Judicial Practice in Tax Invoices Registration Refusal Cases

The Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Peculiarities of Tax Administration of Taxes, Fees and Single Contribution during Martial Law” No. 2260-IX, which entered into force on May 27, 2022, restored the obligation of taxpayers to register tax invoices. Therefore, the problem of illegal refusal of tax authorities to register tax invoices and appealing against such actions is relevant again. We have analyzed the most interesting acts of the judiciary on this issue, which may be useful to entrepreneurs.

1. The controlling body must provide a list of specific documents sufficient for the decision on the registration of the tax invoice – the decision of the Supreme Court of August 04, 2021 in the case No. 0840/4088/18

Description of the case: the company filed a lawsuit to declare illegal and cancel the decision of the tax authority to refuse to register the tax invoice. The payer provided explanations, including accounting documents confirming the reality of the business transaction, but the controlling body refused to register the disputed tax invoice.

Foundings of the Supreme Court:

– general requirements for the act of individual action as an act of law enforcement are its validity and motivation, i.e. indication by the controlling body of specific grounds for its adoption (factual and legal), as well as convincing and understandable reasons for its adoption;

– monitoring the compliance of tax invoices/adjustment calculations with the criteria for assessing the degree of risk is a preventive measure aimed at preventing unreasonable tax credit for transactions that are not confirmed by primary documents or confirmed by copies of documents drawn up in violation of the law, which were confirmed by the payer;

– monitoring should not replace the content of tax audits as a way to implement the power management functions of the controlling body;

– thus, if the decision of the controlling body does not contain, and/or the relevant controlling body does not clearly indicate which risk criterion of the taxpayer was met by such taxpayer, and does not specify the documents that the taxpayer did not submit to the controlling body to confirm the reality of business transactions, such decision of the controlling body is not made in accordance with the requirements of the current tax legislation.

2. The tax authority must specify a specific point of the normative act, which is the basis for the decision to suspend the registration of the tax invoice – the decision of the Supreme Court of February 02, 2021 in the case No. 805/3956/18-a

Decription of the case: the taxpayer received receipts on the termination of registration of tax invoices. The taxpayer submitted written explanations and copies of documents confirming the reality of tax invoice transactions. However, based on the review of written explanations and copies of documents submitted by the taxpayer, the tax authority decided to refuse to register the tax invoice in the Unified Register of Tax Invoices (URTI).

Foundings of the Supreme Court:

– in the receipts for registration of disputed tax invoices, the tax authority did not specify which risk degree criteria were met by those tax invoices, which documents were drawn up in violation of the law and which documents were not enough to decide on registration of tax invoice. Instead, the taxpayer provided the tax authority with primary documents to confirm the reality of business transactions;

– the possibility of providing the taxpayer with an exhaustive list of documents to confirm the legality of the formation and submission of the tax invoice directly depends on the clear definition of the tax authority of a particular type of the risk degree criterion. The general reference by the tax authority  to paragraph 6 of the Risk Evaluation Criteria, without referring to the relevant sub-paragraph, is vague and unjustifiably restricts the taxpayer’s right to be notified of the need to provide exhaustive documents, according to the criterion of the termination of registration, not at the authority’s own discretion (Criteria for Assessing the Degree of Risk Sufficient to Terminate the Registration of the Tax Invoice/Adjustments Calculation in the URTI, approved by the Order of the Ministry of Finance of June 13, 2017 No. 567, which were in force at the time of the consideration of the case);

– conclusively, failure of the tax authority to comply with the statutory requirements for the content, form, validity and motivation of the act of an individual action leads to its illegality.

3. Submission of a single payment order in support of different tax invoices does not indicate the unreality of transactions – the decision of the Supreme Court of July 02, 2019 No. 140/2160/18

Description of the case: the company appealed to the court to declare illegal and cancel the decision of the tax authority to refuse to register the tax invoice and to oblige the tax authority to register the tax invoice in the Unified Register of Tax Invoices. One of the arguments of the tax authority in favor of its decision was the submission of the taxpayer of the same payment orders for different tax invoices.

Foundings of the Supreme Court:

– with regard to the defendant’s arguments about the taxpayer’s issuance of the same payment orders in support of different tax invoices, the court of appeal noted that the written explanations and copies of documents submitted to the plaintiff’s supervisory body confirm the plaintiff’s business transactions with the counterparty. They did not contain signs of violation of the requirements of the legislation on their drafting and were sufficient for the regional commission to decide on the registration of the tax invoice in the URTI. The business transactions, based on which the tax invoice was drawn up, were carried out by the plaintiff within the limits of their economic activity, were factual and confirmed by primary documents. At the same time, the controlling body did not take into account the specifics of the plaintiff’s activities and the written explanations of the taxpayer;

– as such, the submission by the taxpayer of the same payment orders in support of different tax invoices can not indicate the unreality of business transactions on these tax invoices, since the amounts of money in such payment orders include the total amount of the counterparty’s funds paid to the plaintiff.

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