Vladyslav Sokolovskyi is About Trends in the Tax Policy of Ukraine in 2013

Vladyslav Sokolovskyi is About Trends in the Tax Policy of Ukraine in 2013

Kommersant.ua. Comments on the articleMultiplication and pressure

…The managing partner of Sokolovskyi and Partners Law Firm, Vladyslav Sokolovskyi does not see particular positive trends in the tax policy of the country with respect to entrepreneurs as well. The number of tax checks, he says, during the whole year increased, despite the assurances given by the representatives of the Ministry of Revenue and Duties to the contrary. Virtually all checks ended with additional charge of tax liabilities and penalties. Administrative appeal was successful for taxpayers in rare cases and was inefficient way to protect their rights.

After entry into force of the new Criminal Procedure Code (CPC) the number of open criminal proceedings for violations in the tax area has increased dramatically. "Almost every act of checking to the amount of several million hryvnias ends in putting on of information about a criminal offense to a single register of prejudicial inquiries (SRPI), and then - down a trodden path: interrogations, searches, seizure of documents, the requirement to repay charged tax liabilities and penalties", - says Mr. Sokolovskyi. However, he notes the dramatic changes in the sphere of tax planning of structures with foreign participation, due to financial crisis in Cyprus and denunciation of agreements on avoidance of double taxation between the Republic of Cyprus and Ukraine. "The moment of entry into force of the new agreement and the termination of the old one is the subject of dispute among the experts. Therefore, it is necessary for the lawyers involved in international tax planning to propose new business schemes and help the clients to minimize the impact of the crisis", - notes Vladyslav Sokolovskyi.

    Vladyslav Sokolovskyi also considers the deliberate violation of the provisions of the Tax Code by the employees of the Ministry of Revenue and Duties as one of the main problems characteristic of this year. "Failure to register tax bills, illegal deprivation of the right to a refund of VAT in order to improve statistics, mass preparation of acts on the absence of the taxpayers at the place of registration, drawing-up of tax audit reports without taking action on them, followed by the use of such reports for tax liability charging to the counterparties of the taxpayer under inspection – this is only a small part of the arsenal of means to pump up the budget that is getting impoverished", - states Vladyslav Sokolovskyi.

   The experts nowadays break a lot of lances, discussing how the tax control over transfer pricing will be carried out, whether it is viable to apply the procedure of prices approval at controlled transactions, what methods should be used to determine the range of market prices for goods, works and services, how to reflect controlled transactions in the tax account in a proper way. Given the recent trends in the work of the tax authorities employees, the business, according to X, primarily needs to fear the application of penalties provided for in the paragraph 120.3. of the Tax Code. This may be a penalty in the amount of 5 % of the total amount of controlled transactions in the event of failure to report such transactions or a fine in the amount of 100 minimum wages (in the case of failure to provide the documentation specified in subparagraph 39.4.8 of the Tax Code). "The thing is that in order to charge this type of penalty you do not need skilled employees who have a significant amount of knowledge and there is no need to spend a lot of time on checks. These penalties will be applied by the structural units of the Ministry of Revenue and Duties both for actual violations from the part of taxpayers and for imaginary as well," - warns Mr. Sokolovskyi.

      This practice of reports review on administrative violations is assessed by the lawyers as negative, because it is not always possible to challenge the decision of the district court.  Vladyslav Sokolovskyi also shares the opinion that the work of "tax" attorneys was largely influenced by the new CPC. According to him, at the moment the need to coordinate actions of the lawyers who will appeal notices and decisions in the courts, and the lawyers providing legal assistance to senior managers of companies within the frame of criminal proceedings essentially increased. "Coordinated actions make it possible to obtain a positive result both within the frame of "criminal" part of the process of defense and in the plane of reducing financial penalties charged by state financial control" - summarizes Vladyslav Sokolovskyi.