Tax authority fines startup for $95.4k forcing company to move to the UK

The Ukrainian startup MySales Labs, the developer of retail sales forecast solutions, announced a ₴2.6 million (approx. $95,400) penalty from the State Fiscal Service of Ukraine. The founder Alexey Ivasyuk said the Fiscal Service made a mistake, and this penalty should be illegal. That’s why a part of MySales even moved to Great Britain. The information was published on DOU, and Alexey confirmed it for AIN.UA.

What happened?

• There should be a scheduled fiscal check at MySales Labs in 2020, but it has been postponed to 2021 because of the COVID.
• According to Ivasyuk, the fiscals checked three specific persons who received payments as individual entrepreneurs (FOP) for software development and technical support. And the founder said they were the company’s 0.25 part-time employees for some time until they got fired. The founder also described the situation on his Facebook page:

“We provided the officers with all the required documents and explanations against protocol; we hoped everything would be according to the law. But then they wrote in their protocol that we have not provided any documents! Before sending the protocol back to us, they called and said, ‘We understand that you can be right but our leaders demand it so. So, you can go to the court.’ […] They decided to calculate additional taxes for those payments to the FOPs for software development and technical support + fees with an interpretation that we had a labor relationship. Are they actually authorized to do this?”

• Ivasyuk also explained that they provided the fiscal officers with personnel job descriptions, and there was no word about software development. He stated these specialists had been employed after getting payments as FOPs.
• But the Fiscal Service claimed not received those documents despite signed registries of provided articles of incorporation. Due to such “non-providing,” the authority interpreted payments to the FOPs for software development and technical support as labor relationships and issued ₴2.6 million in penalties since 2017. The founder referred to lawyers and said that employees might be 0.25 part-time employed and be FOP simultaneously.
• AIN.UA has also learned the documents: Based on them, MySales Ukraine did really provide the State Fiscal Service with its business documents, including turnover statements, job descriptions, acceptance certificates with FOPs, and labor agreements. On the register of those documents are signatures of fiscal officers who performed the inspection. At the same time, according to the appendix to the inspection protocol, the company should refuse to provide those documents. At the same time, according to the appendix to the inspection protocol, the company should have refused to provide those documents.
• Ivasyuk told AIN.UA that MySales Labs is now disputing the decision with the tax authority, and later, it is going to be challenged in court.
• According to the founder, it is a huge amount for a startup to pay and he cannot pay ₴2.6 million, so mySales is moving its main activities and contracts to the UK, with the only R&D office remaining in Ukraine. The startup’s founder is also considering moving from Ukraine to the UK.