The Grand Chamber of the Supreme Court decides on the jurisdiction of tax disputes where one of the parties is a taxpayer subject to bankruptcy proceedings

The taxpayer's claims (including after the initiation of bankruptcy proceedings and the declaration of bankruptcy with the opening of liquidation proceedings against it) regarding the legality of decisions, acts or omissions of the controlling authority relate primarily to verification of the legality of the authority's actions, which indicates the public law nature of such a dispute in which the authority exercises its power and management functions, and therefore this dispute is referred to the administrative proceedings.

This is stated in the Resolution of the Grand Chamber of the Supreme Court.

According to the circumstances of the case, the State Tax Service of Ukraine issued tax assessment notices based on the audit report of an LLC, which increased the amount of the LLC's monetary liabilities and imposed penalties (financial sanctions). The LLC filed a complaint with the State Tax Service of Ukraine against the tax assessment notices, which were upheld and the complaint was dismissed in this part.

A commercial court ruling initiated bankruptcy proceedings against the LLC, introduced a procedure for the disposal of the debtor's property and appointed a receiver.

Later, the same commercial court received a lawsuit from the LLC against the State Tax Service of Ukraine to declare the tax assessment notices issued on the basis of the audit report unlawful and to cancel them.

The commercial court of first instance upheld the claim. At the same time, the court of appeal stated that the lawsuit in this case should be considered by the commercial court, which is dealing with the company's bankruptcy case.

In considering the case, the Grand Chamber of the Supreme Court noted that the peculiarities of the procedure for considering bankruptcy cases within the commercial jurisdiction determined by the Commercial Procedural Code of Ukraine are regulated by the Code of Ukraine on Bankruptcy Procedures. At the same time, the Code of Ukraine on Bankruptcy Procedures cannot be viewed as extending commercial jurisdiction to certain categories of disputes, which are excluded by para. 8 of part 1 of Article 20 of the Commercial Procedural Code of Ukraine, and are considered as part of bankruptcy cases, since it is the Commercial Procedural Code of Ukraine that determines the jurisdiction of commercial cases. Instead, the Code of Ukraine on Bankruptcy Procedures does not establish the jurisdiction of cases, but rather the specifics of the manner and procedure for considering only a certain category of disputes within the commercial jurisdiction defined by Article 20 of the Commercial Procedural Code of Ukraine.

 Just as the specifics of tax disputes within the administrative jurisdiction established by the Code of Administrative Proceedings of Ukraine are regulated by the Tax Code of Ukraine, the specifics of the procedures for bankruptcy cases within the commercial jurisdiction established by the Commercial Procedural Code of Ukraine are regulated by the Code of Ukraine on Bankruptcy Procedures.

The wording of Art. 7 of the Code of Ukraine on Bankruptcy Procedures indicates that the legislator, intending to assign certain categories of disputes to the jurisdiction of commercial courts, such as those related to the recovery of wages or reinstatement, separately mentioned and distinguished such disputes, while this article does not in any way distinguish tax disputes arising from tax relations and regulated by the Tax Code of Ukraine.

Thus, the jurisdiction of courts to consider certain disputes is established only by procedural codes (the Commercial Procedural Code of Ukraine, the Code of Administrative Proceedings of Ukraine, and the Civil Procedural Code of Ukraine). In other words, from the content of Art. 7 of the Code of Ukraine on Bankruptcy Procedures, it can be concluded that it does not determine the specifics under which administrative disputes arising from tax relations are referred to the jurisdiction of commercial courts within the framework of bankruptcy proceedings.

The Code of Ukraine on Bankruptcy Procedures and the Tax Code of Ukraine are codes with consolidated rules of law, i.e. they are special in terms of consideration of a certain type of commercial disputes (bankruptcy), which are considered by the commercial court under the rules of the Commercial Procedural Code of Ukraine with due regard to the specifics determined by the Code of Ukraine on Bankruptcy Procedures, and, accordingly, a certain type of administrative disputes (tax disputes), which are considered by the administrative court under the rules of the Code of Administrative Proceedings of Ukraine with due regard to the specifics determined by the Tax Code of Ukraine.

The Grand Chamber of the Supreme Court states that the courts of previous instances, having considered this case on the merits, did not take into account its conclusions set out in the decision of 13 April 2023 in case no. 320/12137/20 regarding the determination of the jurisdiction of disputes arising from tax relations to the courts of administrative jurisdiction.

As the commercial courts erred in their assessment of the merits of the case, the Grand Chamber of the Supreme Court considers that the cassation appeal should be partially granted, the decisions of the previous instances should be overturned and the proceedings should be closed.

The Resolution of the Grand Chamber of the Supreme Court of 1 November 2023 in case no. 908/129/22 (908/1333/22) (proceedings no. 12-46гс23) - https://reyestr.court.gov.ua/Review/114904850.

This and other legal positions of the Supreme Court can be found in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.