LETTER OF THE SUPREME ADMINISTRATIVE COURT OF UKRAINE

of November 1, 2011 No. 1936/11/13-11

On January 1, 2011 the Tax code of Ukraine (Item 1 of the Section XIX "Final provisions" of the mentioned Code) became effective.

For the purpose of identical application of separate instructions of the Tax code of Ukraine by administrative courts and the Code of administrative legal proceedings of Ukraine the Supreme administrative court of Ukraine pays attention to it.

According to Item 44.1 of article 44 of the Tax Code of Ukraine for the purposes of the taxation taxpayers shall record the income, expenses and other indicators connected with determination of the taxation objects and/or tax liabilities based on source documents, bookkeeping registers, the financial reporting, other documents connected with calculation and tax payment and charges which conducting is stipulated by the legislation.

Forming of indicators of tax statements, customs declarations based on the data which are not supported by the documents which are determined by paragraph one of this Item is forbidden to taxpayers.

In the letter of the Supreme administrative court of Ukraine of June 2, 2011 of roanalizirovana No. 742/11/13-11 the relevant legislative arrangements the fact that for confirmation of data of tax accounting only those source documents which are constituted in case of the actual implementation of economic activity, that is authentic source documents can be taken into account is also noted. Also in the letter the approximate list of circumstances which can specify lack of the corresponding economic activity is determined.

For clarification of circumstances of reality of making of economic activity courts should check carefully the arguments of tax authorities about the actual non-realization of economic activity stated in inspection statements or confirmed with other proofs.

According to part two of article 71 of the Code of administrative legal proceedings of Ukraine administrative cases about illegality of decisions, actions or divergence of the subject of powers of authority the obligation concerning proof of legitimacy of the decision, action or divergence is assigned to the defendant if he objects to the administrative claim.

Proceeding from content of the given regulation, the obligation is assigned to tax authorities to provide sufficient evidences on reasons for conclusions about violation by the taxpayer of regulations of the tax legislation based on which to such payer the corresponding monetary commitments are determined.

At the same time courts should consider the principle of official clarification of the facts of the case provided by parts four and the fifth article 11 of the Code of administrative legal proceedings of Ukraine in case of the decision of the corresponding disputes. According to the specified regulation the court takes the measures necessary for clarification of all circumstances for case provided by the law, including concerning identification and reclamation of proofs on own initiative. The court shall offer persons who are taking part in case, to submit proofs or on own initiative to summon proofs which, according to court, are not enough.

For acceptance of proper measures for the purpose of establishment of circumstances of reality of implementation of disputable economic activity courts shall summon at tax authority or the taxpayer those proofs which are not provided by participants of case, but who, according to court, can confirm or confute arguments of tax authority concerning availability of violations from the taxpayer. The corresponding actions can be made by court based on Item of 1 part two of Article 110, of article 114 of the Code of administrative legal proceedings of Ukraine.

In case of not receipt of the summoned corroborating evidences in time, established by court, the dispute can be solved based on available in proofs.

If the claimant without valid excuse evades from provision of the proofs upon the demand of court and which are available in materials there is not enough for confutation of the conclusions of monitoring body confirmed with competent evidences which are been the basis for the controversial decision made by it can be refused to the taxpayer the claim.

If the proofs summoned by court in confirmation of legitimacy of the appealed decision (actions or divergence) are not provided by otvetchikomnalogovy body, the court is not deprived of the right to specify the violations of procedural requirements allowed by such tax authority by the resolution of separate determination according to the procedure of article 166 of the Code of administrative legal proceedings of Ukraine.

If collected in proofs will be enough for confirmation of arguments of tax authority concerning lack of the actual implementation of economic activity, concerning illegality of the monetary commitments determined to it it is necessary to refuse the corresponding claim of the taxpayer. At the same time absence or insufficiency of the corresponding proofs taking into account contents of subitem 4.1.4 of Item 4.1 of article 4 of the Tax Code of Ukraine presumption of legitimacy of decisions of the taxpayer if the provision of the law or other regulatory legal act published based on the law or if regulations of the different laws or different regulatory legal acts allow ambiguous (multiple) interpretation of the rights and obligations of taxpayers) is the basis for conclusion about illegality of the appealed decision of monitoring body.

The documents and other data confuting reality of implementation of economic activity which is displayed in tax accounting shall be estimated taking into account specifics of each economic activity - conditions of transportation, storage of goods, content of services which are provided and so forth.

At the same time by itself availability or lack of separate documents, and also mistakes in their registration are not the basis for conclusions about lack of economic activity if from other data it is seen that the actual movement of assets or change in equity or obligations of the taxpayer in connection with its economic activity took place. At the same time availability formally constituted, but doubtful source documents which compliance to the actual circumstances is confuted by competent evidences is not unconditional confirmation of reality of economic activity.

Appeal Courts in case of the solution of question of adoption of proofs which were not researched by Trial Court should consider instructions of part two of article 195 of the Code of administrative legal proceedings of Ukraine. According to the given regulation, the Appeal Court can research proofs which were not researched in Trial Court, on own initiative or according to the petition of persons who are taking part in case if recognizes reasonable failure to provide them in Trial Court or unreasonable variation their Trial Court.

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