Can the moratorium on penalties be applied to violations of foreign trade settlements

The penalty provided for in part 5 of Article 13 of the Law of Ukraine "On Currency and Currency Transactions" for violation of the terms of settlements for export-import operations during the quarantine period established by the Cabinet of Ministers of Ukraine throughout Ukraine in order to prevent the spread of COVID-19 is charged on a general basis, without applying the provisions of subpara. 11 of para. ⁵²¹ of subsection 10 of section XX "Transitional Provisions" of the TCU.

This conclusion was reached by the Supreme Court as part of the Judicial Chamber for Taxes, Fees and Other Mandatory Payments of the Administrative Court of Cassation.

In the case under consideration, the company filed a lawsuit against the supervisory authority, in which it sought to declare unlawful and cancel the tax notice-decision that imposed a penalty for violation of the terms of payments in the field of foreign economic activity (FEA).

The plaintiff considered the conclusions of the supervisory authority, which became the basis for the adoption of the contested tax notice-decision, to be unfounded, since from January 1, 2021, the penalty for violation of the deadline for payments in foreign currency in the field of foreign economic activity by residents is one of the types of penalties within the meaning of the provisions of subparagraph 14.1.162 of the TCU, and therefore the accrual of penalties in the disputed legal relations contradicts the provisions of subpara. 11 of para. ⁵²¹ of subsection 10 of section XX "Transitional Provisions" of the TCU.

Considering this case, the ACC SC stated that the Law of Ukraine "On Currency and Currency Transactions" is a special law that defines the legal framework for currency transactions, currency regulation and currency supervision, the rights and obligations of currency transactions and authorized institutions, and establishes liability for violation of currency legislation.

Although this Law does not regulate the procedure for making a decision on imposing a penalty as a type of administrative and economic sanction for violation of the deadlines for making payments in foreign currency, and such procedure is regulated by the provisions of the Tax Code of Ukraine, this does not mean that legal relations in the field of currency transactions, currency regulation and currency supervision become part of the legislation on the collection of taxes and fees and that they are subject to all provisions of the Tax Code of Ukraine. These legal acts regulate different areas of public policy.

Indeed, according to subpara. 11 of para. ⁵²¹ of subsection 10 of Section XX "Transitional Provisions" of the TCU, during the quarantine established by the CMU throughout Ukraine to prevent the spread of coronavirus disease (COVID-19), taxpayers are not charged a penalty, and the penalty accrued but not paid during this period is subject to write-off. However, such penalty applies only to the collection of taxes and fees and is not applicable to the regulation of currency relations.

In addition, amendments to the provisions of the Law of Ukraine "On Currency and Currency Transactions" are made exclusively by amending this Law. However, the said Law did not contain any provisions that would allow not to apply a penalty (exempt from applying a penalty) for violation of the deadline for settlements in foreign currency during the quarantine period.

In view of the above, it is concluded that the provisions of subpara. 11 of para. ⁵²¹ of subsection 10 of Section XX "Transitional Provisions" of the TCU regarding the non-accrual of penalties during the quarantine period also applies to the penalty for violation of the payment deadlines provided for in part 5 of Article 13 of the Law of Ukraine "On Currency and Currency Transactions" is erroneous.

Thus, the Supreme Court found that the disputed legal relations are specific and regulated by the special Law of Ukraine "On Currency and Currency Transactions", so its provisions should be applied to the calculation of penalties for violation of the terms of payments in foreign currency.

The SAC also noted that the introduction of martial law in Ukraine cannot be regarded as a force majeure circumstance for the non-resident counterparty's failure to transfer funds to the plaintiff's accounts for the delivered goods under foreign economic contracts.

Resolution of the Supreme Court of Ukraine dated July 23, 2024 in case No. 240/25642/22 (proceedings No. K/990/13274/24).