1. **Subject Matter of the Dispute:** Challenging an individual tax ruling issued by the State Tax Service regarding the procedure for taxation of personal income tax (PIT) and military levy on amounts of non-pecuniary (moral) damage awarded by a court to an employee in connection with a work-related injury.
2. **Arguments of the Court:**
– The Court emphasized that tax legal relations are regulated exclusively by the Tax Code of Ukraine, which takes priority over norms of civil or labor law regarding the determination of the tax base.
– The Supreme Court interpreted subparagraph “a” of subparagraph 164.2.14 of clause 164.2 of Article 164 of the Tax Code of Ukraine as clearly distinguishing between “compensation for damage to life and health” (which is fully exempt from taxation) and “compensation for non-pecuniary (moral) damage” (which is subject to a tax relief limit of 4 minimum wages).
– The Court noted that any non-pecuniary damage, regardless of the grounds for its origin (even if caused by a work-related injury), is classified in tax accounting specifically as “non-pecuniary damage” with the corresponding limitation of the tax relief.
– Any broad interpretation that would allow for the exemption of the entire amount of non-pecuniary damage from taxation contradicts the principle of legal certainty and the imperative norms of tax legislation.
– The Court deemed the plaintiff’s references to the practice of the Civil Cassation Court irrelevant, as civil courts resolve issues of employer liability, not the public-law obligations of a tax agent.
– It was also confirmed that the obligations of a tax agent (withholding taxes) arise for an enterprise regardless of whether the funds are paid voluntarily or compulsorily through the enforcement service.
3. **Court Decision:** The Supreme Court upheld the ruling of the appellate court, acknowledging the position of the State Tax Service as lawful and denying the enterprise’s claim.
**Conclusion:** In this decision, the Supreme Court has formed a new legal position for administrative justice, clearly distinguishing the tax regime for compensation for non-pecuniary damage and damage to life/health, thereby eliminating ambiguity in the application of Article 164 of the Tax Code of Ukraine.
