On May 5, 2020, the managing partner of the law firm “WinnerLex,” Anna Vinnichenko, organized by the “Consulting Business Academy,” conducted a webinar on the topic: “Tax Risks in Contractual Agreements.”
Checking contracts from the perspective of tax risks is a crucial component of a company’s effective operations. It is not uncommon for business entities to only verify their counterparts before starting cooperation by obtaining information about the registration of a legal entity, mistakenly believing that the data from the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations is an indicator of the “good faith” of the business. Although Ukrainian legislation does not require the verification of counterparts, judicial practice has established the principle of “tax prudence,” according to which a taxpayer must be reasonable and cautious when choosing a counterpart, meaning they should conduct a thorough check of the counterpart.
Quite often, “superficial” contractual work leads to significant negative consequences in the form of tax disputes, bringing company executives to criminal liability, and significant financial losses for the company. For example, during a documentary planned or unplanned tax audit of a taxpayer’s relations with its counterpart, such operations may be deemed unreal if deficiencies are found in the primary documents. However, courts do not always consider such errors in the primary documents if other documents clearly show that the operations were carried out.
During the webinar, the latest changes in current tax legislation and judicial practice were discussed in detail on the following topics:
- Tax risks of specific types of contracts: supply, services, lease, commission;
- Tax risks of providing financial assistance;
- Minimization of definitions regarding the unrealness/lack of goods in certain business operations;
- Proper tax prudence of a counterpart;
- Doctrinal approach as a presumption of taxpayer guilt;
- Proving the reality of business operations in tax disputes;
- Risks of blocking tax invoices;
- Determining the list of necessary documents to be submitted to the tax authority for the registration of blocked tax invoices;
- Latest judicial practices regarding the suspension of tax invoice registration and removal of VAT payer riskiness;
- Innovations in financial monitoring in the context of tax risks.
Additionally, at the numerous requests of the webinar participants, the issue of preventing tax authorities from conducting a tax audit was raised, specifically:
- Supporting the prevention of a tax audit;
- Evaluating the legality of the audit order;
- Ensuring the inadmissibility of administrative seizure of assets;
- Justifying the legality of the taxpayer’s actions before tax inspectors during the refusal to allow an audit.
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