1. **Subject of the dispute:** Challenging by the taxpayer (Private Agricultural Enterprise “NOVE ZHYTTIA”) of tax notices-decisions by which the controlling authority assessed additional tax liabilities and penalties due to the alleged lack of underlying commercial substance of transactions, failure to substantiate expenses, and violation of deadlines for the registration of tax invoices.
2. **Court’s arguments:**
* The court determined that transactions involving the transfer of assets during the reorganization (spin-off) of a legal entity do not constitute supply of goods and, therefore, are not subject to VAT, as this represents a redistribution of assets rather than a civil law contract.
* Regarding the write-off of feed, fertilizers, and fuel, the court concluded that the primary documents provided by the taxpayer (consignment notes, write-off reports, technological charts) are sufficient to substantiate the reality of business transactions, and the tax authority’s arguments regarding their “lack of commercial substance” are based on assumptions.
* The court confirmed the legitimacy of classifying income from the sale of fermentation products as income from the sale of own agricultural products, which allows the taxpayer to remain on the simplified taxation system (Group 4).
* Regarding the untimely registration of tax invoices, the court applied a legal position according to which, as of May 27, 2022 (after Law No. 2260-IX entered into force), the “COVID-19” moratorium on penalties ceased to be in effect; therefore, the assessment of penalties for registration deadline violations after this date is lawful.
* The court also recognized the imposition of penalties for the late payment of rent and real estate tax as lawful, since the fact of late payment was proven and not disputed by the taxpayer.
* The court, in its decision, explicitly refers to the legal positions of the Supreme Court (specifically in cases No. 160/32652/24, No. 160/29715/23, No. 160/29144/24), emphasizing that a reorganization by way of a spin-off is not a civil law contract, and departs from previous approaches that could have interpreted such operations as supply if they lacked a reasonable economic purpose; however, it emphasizes that the tax authority must prove the fictitiousness of the spin-off through court proceedings, rather than through additional tax assessments.
3. **Court’s decision:** The Supreme Court partially satisfied the plaintiff’s cassation appeal, setting aside the appellate court’s resolution in the part concerning the refusal to cancel the tax notice-decision regarding VAT in the amount of 91.5 million UAH, and upheld the appellate court’s decision in the remaining part, where the legitimacy of the penalties for untimely registration of tax invoices and late payment of taxes was confirmed.
