The ruling of the Supreme Court of Ukraine from 14.06.2016 № 826/14268/14 states that the primary documents issued by the counterparty, whose activities had signs of fictitious business, cannot be considered as properly designed documents and confirm the reality of the economic operation.


It all began with the fact that the VAT has been deducted from VAT by Farfor-Fayans Ltd, VAT and profit tax due to non-recognition of tax credit and transaction costs with LLC “Torenia”. Amounts were not big enough: VAT - more than 8 million UAH., Profit tax - more than 6 million UAH.


The court of first instance recognized the tax authorities' claims as legitimate, the appellate and cassation instances agreed with the arguments of LLC "Porfor-Fayans" and canceled the charges. The point in this dispute was put by the Supreme Court of Ukraine, having canceled the appeals and cassation decisions and upholding the decision of the court of first instance.


The SCU has made such a decision on the grounds that the person on whose behalf the documents from “Torenia” LLC were executed claims that he has no relation to this enterprise. Consequently, the documents are inappropriate.


As you know, the decisions of the SCU serve as precedents for decision-making in courts on similar cases. Most likely, tax authorities will have claims to companies that have been dealing with such "fictitious" firms.