Vasil Kisil & Partners Successfully Represents Rost Agro LLC in Tax Dispute Worth Nearly UAH 33M

Vasil Kisil & Partners’ lawyers have successfully represented Rost Agro Limited Liability Company, one of Ukraine’s largest producers and exporters of seed products, in a tax dispute.

Tax authorities assessed nearly UAH 33 million in financial penalties on the company for allegedly missing payment deadlines in connection with its foreign economic activities. 

The regulatory authorities relied on the fact that the Law of Ukraine on the Procedure for Settlements in Foreign Currency (now called the Law of Ukraine on Currency and Currency Valuables) does not provide for such a ground for suspending a period for assessing a penalty fee for missing payment deadlines under foreign economic contracts as the taxpayer's applying to a notary public for the latter to make an executive endorsement regarding debt collection. 

In making this decision, the tax authorities ignored the fact that the laws of other countries may provide for a different procedure for the collection of undisputed debts, other than that provided for by the Ukrainian currency control laws.

During proceedings in this case, Vasil Kisil & Partners’ lawyers emphasized that the laws of the country of incorporation of the company with which the Company entered into supply agreements provides for only one mechanism for undisputed debt collection, namely applying to a notary for an executive endorsement. The laws of this country do not provide for any procedures for debt collection in court, which could serve as the ground for suspension of the penalty fee assessment period.

The Kyiv Circuit Administrative Court affirmed the aforementioned position taken by the lawyers that, because of certain specifics of the laws of the other country, the Company was deprived of the right to apply to court. Thus, the court maintained that applying to a notary for an executive endorsement was the circumstance upon the occurrence of which the period for penalty fee assessment for missing payment deadlines under foreign economic contracts had to be suspended.

Rost Agro LLC was represented in the dispute by Senior Associate and Attorney-at-Law Yehor Svidlo along with Associate Alina Ratushna.

Commenting on the court's position, Yehor Svidlo, Attorney-at-Law at Vasil Kisil & Partners, said: “This court's judgment is the best example demonstrating that it is not only the letter of the law but also the spirit of the law that should be applied. If the law does not specify that applying to a notary may not serve as the ground for suspending a penalty fee assessment period, the tax authorities may not collect a million hryvnias in penalties from a taxpayer wherever there is evidence that the taxpayer acted in good faith and took all actions provided for by the laws of the other state to collect debts under a foreign economic contract.”

Maksym Bernatskyi, Director of Rost Agro LLC, has commented on the successful outcome by saying: “The tax authorities have a very strange approach – they believe that they alone can determine a remedy to protect the interests of a company in foreign economic relations. In doing so, they ignore the specifics of the national laws of other countries, as well as the effectiveness of one or another remedy. This is not the first attempt by the tax authorities to impose financial penalties on us on similar grounds. However, in each case, although considered in courts of different instances, we've succeeded in having our legitimate interests protected, thanks to the reliable and effective work of Vasil Kisil & Partners’ team.”