INFORMATION LETTER OF THE SUPREME ADMINISTRATIVE COURT OF UKRAINE

of October 10, 2013 No. 1386/12/13-13

For the purpose of ensuring identical application by administrative courts of regulations of the Tax code of Ukraine which regulate forming of expenses in tax accounting of the income tax for transactions of taxpayers for sales of goods, works, services to the connected persons the fourth trial chamber of the Supreme administrative court of Ukraine en banc considered case No. of 826/719/13-on the writ of appeal of Interregional head department Mindokhodov - the Central office on servicing of large taxpayers on the resolution of the Kiev Appeal administrative court of June 4, 2013 on case on the claim of society "National Joint Stock Company" Naftogaz of Ukraine" in the District State Tax Service - the Central office on servicing of large taxpayers of the State Tax Administration about cancellation of tax notifications decisions.

In the resolution of the Supreme administrative court of Ukraine of September 4, 2013 decided by results of consideration of the case No. of 826/719/13-(the copy of the resolution is attached), the legal line item of court of cassation instance is reflected in the corresponding category of disputes.

This line item is that according to regulation of subitem 153.2.6 of Item 153 of article 153 of the Tax Code of Ukraine in tax accounting for the income tax, the expenses incurred by the taxpayer in connection with sales of goods to the connected persons cannot exceed the income from such sale. At the same time the concept of the expenses incurred in connection with sales of goods of understanding of the specified regulation of the Tax code of Ukraine covers all expenses which are subject to accounting in tax accounting in connection with implementation of the corresponding transaction for sale (including cost of goods), and not just distribution costs which are provided by subitem 138.10.3 of Item 138.10 of article 138 of the Tax Code of Ukraine. These expenses in total cannot exceed the income of the taxpayer from sales of goods, works, services to the connected person. Excess of expenses (excess of their amount over income amount from sale) is not subject to reflection in tax accounting for the income tax.

This letter we suggest to inform judges of local and Appeal administrative courts for accounting when implementing justice, namely for the purpose of identical application of regulations of the Tax code of Ukraine by consideration of the corresponding category of disputes.

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