Martial law is not an automatic ground for exempting the state from paying penalties for delayed VAT refund – SC AdmCC

The mere fact of martial law in effect does not relieve the state from accruing and paying penalties on amounts of untimely refunded VAT. To apply the exception provided in paragraph 2 of clause 200.23 of Article 200 of the Tax Code of Ukraine – under which no penalty is accrued – the controlling authority must prove the existence of specific force majeure circumstances that, due to martial law, made it impossible to enter data into the Register of Applications for Refund of the Amount of Budgetary VAT Compensation and to carry out the refund. In the absence of such proof, the penalty is accrued in the general manner (120% of the NBU discount rate).

This conclusion was made by the Administrative Cassation Court of the Supreme Court.

A business entity declared VAT amounts for budgetary refund for the periods 2022–2023. Following audits, the tax authority issued decisions refusing the refund, which the taxpayer successfully challenged in court. In 2024, the decisions canceling the tax notifications-decisions became final and binding; however, the controlling authority did not enter the agreed amount into the Register of VAT Refund Applications and did not ensure its refund. As a result, the taxpayer filed a lawsuit seeking to recover penalties for the unrefunded tax amounts.

The courts of first and appellate instances dismissed the claim. The court of first instance pointed to the uncertainty of the penalty amount and the lack of data entry into the Register. The appellate court emphasized the martial law (in effect since February 24, 2022, with extensions) and, referring to paragraph 2 of clause 200.23 of Article 200 of the Tax Code of Ukraine, considered this a sufficient ground for not applying the penalty.

The Supreme Court overturned the decisions of the lower-instance courts and remanded the case for a new hearing to the court of first instance.

The Court emphasized that the provision of paragraph 2 of clause 200.23 of Article 200 of the Tax Code of Ukraine (non-application of penalty in case of force majeure caused by martial law) does not apply automatically. The controlling authority is obliged to prove the existence of specific force majeure circumstances that made it impossible to fulfill the obligation to enter data into the Register and to carry out the VAT refund. The mere fact of the introduction and continuation of martial law does not constitute such a ground.

Resolution of the Administrative Cassation Court of the Supreme Court dated November 18, 2025, in case No. 160/16076/24 (proceedings No. К/990/41560/25) – https://reyestr.court.gov.ua/Review/131870586.

This and other legal opinions of the Supreme Court are available in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.