Failed to Declare Almost 37 Thousand Dollars of Income from a British Online Platform — The Appellate Court Sided with the Tax Service

The Fifth Administrative Court of Appeal considered case No. 420/20177/25 filed by an individual against the Tax Service in the Odessa region regarding the cancellation of tax notices-decisions on the assessment of personal income tax, military levy, and penalties.

The court upheld the decision of the Odessa District Administrative Court, which confirmed the legality of the tax authority's actions in assessing tax liabilities for undeclared income received from a British online platform.

Case Circumstances

During an unscheduled documentary audit of the plaintiff, the controlling authority used information contained in the letter from the State Tax Service of Ukraine dated 02.10.2024, which was provided by the competent authority of the United Kingdom of Great Britain and Northern Ireland in accordance with the Convention between the Government of Ukraine and the Government of the United Kingdom of Great Britain and Northern Ireland. According to this information, the plaintiff received income from a British business entity for content creation on an online platform during 2022 in the amount of 36,988 USD.

The audit established that the taxpayer: did not submit a tax declaration on property status and income for 2022 and did not declare the amount of income received; did not calculate or pay personal income tax and military levy to the budget. Based on the audit results, an act was drawn up and tax notices-decisions were issued.

After reviewing the case materials and verifying the legality and validity of the court decision, the appellate court concluded to deny the plaintiff's appeal for the following reasons.

Appellate Court Decision

The appellate court noted that the burden of proof is considered a measure of proper conduct established in procedural and substantive law for a person participating in the judicial process, involving the collection and presentation of evidence to confirm their subjective right, aimed at eliminating uncertainty arising in legal relations when it is impossible to reliably clarify circumstances relevant to the case.

An important element of the adversarial process is the standards of proof, i.e., special rules that the court must follow when resolving the case. These rules allow assessing how successfully and convincingly the parties fulfilled the requirements regarding the distribution of the burden of proof and how well they convinced the court of the correctness of their position, making the evaluation of evidence algorithmic and justified.

The appellate court does not dispute that in administrative cases the burden of proving the legality of the decision when challenged in court lies with the authority, but this does not exempt the plaintiff from the right and duty to refute the evidence provided by the defendant/authority (in this case, the Main Department of the State Tax Service).

At the same time, the passive procedural behavior of the complainant, manifested in evading refutation of the arguments and evidence of the defendant/authority, should be interpreted in favor of the defendant/authority.

The plaintiff's position and claims, stated both in the claim and the appeal, simultaneously assert the absence of income received at all; grounds for its reduction; application of a tax rate different from the basic one, etc.

The panel of judges noted that mutually exclusive positions or claims in administrative proceedings cannot coexist simultaneously as they exclude or contradict each other. In fact, the procedural behavior of the plaintiff/complainant consists of avoiding a definitive answer to all questions essential for clarifying the circumstances of the case.

At the same time, the taxpayer's claim that the income receipt is not confirmed by proper evidence is refuted by the case materials, namely the written response from the UK tax authority regarding payments of income from a non-resident, which confirms the plaintiff's participation in the online platform as a recipient of payments.

Considering the above, the panel of judges agreed with the first-instance court's conclusion that the fact of the appellant receiving income from a source outside Ukraine is proven, but the plaintiff did not declare this income, did not pay the mandatory taxes and fees, therefore there are no grounds to cancel the contested tax notices-decisions.

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