Revocation of a tax assessment notice in the amount of 4,176,460 UAH

ESTER GUARDIANS secured the revocation of a tax assessment notice in the amount of 4,176,460 UAH and defended the taxpayer’s right to a tax credit

The team at the ESTER GUARDIANS Law Firm successfully defended the client’s interests in a complex tax dispute, securing a ruling that the tax assessment notice was unlawful and its revocation; in that notice, the tax authority had unjustifiably reduced the amount of the tax credit and imposed penalties on the company totaling 4,176,460 UAH

The dispute arose following the results of a comprehensive on-site documentary audit of the company, during which the tax authority concluded that the tax invoices on the basis of which the client had claimed the tax credit did not correspond to the source accounting documents.

These conclusions were based on errors made by the counterparty when preparing and registering the tax invoices. However, these invoices had been properly registered in the Unified Register of Tax Invoices, and the tax authority had not identified any violations or refused to accept them at the time of registration.

In effect, the tax authority attempted to impose the negative consequences of errors committed by another business entity—as well as the shortcomings of its own work during the tax administration process—on a taxpayer acting in good faith.

During the court proceedings, ESTER GUARDIANS’ attorneys argued that a taxpayer cannot be held liable for the actions or inactions of its counterparty or a regulatory authority if it acted in good faith and fulfilled all the conditions required by law for claiming a tax credit.

The team insisted that the proper and sufficient legal basis for including VAT amounts in the tax credit is the registration of the tax invoice in the Unified Register of Tax Invoices. Any errors made during its preparation or registration by other parties cannot automatically deprive the purchaser of the right to a tax credit if the purchaser was not involved in such violations and had no ability to influence their occurrence.

This case was particularly complex due to the ambiguous practice of the Supreme Court regarding the consequences of errors in registered tax invoices and the limits of liability for a taxpayer acting in good faith. Despite the existence of conflicting legal approaches, the ESTER GUARDIANS team succeeded in convincing the court of the validity of the client’s position and ensuring effective judicial protection of the client’s rights.

Following the proceedings, the court ruled that the tax assessment notice was unlawful and annulled it, thereby restoring the company’s infringed right to a tax credit and protecting it from unfounded additional tax assessments and penalties.