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LETTER OF STATE TAX ADMINISTRATION OF UKRAINE

of March 31, 2011 No. 6319/6/12-0216

The State Tax Administration of Ukraine considered the address concerning application of penal (financial) sanctions by tax authorities and within competence reports the following.

Regulation of the relations in the sphere of collection of taxes and charges, procedure for their administration, circle of subjects of tax legal relationship and responsibility for violation of the tax legislation belong to coverage of the Tax code of Ukraine (further - the Code).

According to article 6 of the Constitution of Ukraine bodies of legislative, executive and judicial authority perform the powers in the limits set by the Constitution and according to the laws of Ukraine.

Public authorities, their officials according to article 19 of the Constitution of Ukraine shall act only on the basis, within powers and method, provided by the Constitution and the laws of Ukraine.

By article 58 of the Constitution of Ukraine it is determined: "The laws and other regulatory legal acts have no retroactive effect in time, except cases when they mitigate or cancel responsibility of person.

Nobody can be responsible for acts which for the period of their making were not recognized the law as offense".

The essence of retroactive effect of regulatory legal acts in time consists that their legal obligation extends to the legal relationship which arose to the introduction of these regulatory legal acts in force.

Analysis results of provisions of Articles 8, of 58, of 92, of 152, of Item 1 of the Section XV "Transitional provisions" Constitutions of Ukraine demonstrate that only the laws of Ukraine on the taxation determine events and the facts which are violations, and responsibility for their making is established. Respectively and retroactive effect in time is implemented through the tax laws in cases when they cancel or mitigate responsibility of person.

Since 01.01.2011 powers, the bases and conduct of bodies of the State Tax Service and their officials, the right, obligation and responsibility of taxpayers are determined by the Code.

According to Item 113.3 of Article 113 of the Tax Code of Ukraine penal (financial) sanctions (penalties) for violation of regulations of the laws on the tax matters or other legislation, control of which observance is imposed on bodies of the State Tax Service, are applied according to the procedure and in the sizes established by the Code and other laws of Ukraine.

Application for violation of regulations of the laws on the tax matters or other legislation, control of which observance is imposed on bodies of the State Tax Service, penal (financial) sanctions (penalties) which are not provided by the Code and other laws of Ukraine is not allowed.

Therefore, tax authorities exercise control of observance of regulations of the laws on the tax matters existing till 01.01.2011, and penal (financial) sanctions (penalties) for violation of regulations of these laws are applied according to the procedure and in the sizes established by the Code and other laws of Ukraine existing at the time of application of sanctions.

Considering instructions of article 58 of the Constitution of Ukraine and the Solution of the Constitutional court of Ukraine of 09.02.99 N 1-rp/99, can draw conclusion that if event, the fact were determined as offense by the tax legislation existing till 01.01.2011 and the same event, the fact are determined in the new legal act as offense for which making legal responsibility is applied and this responsibility mitigates or cancels responsibility of person, then regulations of the new legal act are in that case applied.

If the event, the fact were not qualified as offense by the tax legislation existing till 01.01.2011, and in the new legal act the same event, the fact are determined as offense for which making use of legal responsibility is provided, then in that case legal responsibility is not applied.

If the tax legislation existing till 01.01.2011, event, the fact were determined as offense for which making legal responsibility was applied, and in the new legal act the same event, the fact are determined as offense for which making legal responsibility is also applied, the responsibility operating at the time of its application is in that case applied.

Considering brought, responsibility according to the procedure and the sizes provided by the Code will be applied to taxpayers by results of documentary checks for tax periods till 2011.

Concerning use of frequency of making of offense according to article 123 of the Code

So, Item 123.1 of article 123 of the Code provides that if the monitoring body independently determines the amounts of the tax liability, reduction of the amount of budget compensation and/or reduction of negative value of the taxation object the income tax or negative value of tax amount on value added of the taxpayer on the bases, certain subitems 54.3. 1, 54.3.2, 54.3.5, 54.3.6 of Item 54.3 of Article 54 of this Code, is involved by imposing on the taxpayer of penalty in the amount of 25 percent of the amount of the added tax liability which is illegally declared to return of the amount of budget compensation and/or illegally declared amount of negative value of the taxation object on profit or negative value of tax amount on value added.

In case of further violation within 1095 days the penalty in 50% is imposed, and in case of violation for third time within 1095 days in the amount of 75%.

In case of application of part two and third Item 123.1 of article 123 of the Code it is necessary to consider that frequency is applied only to those relations which took place during action of this regulation.

Thus, further violation for the purposes of understanding of this Article are charges of the tax liabilities which took place since January 1, 2011. Charge of the tax liabilities which were performed till January 1, 2011 are not considered in case of determination of frequency of offense.

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