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CASE. HOW TO CANCEL THE LIMITATION OF VAT LIMITS?

 On 01.08.2019 a legal assistance agreement was concluded between the Law Office of Prikhodko and Partners and a client. The client sought legal assistance by blocking the operation of the enterprise by arresting the VAT limit.

Timeline of events

 On March 13, 2019, at the request of the prosecutor, an investigating judge of the Dniprovsky District Court of Kyiv issued a decision to arrest the property.

 The said order seized property by prohibiting the alienation, disposal and use of property, namely the assets – the amount of VAT limit in the electronic VAT administration system in the State Fiscal Service of Ukraine, our client’s enterprise, by blocking the tax amounts in the electronic VAT administration system ( hereinafter referred to as the SEA VAT) (VAT limit) to which an enterprise is entitled to register tax invoices and / or adjustment calculations in the Unified Register of Tax Invoices.

 Our lawyers have filed a motion to cancel the arrest

 Arguments of appeal

 Under the provisions of Article 131 of the CPC of Ukraine, the measure of securing criminal proceedings is the seizure of property, which according to Art. 190 of the Civil Code of Ukraine the amount of VAT in the SEA VAT is not included, because it does not possess the relevant features. Thus, the amount of the VAT registration limit is simply a record in the electronic VAT administration system, has a purely administrative and legal nature and exists only within the administrative relationship between the taxpayer and the GFS.

 Guided by Art. 316 of the Civil Code of Ukraine, ownership is the right of a person to a thing (property), which he performs in accordance with the law of his own will, regardless of the will of others.

 According to Art. 200-1.1. PC of Ukraine (hereinafter referred to as PC of Ukraine): “the system of electronic administration of value added tax provides automatic accounting of VAT in the context of taxpayers”. That is, the electronic VAT administration system is a DFS database that analyzes and performs automatic VAT accounting for each enterprise. Indicators (VAT limit amounts) are, in their essence, accounting for VAT payer’s business operations in an electronic system, which is carried out in accordance with the requirements of the PC of Ukraine.

 Therefore, an enterprise does not have ownership of the VAT limit because, by its very nature, the limit is an indicator of a business transaction that is not cash or electronic money.

 These figures in the database are not the object of the material world, they can not be considered property of the enterprise, money or electronic money, and therefore are not the subject of property rights, which can be restricted by seizure in accordance with Art. 170 of the CPC of Ukraine.

 Pursuant to paragraph 2 of Section II of the Final Provisions of the Law of Ukraine “On Amendments to the Tax Code of Ukraine on Improving the Administration of Value Added Tax” N 643-19 dated 16.07.2012 it is established that the accounts in the electronic administration system of value added tax are not the Law of Ukraine “On Enforcement Proceedings” applies, in particular, the funds held in such accounts cannot be seized or charged.

 According to Part 1 of Art. 98 of the CPC of Ukraine, material evidence is tangible objects that have been the tools of a criminal offense, have retained its traces or contain other information that can be used as evidence of a fact or circumstance established in criminal proceedings, including objects who have been the subject of criminal acts, money, valuables and other things that have been criminally acquired or received by a legal entity as a result of a criminal offense. Therefore, the VAT limit cannot be material evidence, according to the provisions of Art. 98 of the CPC of Ukraine, it is impossible to confiscate, alienate it, and seek repayment of a civil claim, and therefore the arrest was unjustified, unjustified and in violation of the provisions of Part 10 of Art. 170 of the CPC of Ukraine and it is subject to cancellation.

Conclusion

 August 21, 2019 An investigating judge of the Dniprovskyi District Court of Kyiv issued a decision granting the request in full.

 On September 9, 2019, we received a confirmation letter from the State Tax Service of Ukraine on the full implementation of the decision by removing the arrest from the VAT limit.

 Therefore, it can be concluded that the tax authorities use the procedure for imposing arrests on the VAT limits to block the work of fraudulent taxpayers, sometimes the decision to impose arrest also falls to the real business, since you never know exactly how responsible your contractor is.

 Our company effectively protects the business from blocking the work of enterprises by unprofessional actions of tax authorities.

Author: Anatoliy Perepelchenko

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