The company lost the court case regarding the additional charge of 1.6 million UAH tax due to questionable expenses on fines
During a scheduled field audit, tax authorities in Poltava region discovered a company that understated its profit tax. Based on the audit results, the State Tax Service additionally charged the company over 1.63 million UAH in tax liabilities and penalties. The relevant tax notification-decision was issued based on the audit report, the State Tax Service reported.
The audit established that in 2019 the company unjustifiably included amounts of penalties, fines, and other charges imposed by the gas distribution company for late payment of natural gas distribution services in other operating expenses.
At the same time, the controlling authority noted that the gas distribution company is the founder of the taxpayer and owns 100 percent of its authorized capital. Thus, the parties are related persons within the meaning of the Tax Code of Ukraine, and the founder has the ability to influence the decision-making process and activities of the affiliated company.
Furthermore, it was established that the penalties were voluntarily recognized by the company without conducting claim or litigation procedures and without judicial appeal. At the same time, the actual payment of these amounts was not made — their settlement occurred through offsetting mutual homogeneous claims.
The courts agreed with the tax authority's conclusions that as a result of such operations, the company formed expenses without actually incurring them, thereby obtaining an unjustified tax benefit. According to the court, transactions that lack a reasonable economic purpose and are aimed solely at reducing tax liabilities cannot be considered business activities.
By the decision of the Poltava District Administrative Court dated February 5, 2026, upheld by the ruling of the Second Administrative Court of Appeal dated May 25, 2026, in case No. 440/7870/25, the taxpayer's claim against the Main Department of the State Tax Service in Poltava region was denied.
Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp, our pages on Facebook and Instagram to stay informed about the most important events.
