12:03 28.03.2019

Philip Morris Ukraine calls on fiscal service to withdraw tax notifications for over UAH 635 mln under amicable agreement

3 min read

KYIV. March 28 (Interfax-Ukraine) – The State Fiscal Service (SFS) as of March 27, 2019 has not withdrawn tax notifications for UAH 635 million sent to private joint-stock company Philip Morris Ukraine, despite the amicable agreement foreseeing their cancelation within 30 days after signing the agreement. The agreement was signed on January 31, 2019.

"The State Fiscal Service has not yet withdrawn tax notifications, as it should have done so in accordance with the obligations assumed when signing an amicable agreement with the Philip Morris companies," Managing Director of PrJSC Philip Morris Ukraine Michalis Alexandrakis said at a press conference at Interfax-Ukraine on Wednesday.

According to the legal adviser and the representative of investors – Philip Morris companies, Volodymyr Nakonechny, on January 31 of the current year Head of the SFS Oleksandr Vlasov signed the amicable agreement. According to the document, Ukraine is obliged to ensure the abolition of tax notifications within 30 days after the signing of the amicable agreement, that is, before March 2, 2019.

In connection with the failure to comply with the terms of the amicable agreement, Philip Morris Ukraine appealed to the president of Ukraine, the prime minister to take measures and ensure control over its execution.

"We believe that the SFS will abolish tax notifications in the near future and fulfill the amicable agreement. Otherwise, the Philip Morris companies will be forced to provide the State of Ukraine with reports of violation of the amicable agreement's obligations and international obligations under investment assistance and mutual protection agreements with the Swiss Confederation and the United States," Nakonechny said.

As reported, PrJSC Philip Morris Ukraine in March 2015 appealed and received permission from Kharkiv customs office to apply the processing mode in the customs territory of Ukraine for the production of cigarettes and accompanying products and their re-export for the period from April 1, 2015 through March 31, 2016. The company was authorized to conditional exemption from Ukrainian import duties and other import taxes on materials for processing under the terms of re-export.

After Philip Morris Ukraine carried out processing and re-export operations, the main directorate of the State Fiscal Service in Kharkiv region conducted an unscheduled inspection of the company's compliance with the customs legislation of Ukraine regarding the clearance of goods in the processing mode in the customs territory of Ukraine.

According to the results of the inspection of the main directorate of the State Fiscal Service in Kharkiv region, on June 14, 2016, it approved decision notices that determined the liabilities for paying of import duties, additional import duty and VAT on the import of materials, as well as penalties for the total amount UAH 635.3 million Philip Morris Ukraine. Philip Morris Ukraine said that the actions of the State Fiscal Service are pressure on the company. After that, the parties entered into litigation.

On December 5, 2018, the Cabinet of Ministers of Ukraine approved a draft amicable agreement between Philip Morris and Ukraine, foreseeing the abolishment of the tax notification for the amount of UAH 635.3 million by the State Fiscal Service of Ukraine.

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