Alexander Minin about tax challenges here and now

September 26, 2016

The V Tax Forum arranged by Ukrainian Bar Association was held 2016 at the Hotel Radisson BLU (Kyiv) on Friday on the September 23. The event was supported by KM Partners.

Alexander Minin, the senior partner, participated in the first session of the Forum where during the panel discussion on «What do all around talk about: recent changes and new laws in taxation» the tax reform (draft law of the Ministry of Finance) and other current changes and expected new laws in tax legislation were discussed.
Alexander advanced his opinion that «we don`t need changes for changes` sake». Besides he underlined the necessity to adhere to the principle of stability, first if all by the Verkhovna Rada to be the model for other governmental bodies.


Mr. Minin raised the changes suggested in the Draft Law #5132, registered at the suggestion of the Cabinet of Ministers of Ukraine on September 15, 2016. In particular suggested changes regarding VAT refund paid when purchasing the agricultural products. The suggested wording of para. 47 of the Transitional Provisions restricts the right on refund irrespective of the vendor, which means refund on purchasing the agricultural products not only from the agricultural producers on special regime of VAT according to Art. 209 of the Tax Code of Ukraine. It is planned to introduce such a restriction from January 1, 2017 regardless of whether the amounts were before declared for refund (nowadays the law allows this). The corruption risk is being created – arises the motivation to arrange the issues with tax authorities etc. for obtaining refund before January 1, 2017, because “it will be too late then». It is suggested to restrict VAT refund on the agricultural products which was not actually obtained. Nobody knows how it can be determined by the existing reports. Though, probably all VAT refund on the agricultural product can remain unsettled until the tax audits. Let`s again remember the notorious issue on «void agreements» when the tax authorities claims that business operations were not actually performed. Would not the introduction of mentioned norm trigger the new wave of «void agreements» from the tax bodies? Since this wording gives grounds to refuse in refund according to the suggested norm. By the way, this Draft Law suggests to renovate the audits on VAT.

To make a conclusion, on the one hand – the Ministry of Finance concept on VAT regarding the restriction to question the tax credit confirmed by tax invoice registered if the register. And on the other hand – this Draft Law that doesn`t correspond to this concept.
Also it was mentioned about the necessity of clear record of practice to avoid the affect on taxpayers. Thus, suggestions of the Ministry of Finance provide the liquidation of conclusions of tax authorities as precondition to VAT refund. But due to the position of the Supreme Court of Ukraine subject of the claim on VAT refund is the requirement for giving the conclusions. Therefore, in case if the ongoing disputes are resolved positively, considering that the disputable amounts are substantial, how it is possible to implement the court decision, because the tax office is obliged to give the conclusion, but the conclusion itself cannot exist according to the law.

By and large this situation does not quite fit the frames of the strict compliance with the law from the part both the Verkhovna Rada and the tax office. Furthermore, it is referred to the system flaws. For instance, payment of the military fee that according to the Tax Code of Ukraine belong neither to state, nor to local taxes, its tax base is not provided by the Tax Code of Ukraine. That`s why according to the Tax Code of Ukraine it is not to be paid. Nevertheless, it is required for some reason.Normal condition of the tax area can be provided only when all the participants of this process are equally comply with the set rules, and this requirement is not set only for taxpayers.
Finally as the issue for discussion, Mr. Alexander suggested to propose the resolution of tax dispute for consideration of jury trial meaning the taxpayers on their own who every day faces with such problems, even not for consideration of tax experts. This suggestion caused a lively discussion among the members and speakers who were presented at the event.