Certain aspects of the application of the judicial doctrine of the reality of a commercial transaction

The article examines selected aspects of the application of the judicial doctrine on the reality of commercial transactions in tax legal relations. The essence of this doctrine lies in the principle that only the actual, and not merely the formally declared, movement of assets produces legal consequences for tax accounting purposes. The significance of this judicial doctrine is that it influences the subject matter and procedures of evidence, the types of evidence used, and the approaches to their assessment in order to carry out the legal qualification of a commercial transaction. It is argued that in the absence of a clear normative definition of the term “real commercial transaction,” it is the judicial doctrine that serves as a legal benchmark in resolving disputes between taxpayers and tax authorities regarding the unlawfulness and annulment of tax notices-decisions on the additional accrual of tax liabilities and/or the imposition of financial (penalty) sanctions. It is noted that courts, when addressing the issue of confirming or refuting the reality of commercial transactions, are guided not only by the formal features of primary documents but also assess the actual movement of assets, the economic rationale of the taxpayer’s actions, and other relevant circumstances. The allocation of the burden of proof is specified depending on the procedural status of the parties. It is clarified that the tax authority must prove the existence of indications of the transaction’s fictitiousness, while the taxpayer is obliged to provide admissible evidence of the actual conduct of the business activity. The article discusses the influence of the legal positions of the Supreme Court on the development of the judicial doctrine. Attention is drawn to the shift in approaches to the assessment of primary documents following amendments to the legislation on accounting. It is demonstrated that primary documents have legal force only when an actual transaction has occurred. The conclusion is made on the necessity of a comprehensive evaluation of evidence, taking into account the substance of the commercial transaction rather than its documentary form alone, which is crucial for the fair resolution of tax disputes. It is emphasized that the application of this judicial doctrine enables the court both to confirm and to reject the reality of commercial transactions, based on the assessment of each piece of evidence individually and in their entirety.