• Iryna Kalnytska

    Head of Tax Practice, GOLAW.
    Iryna Kalnytska has extensive experience of tax law, international tax planning and structuring, and currency regulation with a specific focus in the areas of both import and export customs regulations and operations. While handling cases, her top priority is making sure the client’s interests have the utmost legal protection through optimization of the tax consequences for their business.


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GO LAW is one of the leading Ukrainian full service law firms. The firm was founded in 2003 and currently has offices in Kyiv, Lviv, Odesa (all in Ukraine) and Berlin, Germany. The firm’s lawyers are widely recognized for their skills and extensive expertise. The GOLAW team focuses on efficiently resolving issues facing clients, communicating effectively on their behalf, assisting them in navigating the nuances of Ukrainian law, and avoiding costly legal traps.

The firm’s client portfolio includes large and medium-sized, national and foreign companies, banks and financial institutions, as well as private investors doing business in Ukraine or entering local markets.

GOLAW provides sophisticated legal advice and reliable legal assistance in all major sectors, including  agribusiness, retail and FMCG, healthcare and pharmaceuticals, financial services, energy and natural resources, transportation and infrastructure, Internet technology and real estate.

GOLAW has developed a top tier tax practice which includes issues regarding tax functioning in Ukraine, strategic advice on tax planning, tax and fiscal controls, as well as professional contacts with the tax authorities at all levels.

The firm represents its clients in dispute resolution and litigation in general, economic, and administrative courts of all levels, along with support for international commercial disputes. Our deep expertise in white collar defense and investigations enables GOLAW attorneys to successfully represent clients in criminal legal proceedings, advising them on the wider commercial, regulatory and image implications when there are allegations of fraud or corruption.

GOLAW professionals advise clients across a broad spectrum of corporate work including M&A, joint ventures and corporate restructuring, as well as general commercial, antitrust, and corporate governance issues. The effective combination of transaction skills combined with our unique expertise including antitrust, employment, environmental, intellectual property, and taxation, enables the firm to handle issues that can arise from any single corporate transaction.

In banking and finance, the firm successfully represents clients regardless of whether it is a trade, export, finance deal, M&A, or any other financial project; we also provide advice on civil, banking and currency laws.  Our firm is a leader in representing financial services institutions in contentious insolvency and regulatory matters.

The firm’s team of lawyers utilizes unrivaled local knowledge of the demands of operating in increasingly international and volatile markets, with a deep understanding of the issues impacting the energy and natural resources sectors. The firm’s clients are involved in commodities, power, oil & gas, nuclear, mining, metals & minerals, renewable and clean-technology energy industries.

GOLAW covers the full range of labor and employment matters, including: whistleblower litigation, labor-management relations, benefits, collective agreements, and employment of foreign citizens. 

Why do Ukrainian Courts Choose to Supervise VAT Reimbursement Rather than Enforce It?

What is VAT Reimbursement?

Under Ukrainian tax legislation, any VAT taxpayer has the right to receive a refund of VAT when, in the course of his/her commercial activity, it pays more VAT than the taxpayer actually owes the Government, thus accumulating “tax credit”. According to the Tax Code when the amount of the VAT tax obligation is less than the amount of accumulated tax credit, the taxpayer may demand from fiscal authorities to refund the overpaid amount of VAT or request a transfer of that amount to the next taxable period.

Faulty Procedure

The process of VAT reimbursement was fairly simple in the last few years. The taxpayer who intends to receive a VAT refund from the state budget should file an application along with the tax return to the fiscal body at the place of the taxpayer’s registration. If the taxpayer meets all the criterion for reimbursement, the fiscal body files an application to the State Treasury on the basis of which, the Treasury must transfer the appropriate sum to the taxpayer’s bank account.

At the same time, the fiscal authorities are often reluctant to satisfy claims for refund of VAT, even when the claimant met the entire criterion and filed all the documents required by the legislation. The problem is that the process of VAT compensation is often obstructed with bureaucratic impediments, violation of internal procedures, or even simple negligence of staff when processing documents received from taxpayers. Hence, many taxpayers resort to the courts in hopes to receive a much desired VAT refund from the Government.

Uniform Approach toward VAT Related Disputes

Luckily for VAT taxpayers, it seems that Ukrainian courts have finally come up with a more or less consistent approach toward resolution of claims for refund of overpaid VAT from the state budget.

The main reason why courts could not agree on how to enforce such claims is because of the various and often conflicting interpretations of the scope of powers and functions of fiscal authorities, as well as vague limits of judicial authority itself.

Prior to 2015, the Supreme Court of Ukraine expressed the view that the proper remedy in such cases is to issue a judicial order to recover an overpaid amount of VAT in favor of a taxpayer directly from the state budget.1 However, in 2015 and throughout 2016 the decisions of the Supreme Court marked a radical change of approach toward this matter. Thus, the court expressed the view that VAT compensation from the state budget is within the exclusive authority of the State Fiscal Service of Ukraine and the State Treasury. For that reason, the courts have no power to substitute those agencies and decide on recovery of any sums from the state budget.

The Supreme Administrative Court of Ukraine discussed this issue in its Decision No. К/800/44985/15, of 4 February 2016.2 The Court in this case openly disagreed with the position of Supreme Court of Ukraine, noting that the courts should not be limited in the choice of remedies. Thus, the courts have the power to apply the most effective tool to protect and remedy the rights of taxpayers violated by the actions (inactions) of fiscal authorities. In such case, contrary to the position of the Supreme Court of Ukraine, the courts do not substitute or trespass on the authority of fiscal bodies in any manner, but rather carry out their own lawful authority to restore the violated rights of claimants.

Moreover, the Administrative Court in support of its position invoked the provision in Decree of Cabinet of Ministers, which states that the courts may issue orders to refund overpaid VAT, which can be filed directly to the Treasury by the claimant.

An appeal was brought in this case to the Supreme Court of Ukraine, which had its final say on the refund of VAT by means of a direct court order.3 The Supreme Court disagreed with the conclusion of the Supreme Administrative Court, reaffirming its position that courts do not have the authority to “substitute” executive agencies and issue orders which run counter to the procedures specifically established by law. In this case, the Supreme Court noted that issuing a direct court order does not accord with the scheme of VAT refund set out in the Tax Code and applicable Government regulations. The court said that the refunding of VAT can be carried out solely by the State Treasury, based on the application of the taxpayer and written conclusion of the fiscal body.

As a result, the Supreme Court again confirmed that issuing a court order to refund VAT is not a proper remedy in such cases. Instead, the correct remedy would be to issue an order to compel the fiscal body to issue a conclusion for the State Treasury to reimburse the VAT.

In turn, the Kyiv Administrative Court supported the position of the Supreme Court in virtually the same case, which also concerned the refund of VAT4. The judges fully recognized the claims of the plaintiff and ruled that it was entitled to receive VAT refund from the state budget. At the same time, the court refused to enforce this right by means of judicial order for the same reasons as the Supreme Court did so in prior cases. The judges argued that current legislation determines a clear “algorithm” of actions by a VAT taxpayer, local fiscal and treasury bodies when it comes to VAT refund. This algorithm does not make it possible to compensate VAT by means of a judicial order. However, administrative courts have the power to compel an appropriate fiscal body to issue a conclusion based on the evaluation of taxpayer’s tax returns and file it to the State Treasury for further refund of the due sum. The court made it clear that judicial control is important in the resolution of administrative disputes and that the court takes an active position not only during resolution of the dispute, but also in the course of its enforcement.

Fines for Untimely Refund of VAT

After the fiscal body determines the sum to be refunded to the VAT taxpayer, the Treasury is obliged to transfer that sum to the bank account of the taxpayer within five business days, as provided in Article 200.13 of the Tax Code. Accordingly, if the Treasury fails to transfer the sum within that period, a fine in the amount of 120% of the bank rate of National Bank of Ukraine will accumulate from the day of default and until the day when the due sum of compensation is actually paid to the taxpayer.

Thus, in many cases, taxpayers filed lawsuits for refund of VAT, along with claims to impose fines for untimely reimbursement. The review of cases demonstrates that the courts are ready to impose fines on a fiscal body which unreasonably delays refund of VAT to the taxpayer. Thus, the Kyiv Administrative Court ruled in favor of the plaintiff, noting that inactions of the defendant (State Fiscal Inspection) caused a delay in refund of VAT for almost three years. The court said that taking into account the negligent behavior of the State Fiscal Service in the past, it is prudent to establish judicial control over enforcement of the court’s decision. Thus, the court obliged the defendants to file in court a written report of enforcement of the court’s decision within ten days of such decision becoming valid.5


An overview of court decisions regarding VAT refund clearly shows that filing a lawsuit may serve as an effective instrument to fight negligence and inaction on the part of the fiscal authorities in Ukraine. Despite certain inconsistency in the position of the Supreme Court in previous years, recent decisions and the reasoning of the Supreme Court and administrative courts indicate that there is a real possibility to remedy the rights of VAT taxpayers violated due to unlawful actions or inaction on the part of the State Fiscal Service. At the same time, it is important to keep in mind that resorting to a court is not always the best course of action. As noted in abovementioned decisions the courts, despite their considerable authority, have no power to act in place of the fiscal authorities and carry out their legal duty to refund VAT for them. The courts, however, do have the power to make an executive authority do its job properly and, in accordance with the law, to also impose substantial fines if the state body violates the law, such as in the case of a delay in refunding VAT.

1 Decree of Supreme Court of Ukraine, case no. 21-2141. http://www.reyestr.court.gov.ua/Review/3741893

2 Decree of Supreme Administrative Court of Ukraine, case no. К/800/44985/15, dated 04.02.2016.

3 Decree of Supreme Court of Ukraine, case no. 806/2256/15, dated 07.06.2016.

4 Decree of Kyiv Administrative Court, case no. 810/786/16, dated 17.05.2016.

5 Ibid (no. 5).