Nataliia Kurilenko on additional Tax Liability Assessment

Nataliia Kurilenko on additional Tax Liability Assessment

“Yuridicheskaya Praktika” (Legal Practice) No. 7 (1103) of 12 February 2019. Commentary on the article “Nothing redundant. Taxpayers can protect their rights and prevent unnecessary costs through due documentation of economic transactions with purchasing contractors”

Nataliia KURILENKO, the Senior Counsel at Sokolovskyi and Partners JSC, Head of Tax Practice.

During tax audits, tax inspectors often use their own “know-how” to assess additional tax liabilities. One of the most common “know-how” is denial of actual goods delivery in a sales transaction. In such case, a very sophisticated approach is applied to the seller. According to fiscal inspectors, money received from the buyer (via a bank account) is not the payment for goods, but gratuitous financial aid. In turn, according to tax officers, the goods sold are delivered not to the buyer, but to an identified person (as the primary document is made without the actual shipment).

Tax consequences are the following: the seller has to recognize income not only from the goods delivery (to an unidentified person), but also income from the entire amount received from the buyer (VAT included). There are VAT liabilities, but the buyer is not qualified for a tax credit (the goods are delivered to an unidentified person), so the buyer forfeits the right to include the delivery amount to expenses (as the goods were sent not to him/her).

When proving his/her case before the court, one should involve witnesses of the transaction of both parts: not only those who signed the consignment note and the contract, but also freight handlers, storekeepers, drivers, forwarding agents.

The full article is available to subscribers of “Yuridicheskaya Praktika” through the link.

 

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