Appeals against decisions refusing to register tax invoices: current case law

Since 2017, a further category of disputes has been added to the list of disputes between taxpayers and the state tax authorities: disputes concerning the annulment of decisions refusing to register tax invoices and compelling the registration of tax invoices. Year on year, the number of such disputes, in the author’s view, is not decreasing but, on the contrary, is on the rise, since the suspension of tax invoice registration is, on the one hand, an effective tool for exerting pressure on businesses with the aim of obtaining an unlawful advantage and, on the other hand, the legislation does not provide for any sanctions against tax authorities for making even a knowingly unlawful decision to refuse registration of a tax invoice. Consequently, judicial protection in this category of disputes remains, in effect, the only effective—albeit rather slow—means of restoring taxpayers’ infringed rights. When defending a taxpayer in this category of cases, a lawyer would be well advised to take into account the following legal conclusions of the Supreme Court.

Time limit for bringing proceedings

The time limit for bringing a claim before the court seeking a declaration that a decision to refuse registration of a tax invoice in the Unified Register of Tax Invoices is unlawful and for the annulment of that decision, together with a consequential claim requiring its registration where the taxpayer has not utilised the administrative appeal procedure for such decisions as a pre-litigation means of dispute resolution, is determined by Part 1 of Article 122 of the Code of Administrative Procedure of Ukraine and amounts to six months from the date on which the person became aware, or ought to have become aware, of the infringement of their rights, freedoms or interests (Supreme Court ruling of 2 July 2020 in Case No. 1.380.2019.006119). If, however, the taxpayer has utilised the pre-litigation dispute resolution procedure (i.e. the administrative appeal procedure), then in such a case the decision to refuse registration of the tax invoice may be challenged in court within a three-month period from the date on which the taxpayer was served with the decision following the consideration of their complaint (Supreme Court ruling of 11 October 2019 in case No. 640/20468/18).

Requirements for the procedure by which the supervisory authority reaches a decision

The Supreme Court has established a perfectly reasonable legal conclusion regarding this category of cases, according to which public authorities, when adopting decisions which, in particular, restrict the rights of a taxpayer, must avoid excessive formalism. The scope of documents to be provided by value-added tax payers in order to dispel any doubts on the part of the tax authorities regarding the legality of the relevant transaction, as a result of which a tax invoice was drawn up and submitted for registration in the Unified Register of Tax Invoices, although specified in Order No. 520, is always unique and depends on the organisation of commercial relations between business entities, the content of contractual relations between them, and the specific features of the legislative regulation of activities in a particular business sector. It is precisely on the basis of a detailed examination of the content of the documents (in particular the contract), submitted to substantiate the information specified in the tax invoice, that it is possible to draw conclusions regarding the feasibility or otherwise of registering the tax invoice in the Unified Register of Tax Invoices, the registration of which was suspended in accordance with the relevant receipt.

It should be noted that when deciding on the registration of a tax invoice, the supervisory authority is not required to carry out a full analysis of the claimant’s business transactions to verify their authenticity. A substantive assessment of business transactions may only be carried out following a tax audit of the taxpayer, the grounds for and procedure for which are set out in the Tax Code of Ukraine. The subject of consideration in this case is exclusively the correctness and lawfulness of the suspension and refusal to register the tax invoice, and not the reality or commercial nature of the business transactions between the claimant and its counterparty. Such legal conclusions are set out, in particular, in the rulings of the Supreme Court dated: 19 July 2023 in case No. 420/7850/22, 7 December 2022 in case No. 500/2237/20, and 16 September 2022 in case No. 380/7736/21.

Read the full article on the ‘Yurydychna Gazeta’ website: here.