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Quicker and Easier: What the CMU Changes in Appealing Tax Decisions


Galyna Melnyk, Tax Lawyer at Ilyashev & Partners Law Firm
Source: The Liga

Last week, the Ministry of Finance published a draft Law of Ukraine “On creation of competitive conditions in taxation and stimulation of economic activity in Ukraine”. What innovations are envisaged in appealing tax decisions and to what extent it will facilitate the opportunity of efficient protection of enterprises, explains Galyna Melnyk, lawyer at Ilyashev & Partners Law Firm.

The draft law introduces significant changes in the administrative appeal procedure, which can have both positive and negative consequences for taxpayers.

The draft law cancels the two-instance procedure for appealing tax assessment notices (initial and repeated complaints to the fiscal authorities). Instead, it is proposed to submit only one complaint directly to the State Fiscal Service of Ukraine (SFS). It is beneficial for taxpayers who dispute the tax assessment notices not related to the additional charge of tax and hope to quickly resolve the issue. However, reducing the time required for the complaint to go through the fiscal body is not beneficial to those who dispute additional charge of taxes and extend the term of inconsistency of monetary obligations on account of administrative appeal.

It is also proposed to establish the board of appeal for consideration of complaints for over 1,000 tax social benefits (about 1 million hryvnias – Ed.) in the SFS. As the Board will include a business representative, it is expected that this will simplify the overall relations between a fiscal body and a taxpayer.

As compared to the effective wording of the Tax Code, the draft law envisages clearer grounds for extending the term of considering the complaint. In particular, these include: decision of the SFS to request additional documents from the tax inspection that conducted the examination (the decision on extension should specify the list of documents and substantiate the need for their provision), and initiation of the alternative dispute resolution procedure by the payer.

The above procedure is another significant innovation offered by the draft law. It is inherently like a tax compromise. You can use it, if the amount of tax assessment notice exceeds 10 million hryvnias and subject to submission of the application no later than five working days after filing the complaint. In fact, alternative tax dispute resolution suggests that the taxpayer and the tax authority with the assistance of the Board of Appeal (in the form of non-binding recommendations) in writing agree on the final amount of monetary liability/budgetary compensation/negative value. After signing of the agreement, the taxpayer no longer has the right to appeal against the additional charges covered by the agreement, and the tax authority loses the right to check the facts noted in such agreement.

On the one hand, the procedure permits to save time and resources both for the taxpayer and the fiscal authority, but on the other hand, it can become an instrument of pressure on taxpayers.

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