.jpg)
The taxpayer has the right to be reimbursed as part of the damage caused by illegal decisions, actions or inaction of the controlling bodies, their officials (officials), the costs of legal support not related to the protection provided by a lawyer, in particular within the scope of the procedure of administrative appeal of a tax notice- decision. At the same time, the amount of such expenses related to an administrative appeal, in which a corresponding decision is made to recognize decisions, actions or inaction as illegal, should not exceed 50 amounts of the minimum wage established on January 1 of the calendar year.
When determining the amount of compensation for the costs of legal assistance provided by a lawyer, within the limit of the amount provided for compensation, in each specific case the reality of such costs (establishing their validity and necessity), as well as the reasonableness of the amount of costs and their proportionality, is also important and subject to investigation and proportionality to the tax offense of the controlling authority.
On November 16, 2021, the Grand Chamber of the Supreme Court considered the cassation appeal of Goodwelly Ukraine Limited Liability Company (hereinafter Goodwelly Ukraine LLC, the Company, the plaintiff) against the decision of the Northern Commercial Court of Appeal dated April 1, 2021 in the case of Goodwelly LLC Ukraine" to the Western Interregional Department of the State Tax Service for Work with Large Taxpayers (hereinafter referred to as the Western Interregional Department of the State Tax Service), the Main Department of the State Treasury Service of Ukraine in Kyiv (hereinafter referred to as the State Treasury Department in Kyiv) for the recovery of UAH 806,366.42, and adopted a resolution stating the following.
CIRCUMSTANCES OF THE CASE
On March 7, 2018, the Office of Large Taxpayers of the State Tax Service of Ukraine, whose legal successor is the Western Interregional Administration of the State Tax Service, issued a PPR with respect to LLC "Goodwelly Ukraine" on the additional assessment of VAT in the amount of UAH 79,359,369.78 and fines of UAH 39,679,684.89.
On March 17, 2018, the Company (the customer) concluded with the lawyer (the executor) the contract for the provision of legal services No. 1/18 (hereinafter referred to as the Contract).
On the basis of this Agreement, the lawyer analyzed the evidence, prepared documents for appealing the PPR and represented the company in the State Fiscal Service of Ukraine and, in particular, in accordance with the terms of the Agreement, prepared a complaint about the PPR.
Based on the results of consideration of the complaint of "Goodwelly Ukraine" LLC dated March 26, 2018, the State Fiscal Service of Ukraine adopted a decision dated May 25, 2018, according to which it canceled the PPR in the part of surcharges for the sale of goods and material values to unidentified persons and in the corresponding part of the applied fines in in the amount of UAH 80,636,642.00
As a result of the services provided regarding the preparation of an administrative complaint for the administrative appeal of the PPR, the representation of the customer in the State Fiscal Service of Ukraine, Goodwell Ukraine LLC and the lawyer drew up the act of rendered services dated June 19, 2018 in the amount of UAH 806,366.42, which was paid the plaintiff
The plaintiff believed that the costs of legal services provided in connection with the appeal in the administrative procedure of the PPR are the losses of the enterprise caused by the illegal decision of the state authority, which was canceled as a result of the administrative appeal procedure, and therefore are subject to reimbursement from the state budget .
ASSESSMENT OF THE COURT
The rights of the taxpayer are regulated by Article 17 of the Code of Ukraine, sub-clause 17.1.7 of clause 17.1 of which provides the right to appeal, in accordance with the procedure established by this Code, decisions, actions (inaction) of controlling bodies (officials), and sub-clause 17.1.11 of the same clause provides the right to full compensation for damage caused by illegal actions (inaction) of control bodies (their officials), in accordance with the procedure established by law.
The provisions of the Criminal Code of Ukraine correspond to the conditions and grounds for the liability of officials and state authorities for the damage caused by articles 1173, 1174 of the Civil Code of Ukraine.
Damage caused to a taxpayer as a result of a tax offense by a controlling body shall be compensated by a court decision (Clause 114.4 of Article 114 of the Criminal Code of Ukraine).
Analyzing the provisions of Clauses 114.1, 114.2 of Article 114 and Clause 128.2 of Article 128 of the Criminal Procedure Code of Ukraine, it can be concluded that the limitation of damages subject to recovery to the amount of one minimum wage as of the date of recognition of decisions, actions or inaction as illegal applies to those cases when the payer of taxes voluntarily exercised the right provided for by the second paragraph of Clause 114.2 of Article 114 of the Code of Ukraine.
However, if the taxpayer did not use this right (did not make a corresponding claim), then under the same circumstances specified in clause 128.2 of Article 128 of the Criminal Code of Ukraine, he can claim full compensation for damages (more than the amount of one minimum wage) by proving at the same time, all the necessary components of a civil offense: the illegality of state actions, the fact of violation of rights or legal interests, the presence of damage, as well as the cause-and-effect relationship between damage and illegal actions.
According to Clause 114.3 of Article 114 of the Criminal Code of Ukraine, damage caused by illegal decisions, actions or inaction of control bodies, their officials (officials), may include, in particular, documented costs related to administrative and/or court appeals (except for amounts that subject to compensation in the order of distribution of court costs in accordance with procedural legislation) illegal (illegal) decisions, actions or inaction of control bodies, their officials (officials) (legal support not related to the protection provided by a lawyer, business trips of employees or representatives of the taxpayer , attracting experts, obtaining the necessary evidence, making copies of documents, etc.). The amount of such compensation should not exceed 50 times the minimum wage established on January 1 of the calendar year in which the relevant court decision or decision of another body is adopted, in cases provided for by law.
Going into the interpretation of the concept of "legal support that is not related to the defense of a lawyer", it should be noted that the provisions of subsection 114.3.3 of paragraph 114.3 of Article 114 of the Criminal Code of Ukraine prohibiting the inclusion of costs for legal support related to the defense of a lawyer in the composition of damages does not apply to such types of legal assistance as drafting statements, complaints, procedural and other legal documents within the scope of the administrative appeal procedure, as well as representation of the interests of legal entities in state bodies.
In a disputed case, the costs of legal support are the costs of restoring the property status and conditions of activity of the managed entity, which is broader than the definition of losses as costs for the restoration of one's violated right in the context of the definition of losses contained in Article 22 of the Civil Code of Ukraine, and the legal limitation of the size of such costs, the responsibility for compensation of which the state assumed before the payer, also does not contradict the general principle of full compensation of damage according to the rules of articles 1173, 1174 of the Civil Code of Ukraine, articles 17 and 21 of the Criminal Code of Ukraine.
Therefore, the taxpayer has the right to compensate, as part of the damage caused by illegal decisions, actions or inactions of controlling bodies, their officials (officials), the costs of legal support that are not related to the protection provided by a lawyer, at the same time, the amount of such costs , related to the appeal, should not exceed 50 amounts of the minimum wage established on January 1 of the calendar year in which the relevant decision is made to recognize decisions, actions or inaction as illegal.
When determining the amount of compensation for the costs of legal assistance provided by a lawyer, within the limit of the amount provided for compensation, in each specific case the reality of such costs (establishing their validity and necessity), as well as the reasonableness of the amount of costs and their proportionality, is also important and subject to investigation and proportionality to the tax offense of the controlling authority.
The plaintiff referred to the prescriptions of articles 16, 22, 1166, 1173 of the Civil Code of Ukraine, and asked the court to compensate the damages caused by the illegal decision of the state authority in the form of costs incurred by the plaintiff for the payment of the legal services received.
The decision of the tax authority, annulled as a result of its administrative appeal as illegal, is the root cause, the consequence of which is the plaintiff's forced expenses, which are expressed, among other things, in the cost of legal services. At the same time, according to Articles 1166, 1173, 1174 of the Civil Code of Ukraine, the existence of an illegal decision gives the right to compensation for damages, regardless of the fault of the tax authority that issued such a decision.
In view of the above, the appellate court came to the erroneous conclusion that the plaintiff did not prove with proper, admissible, reliable and sufficient evidence in accordance with the norms of Articles 76, 77, 78 of the Civil Procedure Code of Ukraine the presence of all the elements of the offense for the application of such degree of tort liability as reparation.
At the same time, taking into account the restrictions established by subsection 114.3.3 of clause 114.3 of article 114 of the Criminal Code of Ukraine, the court of first instance came to an erroneous conclusion that the claims of Goodwell Ukraine LLC were fully satisfied.
Considering that the PPR in the part of surcharges for the sale of goods and material values to unidentified persons and in the corresponding part of fines was canceled by the decision of the State Fiscal Service of Ukraine dated May 25, 2018, and the minimum wage as of January 1, 2018 was UAH 3,723, UAH 186,150 is to be recovered from the State Budget of Ukraine in favor of "Goodwelly Ukraine" LLC.
You can read more about the text of the resolution of the Supreme Court of Ukraine dated November 16, 2021 in case No. 910/11820/20 at the link: https://reyestr.court.gov.ua/Review/101829998 .