Snapshot: tax litigation in Ukraine

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Judiciary process

Competent courts

Which courts have jurisdiction to hear tax disputes?

Tax disputes, like any other dispute with the public authorities, fall within the jurisdiction of the administrative courts. The structure of the administrative jurisdictions comprises three instances:

  • administrative courts of first instance;
  • administrative courts of appeal; and
  • the Supreme Court (Administrative Court of Cassation).

File a claim

How can tax disputes be taken to court?

The ground for a claim in an administrative court is a violation of the rights of a taxpayer by a decision, actions or inaction of a tax authority.

To lodge a claim, the request must meet the formal criteria determined in the Code of Administrative Procedure (it must include, among others, explanations of the claimant regarding the claims (their grounds), the circumstances that confirm the claim and the relevant evidence) and court costs must be paid.

Individuals or companies, as well as the tax authorities, have standing to act in the event of a tax dispute.

The claim can be filed regardless of its amount, non-monetary disputes can also arise.

The most common option for taxpayers in tax disputes is a declaration of a tax authority’s decision, actions or inaction as illegal and, in some cases, the imposition of an additional duty to act or refrain from acting. In addition, a taxpayer can recover damages caused by this decision, action or inaction of the tax administration as well as legal costs.

Combination of claims

Can tax claims affecting several tax returns or several taxpayers be grouped together?

A tax claim may relate to an unlimited number of decisions of the tax administration addressed to the taxpayer, linked by their reasons or the evidence provided. In addition, there may be multiple defendants (eg tax authorities, other public authorities) in a tax dispute.

Theoretically, taxpayers can bring a joint claim. However, since individual acts are usually contested in tax disputes, such a possibility is very rarely used.

Advance payments

Must the taxpayer pay the amounts in dispute to the court before filing a complaint?

The taxpayer is not obliged to pay the disputed sums to assert his rights. The disputed tax debts are considered unsettled until the entry into force of the final judicial decision.

Cost recovery

To what extent can litigation costs be recovered?

If the taxpayer’s claim is satisfied in whole or in part, the costs of litigation incurred by a taxpayer (including court fees and costs for legal services) may be recovered from the state budget to the extent where the court deems it reasonable based on the respective evidence presented. by the taxpayer. The taxpayer can also file a motion to explain the reasonableness of the expenses.

In the event that a taxpayer loses a dispute, only the costs of the tax administration related to the intervention of witnesses and the conduct of an investigation can be reimbursed.

Third Party Funding

Are there any restrictions or rules on third-party financing or insuring the costs of tax litigation, including filing a tax claim in court?

There are no restrictions on third-party funding; a third party can pay court costs by specifying the case in which these court costs are paid.

Availability of Jury Trials

Who is the decision maker in court? Is a jury trial available to hear tax disputes?

At the court of first instance, a single judge hears the dispute. In the courts of appeal and the court of cassation (the Supreme Court), a decision is taken by a panel of three judges. In certain cases where the panel of judges of the Court of Cassation considers it necessary to deviate from the conclusion on the application of the law in similar legal relations, set out in previously adopted decisions of the Supreme Court, the dispute may be examined by a panel of more than three judges: by the tax chamber, the mixed chamber or the grand chamber of the Supreme Court.

Jury trial is not available for tax disputes.

Time limit

What are the typical timelines for tax hearings?

There are two procedures for reviewing tax disputes in court:

  • general procedure; and
  • simplified procedure.

Before the court of first instance, the general procedure lasts no more than 90 days; and for the simplified procedure, a decision must be taken before the expiry of a period of 60 days. The examination of appeals and cassation appeals is carried out within 60 days for each stage.

However, due to a significant overload of the administrative courts, all the stages of the examination of a case generally take a minimum of one year and sometimes even several years.

Disclosure requirements

What are the requirements regarding disclosure or the obligation to present information for trial?

Typically, along with a relevant statement on the merits of the claims, each party to a dispute will submit all evidence to the court or state the reasons why relevant evidence is not provided.

There is an evidence retrieval process, which can be used in cases where a party cannot present evidence. In these cases, a party can file a motion for the court to take evidence. The court may also request evidence on its own initiative.

The person in possession of the evidence is required to provide it upon a court order. If the person refuses to do so, enforcement action may be taken or the court may consider the case based on available evidence.

Authorized evidence

What evidence is allowed in tax hearings?

Permitted evidence includes witness statements, written evidence, physical evidence and electronic evidence, and expert conclusion. The taxpayer and others can testify about circumstances that are familiar to them and that are important to the case. The taxpayer can testify only in case of consent or on his own initiative.

Experts who have already participated in the examination of a case as witnesses cannot provide expert advice in the same dispute.

There is a general obligation to use the official language in legal proceedings. Thus, the evidence provided in court must be in the Ukrainian language. Translators may also be involved in reviewing evidence.

Representation authorized

Who can represent taxpayers in a tax lawsuit? Who represents the tax administration?

A taxpayer can participate personally in the procedure or be represented by a lawyer. The simple lawyer not registered with the Bar does not have the right to appear in court (there are only a few exclusions to this rule).

For legal entities and the tax administration, self-representation means representation by a director, a member of the executive body and any other person authorized to act on its behalf in accordance with the law, the charter, the decree or the employment contract.

Publicity of the debates

Are tax hearings public?

Tax trials are generally public, hearings and court decisions are public. Any person may be present at the court hearing and take photographs, videos or audio recordings of the hearing, subject to certain limitations which may be imposed by law in individual cases. The other party to the dispute may object to the publicity of the trial and the court may grant it if it considers it justified.

Burden of proof

Who bears the burden of proof in tax hearings?

The burden of proving the legality of decisions, actions or inaction lies with the defendant tax authority.

At the same time, the rules of procedure provide for the general principle of the adversarial nature of the parties to the proceedings. In this regard, according to the position of the Supreme Court, if the tax authorities have proven inaccuracies in the documents submitted by a taxpayer, the burden of proof concerning these arguments is transferred to the taxpayer. In practice, the burden of proof rests with the taxpayer and the tax authorities generally present the same information in the procedural documents as indicated in the tax audit law, without justification or explanation for why they have reached such conclusions.

Case management process

What is the case management process for a tax hearing?

The tax trial is headed by the president of the court, who rules on procedural matters (for example, appoints court hearings or decides whether the case will be heard in written proceedings). The parties may file motions concerning procedural matters and the judge decides on these motions by written decision or at a hearing before the court.

Call

Can a court decision be appealed? If so, on what basis?

A court decision may be appealed to a court of appeal for the following reasons:

  • incomplete clarification of the circumstances of the case;
  • the fact that the circumstances established by the court have not been proven;
  • erroneous conclusions of the court; and
  • misapplication of substantive law or violation of procedural law.

An appeal can be filed within 30 days of the announcement (receipt) of the court’s decision.

The Court of Appeal reviews the case based on the available evidence and additional evidence provided, and verifies the legality and validity of the trial court’s decision within the arguments and requirements of the appeal .

A Supreme Court is treated as “the court of justice”, which generally does not clarify the factual circumstances of the case. Consequently, an appeal in cassation can be examined on limited grounds; namely, whether previous judgments of the Supreme Court in similar legal relations have not been applied by the Court of Appeal; whether the plaintiff has provided sufficient justification to depart from the Supreme Court’s previous judgment; or if there is no Supreme Court judgment in similar legal relationships. A cassation appeal can also be filed due to incorrect application of substantive law or violations of procedural law in the closed list of situations.

The deadline for filing an appeal in cassation is 30 days after the announcement (obtaining) of the decision of the Court of Appeal.

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