukraine (hereinafter \u201cthe Higher Court\u201d) decided on case referral to the Supreme Court and that was the cause of certain conflict between the mentioned judicial bodies.<\/p>\n This leads to considerable increase of the number of applications submitted to the Supreme Court regarding review of judicial decisions and correspondingly of the number of rulings delivered by it. But the analysis of these rulings makes obvious the beginning of unfavorable tendency according to which the Supreme Court \u201cbreaks down\u201d the established and, what is important, entirely justified practice of the Higher Court in number of points of principle.<\/p>\n First of all such situation appears in result of inconsistency of practice of the Higher Court which applies the same legal norms regarding similar cases in different ways without any grounds for that. Moreover, it seems that in such a way the Supreme Court shows to the Higher Court whose word is decisive in administrative proceedings and tries to draw a line under this issue. We would like to remind that the legal opinion of the Supreme Court is mandatory for lower instances and for all subjects who use legal norm, <\/span>analyzed by it, in their activity. That is why the Higher Court is starting to change its practice according to the position of the Supreme Court.<\/p>\n However, the position taken by the Supreme Court in the discussed cases, as opposed to the position of the Higher Court, is obviously not in favor of the taxpayers and at least disregards the principle of lawfulness of the taxpayer\u2019s decision.<\/p>\n Here below there are a number of the most interesting rulings of the Supreme Court starting from March 28, 2015 which arouse doubts whether they are in compliance with the legal norms as well as others which shall be considered while deciding analogous cases by the courts of Ukraine and applying respective legal norms.<\/p>\n <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[83],"class_list":["post-734","post","type-post","status-publish","format-standard","hentry","category-court-practice","tag-other"],"_links":{"self":[{"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/posts\/734"}],"collection":[{"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/comments?post=734"}],"version-history":[{"count":4,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/posts\/734\/revisions"}],"predecessor-version":[{"id":19002,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/posts\/734\/revisions\/19002"}],"wp:attachment":[{"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/media?parent=734"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/categories?post=734"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kmp.ua\/en\/wp-json\/wp\/v2\/tags?post=734"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Review of the court practice of the Supreme Court of Ukraine in the cases regarding taxation issues during the effect of the Law of Ukraine \u201cOn Ensuring the Right for Fair Trial\u201d<\/h4>\n