Unidentified persons who pretended to act for the Dutch company, with whom Kischenzi LLC (“Company”) previously made a heifer supply contract and, accordingly, made partial payment for the goods, sent an email in April 2019, asking the Company to remit the other part of the payment due under the contract but this time to another bank account. The Company, being 100% sure that it was in fact its counterparty, remitted the money to the account so notified.
Based on its inspection findings in autumn 2022, a tax authority brought a claim that the Company’s transfer of funds to the unidentified persons’ account was an import transaction and directly concerned the contract made with the Dutch company. Thus, it applied provisions of the Law of Ukraine on Currency and Currency Transactions to the Company and imposed the maximum penalty possible, that is, a penalty of the paid amount (almost EUR 200,000) for missing payment deadlines.
The first instance court affirmed in full such a position of the tax authority.
However, the Vasil Kisil & Partners legal team comprising Managing Partner Andriy Stelmashchuk, Partner Volodymyr Igonin, Senior Associate Yehor Svidlo, Associates Vasyl Prytula and Alina Ratushna has managed to get a positive outcome in the appellate instance court.
The administrative court of appeal fully affirmed the position of the Vasil Kisil & Partners lawyers and, accordingly, stated that “ … a transaction related to the importation of goods is conditional upon the Ukrainian resident and its non-resident counterparty having a contractual relationship involving the supply (purchase) of the goods … However, there is no relationship of such kind between the claimant and the unidentified person (persons) to whom … the payment was erroneously made pursuant to the payment order …”
Yehor Svidlo, Senior Associate at Vasil Kisil & Partners, commented the case: “In the first place, we should give credit to the professionalism and unbiased attitude of judges of the Sixth Administrative Court of Appeal. Unfortunately, it is hardly the case that judges closely focus on factual background of a specific case, rather than following a well-established model. On a separate note, I would like to single out the court’s position related to the correct application of the Law of Ukraine on Currency and Currency Transactions because it is a game-changing approach to the law enforcement practice that has been for years established in Ukraine. It seems to be a simple and clear idea that funds transferred to the account of a non-contractor under a foreign trade agreement do not and cannot in any way relate to an import (export) transaction. However, it is, in fact, only now that this idea has been substantiated and detailed in a judgment that has entered into force.
The court expressly noted that the provisions of the Law of Ukraine on Currency and Currency Transactions do not apply to the transactions involving the transfer of funds outside a foreign trade agreement and tax authorities have no right to charge a penalty for missing payment deadlines for these transactions.”
Cornelis Huzinha, Kischenzi LLC’s owner and founder, has commented on the favorable judgment as follows: “I am extremely sincerely impressed with the professional approach of the judges of the Court of Appeals to their work, which gives me, as a national of the Netherlands, confidence in attracting investment to Ukraine.
It is a pity that the tax service uses one-size-fits-all approaches in conducting inspections, the sole purpose of which, unfortunately, is to impose huge fines on businesses without an in-depth and unbiased examination of relevant circumstances of the case. Instead of the farmer doing his business, growing bread, he has, owing to our regulatory authorities, to spend a huge amount of time and money to prove his decency in Ukrainian courts.
I would also like to note the high professionalism of Vasil Kisil & Partners’ lawyers who helped us with this case, starting with filing a pre-trial appeal against the results of the tax inspection.”
Kischenzi LLC is an integrated farm consisting of agricultural, dairy, vegetable and pig activities and located in the Central part of Ukraine, established in 2001.
For more details please contact Olga Shevchenko, PR Manager
Tel.: +380 67 358 47 82
E-mail: shevchenko@vkp.ua
About the Firm
Established in 1992, Vasil Kisil & Partners is a Ukrainian law firm that delivers integrated legal advice in banking & finance, mergers & acquisitions, capital markets, antitrust, competition and trade, dispute resolution, public advocacy, tax law, energy and natural resources law, intellectual property law, labor and employment law, real estate and construction law, as well as PPP, concessions and infrastructure law. Vasil Kisil & Partners is a member and exclusively represents Ukraine in such international professional associations as TerraLex (160 law firms in 100 countries), Cathay Associates (40 high-profile law firms with over 500 headcount worldwide in 43 major cities and countries across Europe and Asia) and Ius Laboris (1700 labor and employment lawyers in 50 countries). Andriy Stelmashchuk is a managing partner of Vasil Kisil & Partners law firm.
