Law Firm "DISPUTES"

In December 2022, a Canadian citizen obtained a work permit in Ukraine for a period of 2 years based on an application and documents prepared by the lawyers of "DISPUTS" Law Firm.

Previously, we shared the story of a Canadian citizen whom we assisted in challenging a decision to ban entry into Ukraine for 3 years and forced return to their home country. In court, the foreigner expressed a desire to reside and engage in entrepreneurial activities in Ukraine, and he is now on his way to achieving that goal.

The opening of his own company and engaging in entrepreneurial activities will serve as the basis for obtaining a temporary residence permit in Ukraine for the Client in the future.

However, there is a nuance when a foreigner opens a company in Ukraine – the director of the company must be a Ukrainian citizen because a foreign founder cannot be the director of the same company without permission from the employment center to employ a foreigner in Ukraine.

In September 2022, the Client continued to work with "DISPUTS" Law Firm, and the preparation of a document package for company registration and obtaining a work permit for a foreigner began. On October 17, 2022, the Client's company was registered, and his Ukrainian fiancée became the temporary Director. A bank account was immediately opened for the company. The next step was obtaining the work permit for the foreigner.

In October 2022, changes were made to the Law of Ukraine "On Employment of the Population," which simplified the requirements for the procedure of obtaining such a permit and made it more expensive for foreigners.

Unfortunately, during the consideration of the application for a work permit at the Kyiv City Employment Center, some remarks were made regarding certain information about the foreigner that was provided in the submitted documents.

All the remarks were corrected by the lawyers of "DISPUTS" Law Firm, and on December 23, 2022, the Client received an email with the long-awaited sentence: "The permit is processed and prepared for issuance to the employer."

Thus, the Canadian citizen will welcome the New Year in a new status – as the founder of a new Ukrainian enterprise and its future manager.

On October 27, 2021, attorney Dmitry Chuguenko successfully defended the Client's interests in the Pechersk District Court of Kyiv, proving the Client's innocence in a road traffic accident (DTP).

The court's decision grants the Client the right to receive insurance compensation for the repair of their car.

Case Background:
In June 2021, the Client was driving on the Naberezhne Highway within their lane. To make a right turn, the Client moved to the left, allowing another car to pass, and then turned right to enter the "Kvin" restaurant's side.

Behind the Client, another driver was following, who failed to react in time, did not consider road conditions, did not maintain a safe following distance, and caused a collision with the Client's car, resulting in damage to both vehicles.

The police issued two protocols, which were subsequently sent to the court:

1. The first protocol stated that the Client violated the requirements of paragraph 10.4 of the Road Traffic Rules (PDR), specifically, they did not occupy the far-right position before turning right, leading to a collision with another car. The Client disagreed with these allegations, as per paragraph 10.4 of the PDR, when making a right turn, the driver must take the corresponding far-right position. Still, in a situation where movement is possible only in one direction in one lane, as was the case, the driver may occupy any part of that lane.

2. The second protocol stated that the other driver violated the requirements of paragraphs 2.3 (b) and 13.1 of the PDR, specifically, they failed to consider road conditions, did not maintain a safe following distance, and caused a collision with the Client's car. Both vehicles sustained mechanical damage with financial losses.

In October 2021, the Client sought legal assistance from the "DISPUTS" Law Firm.

Legal Position and Defense Strategies:
During the preparation for the court hearing, Attorney Dmitry Chuguenko carefully examined the legal basis for drafting the protocols and submitted a request to close the proceedings on the grounds of Article 247(1) of the Code of Administrative Offenses due to the absence of the event and the elements of an administrative offense, based on the following arguments:

- The Client did not violate paragraph 10.4 of the PDR.
- The protocol inaccurately claimed that the Client had violated the requirements of paragraph 10.4 of the PDR, specifically, not taking the far-right position before making a right turn. However, considering the one-way traffic on the right lane, the Client had the right to occupy any part of that lane when making a right turn.

- The other driver's actions caused the collision.
- According to the other driver's own statements, they confirmed that the Client was driving in their lane, which had one-way traffic, and that they were at fault for not maintaining a safe distance and not reacting in time to changing road conditions in their lane.

The court, taking into account the explanations of the parties, the testimony of the witness, decided to close the case under Article 247(1) of the Code of Administrative Offenses due to the absence of the Client's guilt and the elements of an administrative offense.

The other driver was found responsible for the DTP.

The insurance company determined the amount of damage at 40,000 hryvnias. As a result of this court decision, the Client obtained the right to receive insurance compensation for the repair of their car.

In May-June 2015, the Client met an acquaintance who, during their conversation, mentioned that a mutual friend of theirs needed assistance in running a business.

Later, this acquaintance contacted her, informing her that she needed to open an account at a bank and sign the necessary documents required for conducting business activities. In return, the Client would receive 2000 hryvnias.

When opening a bank account at the specified bank branch, there were approximately 10 people present, all of whom, like the Client, were opening card accounts to engage in operations with a company called "X" for a fee.

After opening the account, the Client handed over her payment card, signed the papers, and received a reward of 2000 hryvnias.

The individual mentioned earlier assured her not to worry, as their activities were completely legal.

Furthermore, the Client's vigilance was dulled by the fact that the card was not a credit card, and there could be no negative consequences, including debt to the bank, for using it.

After handing over the card, the Client had no further contact with any of the individuals involved, was not informed of any operations on the card, and did not provide consent. Consequently, she concluded that her card was no longer needed and closed the account.

But this is only the beginning of the story.

These individuals acted as a conversion center with the aim of evading taxes for businesses in the real sector of the economy and laundering money obtained through criminal means.

Indeed, this center included several individuals, both physical and legal, who used card accounts obtained for a fee to withdraw cash through ATMs and bank branches.

Over several months of their "work," they conducted transactions on the Client's card totaling around 9 million hryvnias.

The State Tax Service (then Fiscal Service) conducted an audit, as a result of which they assessed taxes against the Client in the total amount of 2.8 million hryvnias and filed a lawsuit to recover these taxes.

In November 2017, the Client sought legal assistance from the "Dispute" law firm.

Client's Interests Defense.

The court hearing in the case brought by the Fiscal Service was scheduled to take place in just a week, so time was limited, and the defense strategy needed to be considered as quickly as possible.

Administrative Proceedings.
The first step was to file a lawsuit to declare the tax assessment decisions unlawful and cancel the tax notifications to stop the proceedings in the Fiscal Service's lawsuit. The grounds for challenging the tax assessment decisions were the fact that the Client did not receive any income, as she was not involved in any entrepreneurial activities, particularly investment-related.

Additionally, the lawyer intended to use materials from the criminal investigation as evidence of the lack of grounds for tax assessments. However, the investigator and prosecutor did not provide any documents upon the court's request to obtain evidence.

Considering the insufficient evidence to support the legal position, the decision was made to initiate a criminal case regarding fraud committed against the Client.

Criminal Proceedings.
The criminal proceedings progressed slowly, but the police and the prosecutor's office worked relatively well. They conducted a formal investigation into the individuals who could be suspects in the case, and it was determined that they could not be found, which was documented in a report. Some documents related to the case finally emerged.

During subsequent court hearings at the District Administrative Court in Kyiv, the lawyer pointed out to the judge in their explanations that the contract between the Client and "X" LLC was void and fictitious, aimed at violating public order (Article 228 of the Ukrainian Civil Code). This was because it involved a criminal offense, as defined in Articles 208 and 212 of the Ukrainian Criminal Code.

Transactions aimed at illegally reducing tax obligations or obtaining budgetary compensation violate public order because they are designed to unlawfully appropriate state property (funds that were supposed to go to the budget or were paid from the budget).

The Client could not have carried out this operation since she did not have the funds to buy and sell securities worth 9,869,535.92 hryvnias.

Income certificates, entries in her employment record, and OK-5 certificates indicated that the Client had never earned close to 10 million hryvnias in her life to purchase securities. She had no money to buy and sell securities. Furthermore, she had no previous involvement in the securities market, was not a securities trader, and had no experience in securities trading. She was employed as a sales manager for travel services and a sales consultant. Thus, she had never dealt with securities and had no interest in them. When she signed the disputed contracts, she did not understand their content and did not attempt to understand it because she trusted the person (in fact, a relative) who asked for help and misled her regarding the true nature of these transactions.

However, these arguments were insufficient, and in light of the representative of the Fiscal Service's objections, it was decided to initiate another legal process – a civil one.

During the consideration of the civil case, the administrative proceedings were suspended based on the court's decision.

Civil Proceedings.
Dmytro Chuhuyenko, the lawyer, filed a lawsuit with Shevchenkivsky District Court in Kyiv to declare the contracts that led to tax assessments as void, based on the following grounds:

As a result of a group of individuals committing criminal offenses against the state, as outlined in Articles 205 and 212 of the Ukrainian Criminal Code, and in the case of the Client, Article 190 of the Ukrainian Criminal Code, she was unjustly assessed a tax debt in the amount of 2,858,954.18 hryvnias. This debt included 2,469,200.00 hryvnias for the income tax of individuals, 187,218.77 hryvnias in calculated penalties, 185,177.25 hryvnias for military duty, and 17,358.16 hryvnias in calculated penalties. This tax debt arose from the recalculated tax liabilities according to the tax assessment decisions, causing damage to her property rights.

According to the content of the Fiscal Service's reports, this tax debt arose from profits obtained from trading securities, with a total value of 9,876,120.00 hryvnias based on the disputed securities purchase-sale contracts.

However, the Client did not engage in any securities transactions and could not have done so due to the circumstances outlined below. As a result, her right is violated, and the disputed contracts should be declared void.

The disputed securities purchase-sale contracts were fictitious and, as a result, invalid because they were not intended to create rights and obligations according to the terms of these contracts. The Client never purchased securities worth 9,869,535.92 hryvnias because:

1. She did not have the necessary funds.
2. She had no connection to the securities market, was not a securities trader, and had no experience in securities trading.
3. Her income, as documented in her employment record, OK-5 certificate, and income certificates, showed that she had never earned nearly 10 million hryvnias in her life to purchase securities.

The income obtained from the difference between the alleged purchase price and the subsequent sale of the securities, along with the transaction dates, lacked any logic. According to the Fiscal Service, the Client supposedly purchased securities for approximately 10 million hryvnias on July 6, 2015, with the intent to sell them with a profit of 6,584.08 hryvnias (0.0667%) by October 1, 2015. Such actions indirectly demonstrate the lack of reality in the purchase and sale of securities.

LLC "X" and LLC "Y" are not real sector enterprises; they were established by unknown individuals with the purpose of systematically committing criminal offenses, namely, tax evasion (part of a conversion center) and fictitious entrepreneurship.

These facts are confirmed by the materials of the pre-trial investigation conducted by the Financial Police Department of the State Tax Service.

Yes, according to the official records, "the pre-trial investigation has established that a group of individuals withdrew cash through point-of-sale terminals and ATMs for a total amount of 39.11 million UAH from transactions involving the purchase and sale of securities that were not actually conducted.

As part of the pre-trial investigation, temporary access to the property and documents of LLC "X" was granted, and during the analysis of the cash flow, no relationship was established between LLC "X" and, in particular, the Client."

"Also, during the pre-trial investigation, no office, trading or warehouse premises, production equipment, fixed assets, and other conditions necessary for fulfilling the contractual obligations before counterparties specified in economic documents were identified. LLC "X" is registered at a mass registration address and is not located at the actual address.

In addition, as witnesses in the aforementioned criminal case, individuals were interviewed, from whose bank accounts cash withdrawals were made, and they showed that they had no connection to the purchase or sale of securities involving LLC "X" and LLC "Y," and the accounts at banking institutions were opened by them solely for monetary remuneration, with subsequent granting of power of attorney."

Furthermore, it is noted that the head of LLC "X" in a phone conversation stated that he is not the head and is located in the area of an anti-terrorist operation.

All these pieces of evidence, taken together, indicate that the disputed Contracts were concluded without the intention of their actual execution, as the Client did not acquire and could not acquire securities, and the Respondents did not intend to trade securities but aimed to engage in illegal activities and commit criminal offenses under the guise of legitimate economic activities.

Resolution:
On April 19, 2019, the Shevchenkivskyi District Court of Kyiv fully upheld the claim and declared the disputed contracts null and void.

Only in December 2019, the administrative court resumed proceedings, and in June 2020, it issued a decision that fully satisfied the claim for the cancellation of tax notifications.

In October 2020, the Sixth Administrative Court of Appeals denied the Main Department of the State Tax Service in Kyiv's appeal and left the decision unchanged.

On July 30, 2021, the District Administrative Court of Kyiv issued a decision refusing the Main Department of the State Tax Service in Kyiv in satisfying the claim for the collection of a tax debt in the amount of 2.8 million hryvnias.

The client can now live peacefully and not worry about this episode in her life.

An extremely complex, lengthy, and interesting cross-sectoral case.

A victory that we, the lawyers of the "Dispute" law firm, are rightfully proud of.

On July 30, 2021, attorney Dmytro Chuguienko completed a three-year legal support case, which included multiple branches of law trial court proceedings. In the end, the attorney helped the client to avoid paying taxes of 2.8 million hryvnias (approximately 100 thousand US dollars at that time).

History

In May - June 2015, the Client met her relative who mentioned that his acquaintance needed help in running a business. Later on, this acquaintance contacted her and informed her that the Client was required to open a bank account and sign the necessary papers for conducting business. For such help, the Client would get 2,000 hryvnias or 70USD.

There were about 10 people in the branch of the specified bank, who, like the Client, had opened debit card accounts for a fee to carry out transactions with LLC "X". After opening the account, she gave away the debit card, signed the papers, and received a reward of 2000 hryvnias from the acquaintance. He assured The Client not to worry, as their activities are completely legal.

In addition, the Client's vigilance was dulled by the fact that the card was not a credit card, there could be no negative consequences for using it, in particular, no credit debt to the bank.

After handing over the Card, the Client did not contact any of the mentioned persons and was not informed about operations with the Card, therefore she came to the conclusion that her card is no longer needed and closed the account.

But it was just the beginning of the story.

That "acquaintance" and the company have acted as a conversion center (money laundering) to evade the payment of income taxes for enterprises in the real sector of the economy and to launder money obtained by criminal means. Thus, the specified conversion center included many individuals and legal entities who used card accounts to withdraw cash through ATMs and bank branches.

During several months of their "work", they carried out card transactions for a total amount of 9 million hryvnias and this amount is only for 1 card account.

The State Tax Service made an audit on those transactions and the Client was overcharged in taxes of 2.8 million hryvnias. Thus, the tax service filed a lawsuit to collect those funds.

Protection of the Client's interests.

In November 2017, the Client applied to the Disputes Counsels' Partnership for legal assistance.

The trial of the State Tax Service of Ukraine vs the Client had been scheduled for just a few weeks, so time was short and a defense strategy had to be generated as quickly as possible.

Administrative proceedings

The first thing that needed to be done was to file an administrative lawsuit for recognition as illegal and revoke tax notifications-decisions (hereinafter - "TND") to suspend the proceedings on the Tax Service's lawsuit to collect that huge debt.

The basis for appealing the TND was the fact, that the Client did not carry out any entrepreneurial activity and any investment activity in particular, thus did not receive any income.

In addition, the attorney intended to use the materials of the criminal proceedings as evidence of the absence of grounds for charging taxes. But the investigator and the prosecutor did not provide a single document at the judge's warrant to represent evidence.

Because of the insufficiency of the evidence base for proving the aforementioned legal position, the attorney decided to initiate criminal proceedings on the fact of committing fraud against the Client.

Criminal procedure

The criminal procedure progressed very slowly, but the police and the prosecutor's office did a pretty good job: they carried out a formal check on the persons who could be suspects in this case, established that they could not be found, and made a report on this.

At least some documents appeared in the case.

At the following court hearings in the District Administrative Court of Kyiv, the attorney drew the judge's attention to the fact that the Agreement concluded between the Client and LLC "X" was void and fictitious, because it was aimed at violating public order (art. 228 of the Civil Code of Ukraine) and because there was a criminal offense stated in art. 208, 212 of the Criminal Code of Ukraine. An illegal deal aimed at willful evasion of taxes or obtaining the right to a budget refund violates public order, as it is aimed at the illegal acquisition of state property (non-receipt of a substantial amount of funds by budgets or targeted state funds).

The client could not carry out this operation, as she did not have money for the purchase of securities of UAH 9,869,535.92. for their further sale. Statements of earnings, records in the workbook, and certificate OK-5 indicated that during her entire life the Client has not ever had an income of almost 10 million hryvnias to purchase securities.

At the same time, such arguments turned out to be insufficient, and taking into account the objections of the representative of the Tax Service, the attorney decided to start another legal process - a civil one.

And for now, the administrative proceedings had been suspended based on a court order.

CIVIL PROCEDURE

Attorney Dmytro Chuguienko filed a complaint with the Shevchenkivsky District Court of Kyiv to declare null and void the contracts that became the basis for tax assessment, on the following grounds.

According to the content of the Acts of the Tax Service, the specified debt arose from the profit from the transactions of purchase and sale of securities for the total amount of UAH 9,876,120.00. under the disputed Contracts for the purchase and sale of the securities.

The disputed securities purchase and sale agreements are fictitious and, as a result, null and void because they were not aimed at establishing, terminating, or changing civil rights and obligations provided in these agreements, due to the following:

The client did not purchase securities of UAH 9,869,535.92 because:

1. She had no necessary funds for this.
2. She never had anything to do with the stock market, is not a broker, and has no experience in trading on the stock market. As stated in the Client's workbook, she worked as a travel services sales manager and sales consultant. She had never come across securities and had no interest in them. While signing the disputed Contracts, she did not know their content. She did not try to find it out, as she trusted the person (actually a relative) who asked for help and misguided her about the actual content of the beforementioned transactions.
3. Income derived from the difference between the price of purchase and sale of the securities, as well as the dates of transactions did not make any sense. So, the securities were allegedly purchased for the price of UAH 9,876,120.00 and were sold for the price of UAH 9,869,535.92. According to the Tax Service, the Client purchased securities worth about 10 million hryvnias on 07/06/2015 to sell them by 10/01/2015 with a profit of 6,584.08 hryvnias. (0.0667%).

Such actions indirectly prove the lack of substance of the transaction of purchase and sale of securities.

1. LLC "X" and LLC "U" are not enterprises in the real sector of the economy, they were created by unknown persons to systematically commit criminal offenses: tax evasion, money laundering (part of the conversion center), and fictitious entrepreneurship.

The mentioned facts are confirmed by the materials of the pre-trial investigation of the Tax police in the Obolon District of Kyiv. Thus, according to official memos in the case, "the conducted pre-trial investigation found that a group of individuals withdrew cash through post terminals and ATMs in the total amount of UAH 39.11 million." from securities purchase and sale transactions that were not carried out.

As part of the pre-trial investigation, temporary access to the belongings and documents of LLC "X" was made. During the analysis of that documents and the movement of funds, the relationship between LLC "X" (code 39481091) and the Client was not found.

"Also, the pre-trial investigation did not find any sign of offices, commercial and warehouse premises, production equipment, fixed assets, and other conditions, which are necessary for the fulfillment of the contractual obligations to the counterparties specified in the business documents. LLC "X" is registered at the mass registration address and is not located at the address.

Along with this, individuals from whose bank accounts cash withdrawals were made were interrogated as witnesses in the aforementioned criminal proceedings, who specified that they had nothing to do with the purchase or sale of securities involving LLC "X" and LLC "Y"; and accounts in banks were opened by them exclusively for a reward with the subsequent issuing of powers of attorney ."

In addition, it is stated that the director of LLC "X" in a telephone conversation told that he was not the director and has always been is in Anti-Terrorist Operation Zone.

All these pieces of evidence completely indicated that the disputed Contracts were concluded without the purpose of their actual execution, since the Client did not purchase and could not purchase securities, and the Defendants did not intend to trade in securities but intended to carry out illegal activities and commit criminal offenses under the guise of legal economic activity.

On April 19, 2019, the Shevchenkivskyi District Court of Kyiv fully satisfied the claim and declared the disputed contracts null and void.

Only in December 2019, the Administrative court resumed the proceedings, and in June 2020, it passed a decision where the lawsuit for revoke of tax notices-decisions was fully satisfied.

In October 2020, the Sixth Administrative Court of Appeal refused the State Tax Service to satisfy the appeal and left the decision of the administrative court unchanged and in force.

Then on July 30, 2021, the District Administrative Court of Kyiv passed a decision refusing the claim for the collection of tax debt of 2.8 million hryvnias.

The Client can now live peacefully and not worry about this episode in her life.

That was an extremely complex, long, and interesting multi-branch case and we, the lawyers of the Disputes Counsels’ Partnership, have all the right to be proud of the victory that we gained for the Clie

In December 2022, a Canadian citizen obtained a work permit for 2 years based on the application and documents drafted and submitted by solicitors and attorneys of the Law Firm "Disputes".

Earlier on our website, we mentioned a Canadian citizen whom we helped to appeal the State Immigration Service decision on an entry ban to Ukraine for 3 years and expulsion to his country of origin. During the trial, the foreigner expressed his desire to live and do business in Ukraine. And he is heading toward his goal.

Opening a company and the entrepreneurship itself will be a legal ground for obtaining a temporary residence permit in Ukraine for the Client in the future.

But there is one peculiarity in starting a business by a foreign citizen in Ukraine - the director of the company must be a citizen of Ukraine or must have a work permit from the Employment Center.

In September 2022, the Client continued his cooperation with the Law Firm "Disputes" and we prepared a package of documents for company registration as a first step in obtaining a foreigner's work permit. The Client's company was registered on October 17, 2022. His Ukrainian bride became the temporary director. A bank account was opened for the company. The next stage was to obtain a work permit for the employment of a foreigner.

In October 2022, the Law of Ukraine "On Employment of the Population" was amended to simplify the requirements for the procedure for obtaining such a permit for foreigners, while at the same time making it more expensive.

Unfortunately, during the consideration of the application for the issuance of a work permit at the Kyiv City Employment Center, there were remarks regarding some information about the foreigner, which were specified in the submitted documents.

The lawyers of the Law Firm "Disputes" fixed all the remarks, and on December 23, 2022, a letter was sent to the Client's e-mail with the following sentence: "The permit has been issued and prepared for handover to the employer."

Thus, the Canadian citizen will meet the New Year with a new status - as the founder of a new Ukrainian enterprise and its future Director.