Namelaka has been in a legal battle with the tax authorities for five years in a row: the amount in dispute is 209,000 UAH
8 April 16:42
Namelaka, a well-known pink pastry shop in Ukraine—where lines of people eager to try its pastries form almost every day in Kyiv—has been defending its position in court for five consecutive years regarding the inclusion of certain expenses in its tax credit. Meanwhile, tax authorities insist that the pastry maker has allegedly committed violations. What is the essence of the dispute and what stage is it currently at? The editorial staff "Komersant Ukrainian" based on data from the Register of Court Decisions.
The Start of the Dispute
In 2021, Namelaka LLC came under scrutiny by regulatory authorities due to its value-added tax (VAT) return for November 2020. The tax service deemed the negative VAT balance reported by the company to be overstated and initiated a dispute that has been ongoing for over four years.
The essence of the claims
Based on three notices from the Main Directorate of the State Tax Service in Kyiv, an unscheduled on-site documentary audit of Namelaka LLC was conducted in late January 2021. The auditors examined the correctness of the calculation of the negative VAT balance in the November 2020 return, which included negative balances from previous reporting periods.
Based on the audit results, a report was drawn up on February 4, 2021, stating “violations of several provisions of the Tax Code of Ukraine.” The auditors concluded that the negative VAT balance had been overstated by UAH 209,912. Specifically, the report noted:
“…as a result of the audit, an overstatement of the negative balance included in the tax credit… was established for a total amount of UAH 209,912 for November 2020, namely:
- an understatement of VAT tax liabilities … in the amount of UAH 109,277 corresponding to the shortage of inventory;
- underreporting of VAT tax liabilities in the amount of UAH 100,635 … due to the failure to accrue tax liabilities for the cost of services related to a portion of the rent and electricity consumed,” states one of the court rulings in the case.
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Based on the act, the State Tax Service issued Tax Notice-Decision No. 00184250702 dated March 10, 2021, which resulted in the refusal to register the tax invoice and a corresponding reduction in the company’s tax credit.
The parties’ positions in the dispute
Position of the State Tax Service:
The tax authority considered that Namelaka LLChad improperly included expenses in its tax credit that did not meet the criteria for business activities and had no grounds for claiming a negative balance in full. The main claim was that part of the expenses (rental of non-residential premises, electricity, etc.) was not substantiated as exclusively related to the generation of income and therefore should have resulted in tax liabilities under the rules of Section 198.5 of the Tax Code of Ukraine.
Namelaka LLC’s Position:
The plaintiff insisted that all expenses were correctly reflected in the financial statements, and the negative VAT balance was calculated in accordance with the requirements of the Tax Code. The first-instance ruling states that the company provided sufficient evidence, and the State Tax Service’s conclusions were made without sufficient grounds:
“To declare unlawful and revoke the tax notification-decision of the Main Directorate of the State Tax Service in Kyiv dated March 10, 2021, No. 00184250702,” the court ruling states.
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First Instance: Decision in Favor of Namelaka
On April 30, 2025, the Dnipropetrovsk District Administrative Court fully granted the administrative claim filed by Namelaka LLC. The court found that the tax notice-decision was unlawful and revoked it:
“…to grant the administrative claim… to declare the tax notice-decision unlawful and to revoke it…,” the decision states.
In addition, the court awarded the company court costs from the defendant in the amount of UAH 3,149 (court fee) and UAH 4,000 (legal fees).
Appeal: The case is not closed
However, the first-instance decision was not the final word. The Main Directorate of the State Tax Service in Kyiv filed an appeal, and on August 1, 2025, the Sixth Administrative Court of Appeal issued a ruling scheduling the case for consideration in written proceedings.
Thus, the dispute between the business and the tax authority continues, and a final decision on the legality of the State Tax Service’s actions has not yet been made.
As reported by
