• Iryna Kalnytska

    Attorney-at-Law, Partner, GOLAW



19B Instytutska Street, Office 29,

Kyiv, 01021, Ukraine,

Tel.: +380 44 581 1220/1221

Fax: +380 44 581 1222

E-mail: info@golaw.ua

Web-site: www.golaw.ua


GOLAW is an international full-service law firm with the offices in Kyiv (Ukraine) and Berlin (Germany). The firm has been recognized by several prestigious international and Ukrainian rankings, such as The Legal 500, Chambers & Partners, IFLR 1000, Best Lawyers, Who is Who Legal, Legal Awards, etc., and continuously ranked among the TOP 10 Leading Law Firms of Ukraine.

GOLAW provides sophisticated legal advice and reliable legal assistance in all major sectors, including agribusiness, retail and FMCG, healthcare and pharmaceuticals, financial services, renewable energy, transportation and infrastructure, IT and real estate. The client portfolio of the firm includes large and medium-sized, national and foreign companies, banks and financial institutions, as well as private investors doing business in Ukraine or entering local and/or foreign markets. Among them — TIU Canada, Inditex Group (Zara, Pull & Bear, Massimo Dutti, Oysho, Bershka, Stradivarius), Fiba Retail (Marks & Spencer, GAP), ProCredit Bank, Expobank CZ a.s., Oriflame, Red Bull, Reckitt Benckiser, Syngenta, Export Guarantee and Insurance Corporation (EGAP), Azelis, Galicia Distillery, Enkom a.s., KBPP Management Ltd., Georgian International Energy Corporation (GIEC), Mercator Medical, Ubisoft, etc.

GOLAW practice areas are: Banking and Finance; Litigation and Dispute Resolution; Corporate Law and M&A; Criminal Law and White-Collar Defence; Tax; Insolvency and Corporate Recovery; Restructuring, Claims and Recoveries; Real Estate; Employment; Government Relations (GR); Anti-Corruption and Anti-Bribery; Antitrust and Competition; International Trade; Compliance, Corporate Governance and Risk Management; Intellectual Property; Environmental Protection; Maritime Law.

GOLAW is a member of the leading Ukrainian and international legal associations (International Bar Association (IBA), Rechtsanwaltskammer Berlin (Berlin Bar Association), Ukrainian National Bar Association (UNBA), etc) and business associations (American Chamber of Commerce (ACC), European Business Association (EBA), Ukrainian Network of Integrity and Compliance (UNIC), German-Ukrainian Chamber of Industry and Commerce (AHK), International Turkish Ukrainian Business Association (TUID), European-Ukrainian Energy Agency (EUEA)).


How to Optimize Time and Money on Appealing Tax Notices-Decisions in Ukraine

Given the fact that Ukrainian tax legislation frequently changes and the business sector experiences a number of challenges while adapting to “a game under new tax rules”, the issue of appealing against tax notices-decisions of tax authorities (hereinafter the plural referred to as “TNDs” and in the singular as “TND”) continues to be topical. In this article we will single out several merits and demerits of TNDs’ appealing procedures, prescribed by Ukrainian tax legislation, in the light of minimization of the time and expenses of taxpayers, which are required for such procedures.

TND is a decision of a tax authority that obliges a taxpayer to pay a certain sum of certain tax, calculated by the tax authority, or modify tax reporting. TNDs are usually issued as the result of tax audits of taxpayers. It is unfortunate that TNDs are sometimes issued in the absence of reasonable grounds for this, which results in their illegality. That’s why the Tax Code of Ukraine (hereinafter — the TCU) grants taxpayers the right to appeal against TNDs within an administrative procedure and/or to court.

It is worth clarifying that the administrative procedure is out-of-court and involves the filing of complaints by taxpayers to the higher tax authority of Ukraine against TNDs, issued by lower tax authorities.

Taxpayers quite often omit the administrative procedure of appealing TNDs and, upon their receipt, appeal them to a court. For sure, this approach conforms to Ukrainian legislation and may take place. But, from our point of view, more relevant for taxpayers in the majority of cases is appealing TNDs within administrative procedure and only in the event of its negative result appealing them to court and that is why.

Firstly, administrative procedure flows in a short time-frame and may take from 1 to 3 months. This depends on a number of factors, particularly as to whether or not the higher tax authority will extend the consideration term of a taxpayer’s complaint. In this vein the TCU establishes that a taxpayer’s complaint shall be considered and the decision issued and sent to a taxpayer by the higher tax authority of Ukraine within 20 calendar days following the day of receipt of the complaint. At the same time, the TCU grants the foregoing governmental body with the right to extend the consideration term but not more than for 60 calendar days.

Secondly, the administrative procedure of appealing against TNDs does not require any payments to the Ukrainian state budget to be held. Yet, it will require payments for legal aid in the event of involvement of attorneys to handle it.

Thirdly, as follows from practice, taxpayers do have very strong chances of cancelling TNDs just within administrative procedure, so that the need to refer to a court in order to cancel them will never even arise. This is possible only if taxpayers effectively exercise a wide range of rights and mechanisms granted them within the administrative procedure by Ukrainian tax legislation. Of course, together with a well-built legal position envisaged in their complaint against TNDs. Unfortunately, not all taxpayers are aware of the above-mentioned rights and mechanisms and those who are do not always exercise them.

For example, taxpayers may review the materials of tax audits and administrative appeal. This way they can get acquainted with documents taken into consideration by the tax authorities when issuing TNDs, and this will enable taxpayers to better understand the position of tax authorities and present solid counter-arguments to it.

Furthermore, taxpayers may personally attend sessions of the highest tax authority of Ukraine devoted to consideration of their complaints against TNDs, give oral explanations regarding the subject matter of complaints and carry out technical recording of such sessions. Taxpayers may ask the foregoing government body to involve to aforementioned sessions the representatives of the lower tax authority that issued TNDs under appeal and to involve representatives of mass media outlets in such sessions with a view to attract attention to the appeal. All of this entails deeper consideration of complaints against TNDs.

Ukrainian tax legislation grants taxpayers one more very important right, the right to ask for support from the Business Ombudsmen Council to cancel TNDs within an administrative appeal.

The last point should be clarified. The Business Ombudsmen Council is a permanent advisory body of the Ukrainian government established with assistance from international partners of Ukraine and the Ukrainian business community. It is important to note that the Business Ombudsman Council is not authorized to cancel TNDs, but it may contribute to their cancellation before a judicial appeal. Taxpayers can turn to the Business Ombudsman Council to get its support in administrative appeal of TNDs by filing claimants against the tax authorities that issued them with an explanation as to why such TNDs shall be deemed illegal. If the Business Ombudsman Council finds such claimants reasonable, it will support a taxpayer throughout an administrative appeal, particularly by sending to the higher tax authority of Ukraine legal positions on protecting the respective taxpayer, attending sessions of such government body devoted to the complaint against the TNDs by such taxpayer.

As practice shows, the Business Ombudsman Council’s support for taxpayers results in more thorough consideration by the highest tax authority of Ukraine of complaints against TNDs. Besides, the Business Ombudsman Council’s written positions on illegality of TNDs are always taken into consideration by courts if the respective TNDs are appealed in court after their unsuccessful appeal in an administrative procedure.

Fourthly, administrative procedure of appealing against TNDs has one more very important “bonus” for taxpayers in those cases where the fact that TNDs will not be cancelled within an administrative procedure is obvious: it provides taxpayers with time to get ready for a court appeal against TNDs. This means that while an administrative procedure continues, a taxpayer can improve his/her legal position on the illegality of TNDs and properly prepare all documents evidencing this fact for presentation to a court.

Therefore, all the points listed above appear to make an administrative procedure very attractive for taxpayers.

Without prejudice to the above, taxpayers should take into account that sometimes an administrative appeal against TNDs may be irrelevant and appealing TNDs to court will be preferential. To make a conclusion on relevance or irrelevance, a high-quality analysis of the factual and documental background of TNDs’ issue must be carried out.

It should be also noted that in January 2020 the Ukrainian legislative body adopted the Draft Law No.1210 On Amendments to the TCU on Improvement of Tax Administration, Elimination of Technical and Logical Inconsistencies in the Tax Legislation (hereinafter – “Draft Law No 1210”) aimed at introduction of fundamental changes to the TCU.

Inter alia, such changes may influence the administrative procedure of appealing TNDs. As follows from the initial versions of Draft Law No.1210, it provided for establishment of one more institutional body for administrative appeal of TNDs — the Appeal council for consideration of taxpayers’ complaints (hereinafter – the Appeal council). It was planned that such body would be authorized to consider taxpayers’ complaints against certain categories of TNDs after their unsuccessful appealing to the higher tax authority of Ukraine, and such consideration would be free of charge and short-term — within 15 business days following the day of receipt by the Appeal council of taxpayers’ complaint with the possibility to extend this term for 30 business days.

Thus, the Appeal council was planned as one more stage of administrative appeal that would provide taxpayers with a possibility to challenge TNDs before going to court and to save time and minimize expenses in the event of a positive

However, Draft Law No.1210 has not entered into force yet: it is waiting to be signed by the President of Ukraine and its final official publication. As there is no official text yet, it is not clear whether the idea of creation of the Appeal council was included in the final version of Draft Law No.1210 or not.

As to appealing TNDs in court, this procedure may, unfortunately, last for years due to the heavy caseloads of courts. Besides, filing a plaint requires payment of a court fee to the Ukrainian state budget. It may also require payment of case-related expenses that include, inter alia, expenses on legal aid in the event of involvement of attorneys to handle the respective tax court case.

Thus, appealing against TNDs to a court generally appears to be less advantageous for taxpayers.

However, within the court procedure of appealing TNDs taxpayers are granted the right to receive compensation for their payments of the aforementioned court fee and case-related expenses. They may be compensated to a taxpayer in full if his/her plaint regarding TNDs is fully satisfied by a court. In the event of partial satisfaction of a plaint, a taxpayer may receive compensation in part, proportional to the sum of satisfied claims. Finally, if a taxpayer’s plaint against TNDs is not satisfied by a court, no compensation will be provided.

A few words about compensation of expenses on legal aid. In order to obtain it, the sum of these expenses must be declared by the taxpayer within his/her court case against TNDs in accordance with procedural rules, be properly justified and confirmed by a number of documents. Courts always evaluate declared for compensation expenses on legal aid, and in the result of such evaluation may decide on compensation in full, in part or refuse in it even in the event of full satisfaction of a plaint against TNDs.

In our practice we always recommend taxpayers to exercise their right to compensation of expenses on legal aid, asking the court for full compensation of them. Especially taking into consideration the abundance of court decisions providing it. For instance, in court case No.815/3146/18 the court decided to fully compensate the taxpayer’s expenses for legal aid in the amount of USD 4,000. Another example is court case No.640/7703/19, where a court also decided to compensate the taxpayer the entire sum of expenses on legal aid, which came to USD 8,000.

To conclude, we would like to mention that success in appealing against TNDs, whether in administrative or judicial procedures, always depends on proper preparation of one’s legal position and evidence to prove the illegality of TNDs. Therefore, we recommend enlisting skilled tax consultants to the appeal process.