KM Partners has successfully represented interests of Ukrainian cinema network

03/ 06/ 2021

KM Partners has successfully represented interests of Ukrainian cinema network in a dispute with the Main Department of the State Tax Service in Kyiv and has proved the legality of receiving accounting services by a company on the basis of civil contract with an individual entrepreneur. On the results of the documentary scheduled tax audit, the tax authority has requalified remuneration payment to individual entrepreneur into salary, charged additional tax liabilities, Unified Social Security Contribution, Military Tax and imposed corresponding penalties. After the examination of evidences, the court determined that the contract, concluded between company and individual entrepreneur, did not contain features of an employment contract, and the individual entrepreneur provided accounting services without exercising labor function, in particular: «Proceeding from the specified civil contracts, the court has not established that the individual entrepreneur was employed according to a particular qualification, profession or position; the court has not also established the fact of explaining to such persons their rights and obligations and informing about working conditions with further signing of the acknowledgment , … work management process remains outside the scope of the contract, the purpose of such contracts is to obtain a certain material result». The court also agreed with the arguments of KM Partners‘s attorneys and concluded that: «Usage of electronic signature of the individual entrepreneur shall not evidence for the existence of labor relations between the company and the individual entrepreneur. It may only prove the inconsistency of legislation in this sphere, lack of mechanism for obtaining electronic signature by a non-employee, but not the existence of labor relations». Representation of the client’s interests before the court was performed by the team of KM Partners, in particular, by Senior of Counsel Yaroslava Ivasiuk led by Partner Alexander Shemiatkin.

On the results of the documentary scheduled tax audit, the tax authority has requalified remuneration payment to individual entrepreneur into salary, charged additional tax liabilities, Unified Social Security Contribution, Military Tax and imposed corresponding penalties.

After the examination of evidences, the court determined that the contract, concluded between company and individual entrepreneur, did not contain features of an employment contract, and the individual entrepreneur provided accounting services without exercising labor function, in particular:

«Proceeding from the specified civil contracts, the court has not established that the individual entrepreneur was employed according to a particular qualification, profession or position; the court has not also established the fact of explaining to such persons their rights and obligations and informing about working conditions with further signing of the acknowledgment , … work management process remains outside the scope of the contract, the purpose of such contracts is to obtain a certain material result».

The court also agreed with the arguments of KM Partners‘s attorneys and concluded that:

«Usage of electronic signature of the individual entrepreneur shall not evidence for the existence of labor relations between the company and the individual entrepreneur. It may only prove the inconsistency of legislation in this sphere, lack of mechanism for obtaining electronic signature by a non-employee, but not the existence of labor relations».

Representation of the client’s interests before the court was performed by the team of KM Partners, in particular, by Senior of Counsel Yaroslava Ivasiuk led by Partner Alexander Shemiatkin.