Top 5 Supreme Court Decisions Changing Tax and Corporate Rules for Business

Judicial practice in Ukraine continues to change rapidly under the influence of martial law and digital transformation. The Supreme Court is increasingly shaping approaches that directly affect business — from tax disputes and evidence to issues of succession.

Recent positions of cassation courts indicate stricter requirements for state authorities, clarification of evidence standards, and revision of approaches to protecting company rights in difficult economic conditions. In the new selection by the "Judicial and Legal Newspaper" — 5 key decisions that already ensure uniform practice and predictability for business.

Market Price vs Investment Value

In case No. 320/46182/24, the Supreme Court, sitting as a panel of judges of the Cassation Administrative Court, decided the fate of taxes on the sale of real estate at prices under investment contracts.

The tax authority audited a venture corporate investment fund and concluded that when selling apartments to individuals in 2023–2024, they were granted an additional benefit, namely an individual discount. The tax authorities considered the difference between the fixed price under investment contracts and the market value of the apartments at the time of ownership registration as a discount. Also, in the tax authority's act, this difference was contradictorily called "sale of a share in the authorized capital below nominal value." The fund was charged personal income tax and military levy on this amount.

Contrary to the controlling authority's position, the fund stated that people did not receive a free benefit or discount but bore real costs of purchasing housing from the moment of signing the investment contracts, taking on construction risks. The increase in apartment value during construction is capitalization of investments, not a discount from the fund. Moreover, the tax authority confused the sale of apartments with corporate rights, and the nominal value of a share alone is not a benefit without proving its market price.

The Supreme Court concluded that the difference between the investment contract price (at the construction stage) and the current appraised value at the transfer of ownership is not income in the form of an additional benefit.

The price at the investment stage accounts for risks of asset value changes over time. To prove the provision of a discount, the tax authority must confirm its individuality (personalization) compared to ordinary conditions for other buyers.

Real Business Activity Over Formalism

The tax authority conducted a scheduled field audit and charged an agricultural enterprise over 60 million hryvnias including penalties. The controlling authority increased the taxpayer's monetary obligations for corporate profit tax, value-added tax, personal income tax, military levy, and also applied penalties, which became the subject of judicial appeal.

The District Administrative Court partially satisfied the agricultural enterprise's claim. It canceled most tax notices-decisions (TND) because the tax service did not provide proper evidence of violations. However, it recognized the penalties related to corporate profit tax and VAT as lawful.

The Administrative Court of Appeal left the first instance decision unchanged, supporting the taxpayer's conclusions regarding the groundlessness of claims for 60 million UAH.

The Supreme Court, sitting as a panel of judges of the Cassation Administrative Court in case No. 140/4934/25, emphasized the priority of the economic substance of the transaction over the form of documents. The Supreme Court dismissed the cassation appeal, leaving the contested court decisions unchanged.

Formal deficiencies in documents, arithmetic discrepancies, or even the absence of certain primary documents are not sufficient grounds for additional tax assessments.

The burden of proving fictitious transactions lies entirely with the controlling authority. The decisive factor is the comprehensive evaluation of evidence and establishing the real economic substance of the transaction. If there is confirmation of actual use of goods, fixed assets, or services in business activities, formal document deficiencies are not grounds for refusal to recognize expenses or depreciation, and expenses are recognized in the period incurred provided they are related to business activities.

The controlling authority must prove not only discrepancies in reporting or accounting but also a causal link between such discrepancies and the understatement of the tax base.

Succession Without a State Stamp

Case No. 520/35281/24 concerns the moment of transfer of obligations during the reorganization of legal entities.

The Main Department of the Pension Fund of Ukraine filed a lawsuit against the defendant to recover debt for reimbursement of actual expenses for payment and delivery of pensions granted on preferential terms.

The Pension Fund stated that the defendant owed payment of preferential pensions to employees who acquired the relevant service period. Since the debt was not paid voluntarily, the amount was subject to compulsory recovery in court.

The defendant opposed the claim. The main argument was that the enterprise is not the official successor of the municipal enterprise where the preferential pensioners actually worked. The defendant referred to the fact that according to the Unified State Register (USR), the municipal enterprise is still in the process of termination, liquidation registration is not completed, and no changes about succession have been made to the defendant's founding documents.

The District and Appeal Administrative Courts denied the Pension Fund's claim. The courts agreed with the defendant, noting that without completion of registration actions and liquidation of the municipal enterprise in the USR, financial obligations cannot be imposed on the future successor. Moreover, the courts considered unproven the fact that pensioners acquired preferential service specifically at the predecessor enterprise.

The Supreme Court disagreed with the conclusions of the lower courts, satisfied the cassation appeal of the Pension Fund's Main Department, canceled the lower courts' decisions, and issued a new ruling fully satisfying the Pension Fund's claims.

The absence of an entry in the USR about the termination of a reorganized legal entity does not exempt the successor from fulfilling obligations.

If there is a transfer act signed by the parties, obligations (including public-law ones such as payment of preferential pensions) pass to the new company regardless of completion of registration procedures. The USR entry has only a declarative character.

Corporate Rights

Case No. 910/4859/25 clarifies the right of a participant to independently convene meetings. The subject of consideration by the Commercial Cassation Court of the Supreme Court was a cassation appeal of an LLC in a case brought by a former general director against the LLC.

The former director filed a lawsuit demanding to invalidate the general meeting decision on his dismissal, cancel the dismissal order, reinstate him as general director, and remove information about the new head of the company from the Unified State Register (USR).

The Commercial Cassation Court of the Supreme Court explained the rules for convening general meetings on the initiative of company participants (Articles 31, 32 of the Law on LLC/Private JSC).

Thus, the right to independently convene meetings arises only when the executive body ignored the participant's request and did not convene the meeting within the legally established period.

If the director convened the meeting but did not include the participant's issue in the agenda, the participant does not have the right to convene separate own meetings.

Proposals of a participant owning 5% or more of the authorized capital are considered automatically included in the agenda. Such issues can be lawfully voted on at meetings already organized by the company.

The Commercial Cassation Court agreed with the appeal that the majority participant (initiator) had no legal grounds to convene alternative meetings because the general director did not ignore his request and timely prepared the general meeting.

Right to Preferential Rates

Case No. 320/49198/24 concerned the payment of dividends and interest to non-residents. The Supreme Court, sitting as a panel of judges of the Cassation Administrative Court, resolved a tax dispute between PJSC "DTEK Pavlogradvugillya" and fiscal authorities.

The tax authorities failed to prove the existence of hidden permanent establishments of foreign companies in Ukraine and to collect over 363 million hryvnias from the enterprise.

The conflict arose following a documentary unscheduled desk audit conducted by tax specialists. The controlling authority claimed that the PJSC improperly applied preferential tax rates when paying interest and dividends to non-residents. According to the tax service, foreign recipients actually have a permanent establishment in Ukraine, so these payments should have been taxed at the standard rate. Based on these conclusions, the enterprise was issued tax notices-decisions totaling over 363 million hryvnias.

The enterprise emphasized full compliance with international double taxation avoidance conventions, and the beneficiary status and non-resident status were confirmed by all necessary documents.

The Supreme Court concluded that the tax authority has no right to deny the application of preferential rates under international treaties if it has not proven the existence of a non-resident's permanent establishment in Ukraine.

Formal signs such as Ukrainian directors or registration in a Ukrainian business center do not indicate a permanent establishment without evidence of regular commercial activity of the non-resident in Ukraine.

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