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Supreme Administrative Court of Ukraine decision on Livela case sets precedent for big business to avoid taxes


INTERFAX-UKRAINE
Kyiv. January 24, 2011

“The Supreme Administrative Court of Ukraine (the SACU) decision upholding tax relief for Poltava-based Livela Company, an importer of oil products, establishes a precedent for big business to break free of taxes”, believes Partner of Volkov and Partners Ihor Martsyn.
“This decision may create a precedent for other courts to resolve in the same “legal” manner with further benefit for big business to be exempted from taxes and duties”, he noted.
Mr. Martsyn mentioned that interested state authorities have no legal grounds to appeal against the SACU’s decision in the Supreme Court of Ukraine, as the SACU did not apply the provisions of the substantial law and issued a verdict solely on the basis of the procedural rules.
In addition, the Partner sees the previous judgments can hardly be revised just because of newly disclosed facts in the case.
In his opinion, a possible solution is that interested parties would go to the Avtozavodskoy District Court of Kremenchuh (the first instance court that exempted Livela from taxes and duties) with a petition to clarify the terms of the company’s exemption from taxes, and specify the kinds of taxes and duties in question. “In case where clarifications contradict the effective legislation, the respective decision will be subject to appeal in the appellate and cassation procedure”, Mr. Martsyn summed up.
Reportedly, according to the decision dated December 22, 2010, the Supreme Administrative Court of Ukraine upheld Livela’s tax relief, including the one for tax-free imports of fuel products to Ukraine. In addition, the decision reads that it is final and without appeal.
In the middle August 2010, the State Customs Service of Ukraine commenced execution of customs clearance of the imported by Livela refined oil batches exempt of excise duty and VAT. Such actions were effected by the company upon a number of court decisions in favour thereof.
Fuel market experts concluded that Livela applied the scheme of duty-free customs clearance to the fuel products based on the certain provision of the Law “On Foreign Investments”.
According to the data of А-95 Consulting Group, Kyiv, the Livela’s share in the total volume of tax-free fuel imported to the country ran up to 50 percent in October–November 2010.
In December 2010, President Viktor Yanukovych charged the Antimonopoly Committee of Ukraine with investigating the effect Livela’s activity had on the Ukrainian market.
Therefore, in the end of 2010 the AMCU filed a suit against Livela due to alleged abuse by the company of its dominant position while importing oil products.
The Memorandum signed between Ukraine and the International Monetary Fund dated July 16, 2010 envisages a provision on suppression of the uncertain import schemes by the country.
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