This will be a clear signal that the Ukrainian government protects the rights of investors in Ukraine.
Managing Director of Philip Morris Ukraine Michalis Alexandrakis says the company, one of the country's largest tobacco manufacturers, expects Ukraine's State Fiscal Service (SFS) will soon implement the amicable agreement between the company and the government, under which the latter is obliged to ensure the abolition of tax assessment notices totaling UAH 635 million, or US$23.5 million.
"We're disappointed by the fact that the Ukrainian tax authorities have not yet withdrawn tax assessment notices. The settlement deal has already entered into force, and we hope that the SFS will ensure compliance with legal requirements and take measures to implement the agreement," he said at a press conference in Kyiv on March 27.
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According to Alexandrakis, this will be a clear signal that the Ukrainian government protects the rights of investors in Ukraine and ensures the improvement of the country's business climate.
Legal adviser at Philip Morris Ukraine Volodymyr Nakonechny says the company in 2015 joined a special customs regime for processing the produce in Ukraine for its further exports. This was authorized by the SFS's Kharkiv customs office.
Nakonechny added that under the regime, Philip Morris Ukraine was entitled to conditional exemption from the Ukrainian import duty and other import taxes on materials for processing raw materials, the products from which belonged to re-export.
It is noted that the total cost of products that were manufactured and exported under the special regime during 2015-2016 was estimated at EUR 87 million.
However, according to Nakonechny, in March 2016, when the validity of the regime almost expired, the SFS initiated a tax audit to check the legitimacy of the use of the special regime by Philip Morris companies. Thus, as a result of the audit, the SFS issued tax assessment notices totaling UAH 635 million. After an unsuccessful administrative appeal at the SFS bodies, as well as in the court of first instance, four Philip Morris companies submitted an investment dispute notice to the Ukrainian government.
"To resolve the issue, the government created an interdepartmental ad hoc group that prepared a draft settlement agreement between the Philip Morris companies and the state of Ukraine," the press conference participants added.
Deputy Business Ombudsman Tetiana Korotka, in turn, said that acting head of the SFS Oleksandr Vlasov signed the settlement agreement on January 31, 2019. Under the document, Ukraine was obliged to ensure the abolition of tax assessment notices within 30 days after its signing, that is before March 2.
However, as of March 27, the SFS had not yet withdrawn the tax assessment notices, according to Alexandrakis.
UNIAN memo. Philip Morris Ukraine is part of one of the world's largest cigarette manufacturers, Philip Morris International (PMI).
Philip Morris Ukraine in 2017 posted UAH 627.3 million ($23.3 million) in net profit, whereas it was in the red in 2016 with net losses estimated at UAH 1.08 billion ($40 million).
Philip Morris has been operating in the Ukrainian market for over 15 years. The company manufactures its products at a factory in Ukraine's Kharkiv region. Philip Morris products are represented in Ukraine by such brands as Chesterfield, Bond Street, Marlboro, L&M, Parliament, etc.