Failure to Register Tax Invoices Is Not an Automatic Breach of Contract — Conclusion of the Joint Panel of the Commercial Cassation Court of the Supreme Court

The legal nature of the obligation to register tax invoices is purely public, which prevents it from being transformed into a civil obligation, even with the parties’ agreement in a contract. Since taxation is governed by mandatory rules, any contractual provision that contradicts them does not create the legal consequences envisaged by the contract and does not provide grounds for contractual liability.

This conclusion was reached by the joint panel of the Commercial Cassation Court within the Supreme Court in case No. 904/2953/24.

Case Background

In the case under review, the buyer filed a claim seeking contractual penalties from the supplier for breaching obligations to register tax invoices in the Unified Register of Tax Invoices, as stipulated in their supply agreement.

After reviewing the case materials and the parties’ arguments, the local commercial court dismissed the claim, a decision upheld by the appellate court.

Disagreeing with the lower courts, the plaintiff filed a cassation appeal with the Supreme Court of Ukraine, requesting, among other things, that the decisions of the first-instance and appellate courts be annulled and a new decision be issued satisfying the claim in full.

The matter before the joint panel concerned whether failure or improper performance of contractual terms regarding tax invoice registration could constitute a business law violation giving rise to contractual liability.

Conclusions of the Supreme Court

The panel upheld the decisions of the lower courts and made the following key findings:

• The procedure for preparing and registering tax invoices is governed by the Tax Code of Ukraine, which regulates relations arising in the sphere of taxation and levies.
• The Tax Code does not allow the application of civil law governing obligations between parties to these relations. These rules are mandatory, meaning they cannot be altered by agreement between the parties.
• The seller’s obligation to register a tax invoice is a duty as a taxpayer in public-law relations with the state, not a contractual obligation toward the buyer.
• Including obligations subject to tax law regulation in a private-law contract does not convert them into civil obligations, regardless of the parties’ intent.
• Therefore, such contractual provisions do not create the legal consequences envisaged by the contract and do not provide grounds for contractual liability.
• An agreement between the parties to regulate their relations contrary to statutory limitations does not establish any corresponding right or obligation.