The agricultural sector is one of the fundamentals of Ukraine’s economy, which is why the state contributes to its efficient functioning.
In turn, the Tax Code of Ukraine (hereinafter – TCU) defines the single tax of the fourth group as one of the mechanisms to support farmers, which has unique nuances and specific case law on appealing the actions of the State Tax Service.
Payers of the single tax of the fourth group with a simplified system of taxation are legal entities and individuals – entrepreneurs (hereinafter – FOP), who are agricultural producers, the criteria for which to be able to choose and stay on the simplified system of taxation (single tax group 4) are defined in p. . 4 item 291.4 of Art. 291 TCU. The legal basis of this issue is enshrined in Chapter 1 “Simplified system of taxation, accounting and reporting” chap. XIV “Special tax regimes” TCU.
Analyzing the provisions of the applicable rules of the TCU, we can conclude that the criteria for compliance with FOP defined more than for legal entities. This nuance follows from the fact that in order to carry out a sole proprietorship in accordance with the Law of Ukraine “On Farming”, he must at the state registration, in addition to the application, must submit an agreement (declaration) on the establishment of a family farm. The standard form of such an agreement was approved by the order of the Ministry of Agrarian Policy and Food of Ukraine dated April 5, 2019 №177 (more details on registration are set out in the Letter of the Ministry of Justice of Ukraine dated 25.11.2019 N 10575 / 8.4.3 / 32-19).
Due to the establishment of a special procedure for accounting, reporting and registration of single taxpayers of the fourth group, there are special categories of disputes with the State Tax Service.
The subject of litigation is usually the determination of the object of taxation and the cancellation of decisions to revoke the status of a single tax payer.
The tax base for this group of taxpayers is the normative monetary valuation of agricultural lands or lands of the water fund (paragraph 292 of paragraph 1.2 of Article 292 of paragraph 1 of the TCU). It should be noted that the norms of the TCU do not provide a definition of these concepts, their possible categories or the order of acquisition of land, and therefore in practice a large number of agricultural producers complain about misunderstanding by tax officials of land legislation and, consequently, incorrect definition tax bases.
One of the common categories of litigation is cases of additional tax liability on the basis of the taxpayer’s use of regulatory and monetary valuation of one category of land, when, according to the State Tax Service, they actually use for another purpose, so the choice of tax base is incorrect.
At the same time, traffic police officials do not pay attention to the proper proof of these circumstances in the manner and procedure prescribed by applicable law, and make tax notices-decisions (hereinafter – PPR) on the basis of their own assumptions or improper evidence. Usually, when adopting PPR, the State Tax Service uses the analytical information and documents provided by local governments, forgetting that neither the State Tax Service nor local governments are authorized by current legislation of Ukraine to control the correct use of land by citizens and enterprises.
Indicative here is the case № 500/2430/18, the subject of which was the cancellation of accrued tax liabilities. The reason for underestimation of the single tax of the fourth group, according to the State Tax Service, was the plaintiff’s use of the category of land – “pasture” for growing crops and non-application of the single tax of the fourth group of normative-monetary assessment as for one hectare of “arable land”.
The decision of the Supreme Court of 31.01.2020 in the above case states that the courts justified the rejection of the reference of the supervisory authority that the plaintiff uses the land for “arable land”, as in the materials of both the inspection and this case there is no evidence , which would confirm the fact that the plaintiff used the leased land for a purpose other than that determined by the officially authorized bodies (such as acts of land survey, which would confirm the facts of misuse of land, etc.).
The analysis made by the body implementing the state tax policy, or the responses of the local self-government bodies referred to by the defendant, are not admissible evidence of the fact that the plaintiff uses the land for the intended purpose of “arable land”.
According to the provisions of Articles 188, 189 of the Land Code of Ukraine, Article 5 of the Law of Ukraine “On State Control over Land Use and Protection” self-governing control over land use and protection, which is carried out by village, settlement, city, district and regional councils in any case does not exclude the need to record it is the executive body violation of land use.
Thus, satisfying the claims of the taxpayer, the Supreme Court stressed the need to confirm the decisions of the State Tax Service with appropriate evidence, in particular, the documents of the authorities authorized to control the use and protection of land.
Another category of litigation is the dispute over the revocation of the status of a single tax payer and the appeal of the actions of the State Tax Service. Monitoring the legal positions of the Supreme Court in this category of cases is important for taxpayers, because if the controlling body during the inspections of the single taxpayer of the fourth group does not meet its criteria, which entitle to be on the simplified taxation system, such taxpayer may be charged taxes and fees , from which he was exempted as a payer of the single tax of the fourth group, and penalties (financial) sanctions (fines) provided for in Chapter 11 of Sec. II TCU.
Non-compliance with the criteria set by the TCU also results in the obligation of such a taxpayer to move to the general taxation system starting from the month following the month in which the State Tax Service established such non-compliance.
According to the TCU, the registration of a single taxpayer is indefinite and can be revoked by exclusion from the register of single taxpayers by the decision of the supervisory authority in the case of:
submission by the taxpayer of an application for refusal to apply the simplified taxation system;
termination of a legal entity (except for transformation) in accordance with the law;
if in the tax (reporting) year the share of agricultural production of the legal entity of the single tax payer of the fourth group is less than 75 percent;
if the payer of the single tax of the fourth group has not submitted the tax reporting provided by the TCU.
When appealing against the actions of the State Tax Service regarding the abolition of the status of a single tax payer of group 4, we also recommend taking into account the following legal positions formulated by the Supreme Court in this category of cases:
1. Due regard shall be paid to the formulation of claims for the full and proper protection of infringed rights. Thus, it follows from the Resolution of the Supreme Court of 05.02.2019 in case №805 / 206/17-a that the most effective way to protect the violated right of a taxpayer when canceling the registration of a single tax payer without proper execution of the decision is to recognize illegal actions of the controlling body. 4 groups, the obligation of the latter to renew the registration of the single tax payer of 4 groups and to confirm the specified by issuing a certificate confirming such status.
2. The existence of a debt as of January 1 of the current year is a ground for refusal to acquire the status of a single tax payer only for those who acquire this status for the first time, and does not apply to cases of confirmation of the status of such a taxpayer. The legal position is set out, in particular, in the decisions of the Supreme Court of March 29, 2018 in case №804 / 2321/17, of April 12, 2019 in case №2240 / 2504/18 and of September 23, 2020 in case № 810/1586 / 16.
3. Non-compliance of the taxpayer with the criteria that entitle to be on the simplified taxation system (paragraph 4, paragraph 291.4. Article 291 of the TCU) can be established only by conducting a documentary, not in-house tax audit (Supreme Court decision of 03 December 2020, case № 200/9334/19-a).
So, in summary, the single tax of the fourth group has its own peculiarities of collection and accounting and requires taxpayers to be meticulous about meeting the deadlines for payment of taxes and annual confirmation of the relevant status. Failure to comply with these deadlines and eligibility criteria may result not only in the imposition of penalties, but also in the loss of the special status of a single taxpayer of group 4.
When appealing against the actions or decisions of tax authorities, we recommend that you take into account current case law on these issues, which allows you to predict the results of the appeal.
