SC: one tax invoice is not enough — you need proof of a real transaction

In tax disputes, businesses often rely on formal documents — tax invoices, acceptance certificates, contracts, payment orders — and assume that their existence automatically confirms that transactions are real and that the taxpayer is entitled to input VAT and expense recognition. In practice, the Supreme Court consistently states that a tax invoice and other supplier documents are not unconditional proof that transactions are real if the overall circumstances point to the opposite.

Position of the Supreme Court: it is not the documents but the actual transaction that creates legal consequences
The Court emphasizes that the mere existence of tax, delivery and other accounting documents of the supplier does not by itself prove that a transaction is real if other circumstances indicate that the data are unreliable; legal consequences in the form of input VAT and deductible expenses arise only from transactions that have actually been carried out and are supported by primary documents reflecting their real economic substance, whereas purely formal paperwork does not legalize something that in fact never happened.

Why one tax invoice is not enough
A typical situation: the taxpayer has a contract, a tax invoice, a delivery note and a payment order. On paper the set looks complete, yet the Supreme Court has repeatedly sided with the tax authority where:

• all contracts are “carbon copies”, with identical terms and no individual features, which points to a purely formal document flow;
• data from the Unified Register and analytical databases show no real supply chain (counterparties “sell to themselves”, there is no logistics, real manufacturers or stock on warehouses);
• the counterparty lacks staff and physical assets that would make it possible to perform the declared scope of work or supply (no personnel, transport or production facilities, etc.);
• apart from formal invoices and contracts, the taxpayer provides no additional evidence that the transaction was actually performed (detailed acceptance certificates, CMR/waybills, warehouse records, internal memos, correspondence, photo or video evidence).

The Court stresses that contracts, tax and delivery invoices do not in themselves prove the real movement of assets and only record the parties’ intention. Therefore, the court expects a broader set of evidence demonstrating the genuine business substance of transactions (origin, movement and transfer of goods and the performance of works or services).

What exactly the court examines: “red flags” for input VAT
Case law has developed several indicators that cast doubt on the reality of transactions despite the presence of tax invoices:

• Impossibility for the counterparty to make the supply. For example, it has no employees, fixed assets, leased warehouses or production premises, or vehicles. The Court makes it clear that in such circumstances formal primary documents do not prove that the transaction is real.
• A broken or artificial supply chain. Counterparties look like mere “transit” entities in the register, file no reports, pay no taxes but generate large volumes of tax invoices, often issued “to themselves”.
• Absence of supporting documents typical for that type of transaction. For a sale of goods one would expect waybills, warehouse and transport documents; for services — detailed certificates, technical assignments, reports and photo or video evidence.
• Lack of economic sense or connection with the taxpayer’s business. If a transaction has no clear business purpose, the court will scrutinize the “paper” package even when tax invoices exist.

Courts also take into account information from the tax authorities’ analytical databases but stress that such information is not in itself conclusive evidence of sham transactions. It only creates a background that must be corroborated with other objective data.

Burden of proof: what the taxpayer must do
The Supreme Court consistently proceeds from the premise that it is the taxpayer who must prove the reality of the business transactions that generate input VAT and deductible expenses. If the tax authority puts forward specific arguments that transactions are fictitious — such as insufficient resources of the counterparty, a broken supply chain or absence of goods in warehouses — the burden of disproving these claims shifts to the taxpayer.

In a recent case, the Court expressly stated that the right to input VAT arises only where transactions are real (actual and genuine), carried out within the taxpayer’s business activities and supported by properly executed primary documents. This means that:

• absence of primary documents or providing them “retroactively” at the dispute stage significantly weakens the taxpayer’s position;
• merely filling in documents without reflecting the actual movement of goods, works or services does not protect against additional assessments;
• the court evaluates evidence as a whole rather than in isolation, so a single invoice or certificate without a supporting “background” does not work.

What evidence of real transactions the court expects to see
Court practice shows that the more comprehensive the set of evidence the taxpayer submits, the higher the chances of defending input VAT. The Supreme Court and professional reviews recommend, in particular:

• Contracts and addenda with detailed terms (volumes, deadlines, specifications, acceptance procedures, responsible persons).
• Properly executed primary documents: acceptance certificates, work completion certificates, delivery notes, invoices, payment orders, trial balances, warehouse cards and similar records.
• Logistics documents: waybills, transport contracts, transportation requests and route sheets where the transaction involves physical movement of goods. The Court recognizes that waybills are not formally primary documents for acquisition, but their existence is appropriate evidence that goods were moved.
• Evidence that works or services were actually performed: technical assignments, reports, internal memos, photo and video records of completed works, correspondence with counterparties, minutes of meetings.
• Data on counterparties: extracts from registers, information about staff, fixed assets and production capacity — anything that confirms their ability to perform their obligations in reality.

The general conclusion from case law is that proving the reality of a transaction means establishing the actual movement of assets in the course of performing the contract, not just producing one or two tax invoices and a formal contract.

Practical takeaways for business

1. Do not limit yourself to a “minimum package”. A contract, a tax invoice and an acceptance certificate are the baseline, but for risky transactions (large amounts, new counterparties, problematic sectors) you should build an extended set of primary and supporting documents.
2. Screen your counterparties before you sign. A partner’s resources, reputation and tax discipline influence how courts will view the transactions. A functioning KYC process is no longer a “nice to have” but an element of tax safety.
3. Record factual actions. For services and works, photo and video records, detailed reports, correspondence and internal documents significantly strengthen your evidence base.
4. Prepare for audits in advance. When documents are created “from scratch” after a dispute has already started, courts view them with particular skepticism. Primary documents must be created at the time the transaction is carried out, not after the fact.
5. Be ready for a holistic assessment. Tax authorities and courts look at a transaction “in the round”: economic substance, real resources, logic of the supply chain and the counterparty’s behavior. Formal documents are only one piece of the puzzle.

The Supreme Court sends a clear signal: the era when it was enough to simply have a tax invoice and a contract is over. What matters now is the substance of the transaction, the real movement of goods, works and services and the taxpayer’s ability to prove this convincingly through a comprehensive set of documents and other evidence.

If you have questions or issues related to the reality of business transactions, tax audits or the safety of your input VAT, you should consult lawyers who deal with such disputes on a daily basis.
Author: Ihor Yasko, Managing Partner at “WINNER” Law Firm, PhD in Law.