The Supreme Court, which is part of the court chamber for taxes, duties and other obligatory payments of the administrative court of cassation, reviewed case no. 1340/3649/18 (administrative proceedings no. K/9901/20383/19) in cassation and issued a Decision dated 31 January 2020. On the claim of the resident legal entity to the SFS department for recognition as unlawful and annulment of the decision, by which the plaintiff was charged a penalty for violation of terms of settlements in the sphere of foreign economic activity based on art. 1 of the Law of Ukraine “On the procedure of settlements in foreign currency” [as of today this Law is no longer in force, and regulation of foreign economic activity in this direction is carried out by the Law of Ukraine "On Currency and Foreign Exchange Transactions" dd. 21.06.2018 No. 2473-VIII].
By the preamble of the case, the plaintiff exported goods to a non-resident company, which in turn was to make payment to the resident. As a result of a non-resident's failure to comply with its monetary obligations under the contract, the parties agreed to agree to terminate the obligations by setting off counterpart homogeneous claims for payment in currency (euros). However, the Head Department of the SFS Department of Lviv region did not take into account the above-mentioned fact and applied to the claimant (resident) penalties for violation of terms of settlements under the foreign economic agreement.
Refusing to satisfy the claims, the courts of the first and appellate instances came to the conclusion that the termination of obligations by offset of counter-uniform claims during the period of validity of the Resolution of the Board of the National Bank of Ukraine "On settlement of the situation on the monetary and currency markets of Ukraine" dated September 14, 2016 No. 386 and December 13, 2016 No. 410 [which are currently invalid] was not the basis for removal of the export operation from control and, accordingly, for termination of the term of crediting the currency proceeds, established the following
Taking into account the circumstances of the case, the Supreme Court drew attention to the fact that the current legislation does not prohibit, but does not limit the legal forms of settlement of foreign economic transactions. Thus, the receipt of foreign currency on the account of a resident as a fulfillment of obligations of a resident of Ukraine to a non-resident under a foreign economic contract by offsetting counterclaims, if properly executed, is one of the legal means of settlement of mutual obligations by the parties.
At the same time, the Court pointed out that the restrictions imposed by resolutions of the NBU Board on the removal of foreign exchange control of export transactions of customers on the basis of documents on termination of obligations offset by counter-uniform claims in foreign currency are addressed exclusively to authorized banks.
Taking into account the abovementioned, the Supreme Court has formulated a new legal position according to which a resident is free to choose the form of settlements on foreign economic operations among those that do not contradict the laws of Ukraine, and that is why being under control of such operations by itself does not entail consequences in the form of application of penalties (fines) foreseen by the article. 13 of the Law of Ukraine "On Currency and Foreign Exchange Transactions". Termination of an obligation by offset of counter-uniform claims is a constituent part of the right to freedom of entrepreneurship guaranteed by the Constitution of Ukraine and may be restricted exclusively by the laws of Ukraine.
Liberalization of foreign economic activity ensures simplification of its conduct by our clients, accompanied by the relevant practices of the Deiak Law Firm, in particular, Tax Practice, Dispute Resolution, and International Trade.
