Higher Administrative Court interprets rule on applying financial sanctions for violations committed in Q2 – Q4 2011

On 4 May 2012, the Higher Administrative Court of Ukraine in its letter No.1197/12/13-12 clarified the application of item 6 of Subsection 10 of Section XX of the Tax Code of Ukraine.

Item 6 states that financial sanctions shall not apply to corporate profit tax payers and tax payers that have transferred to the general taxation system for tax law violations resulting from activities in Q2 – Q4 2011.

The clarification states that corporate profit tax payers are released from liability only for tax violations they committed in their capacity as corporate profit tax payers, i.e. only for violations of the rules for levying the corporate profit tax. Liability for violating the rules for other taxes will arise on the usual basis.

Entities that became the corporate profit tax payers in 2011 and formerly used the simplified taxation system are released from liability for violating all tax rules, not only those pertaining to levying corporate profit tax.

Those tax payers that transferred to the general taxation system after the Tax Code of Ukraine took force on 1 January 2011 will be released from sanctions. The transfer must have been made in the form of a purposeful expression of the tax payer’s will by a method envisaged by the law, e.g. the filing of an application by the single tax payer or that tax payer’s non-receipt of the single tax payer certificate for the next calendar year.

If the tax payer loses the right to use the simplified taxation system (because, for example, the tax payer exceeds the established proceeds threshold level), item 6 of Subsection 10 of Section XX of the Tax Code will not apply.

Contacts
Vladimir Kotenko
+380 (44) 490-3006
Vladimir.Kotenko@ua.ey.com