A department of the Odesa City Council was unable to recover VAT from a contractor

In Odesa, the Department of Municipal Services was denied its request to collect nearly 727,000 hryvnias from the company “Apus Plus.” Officials had attempted to recover the value-added tax they themselves had paid to the contractor for major repairs to residential buildings.

This is stated in a ruling by the Commercial Court of Odesa Oblast. 

As noted in the case file, in 2025, the Department of Municipal Services entered into 26 construction contracts with the company “Apus Plus” for the major renovation of Odesa’s housing stock at the expense of the city budget. VAT was included in the contractual cost of the work by mutual agreement of the parties.

The contractor completed the repairs, the client accepted them without objection, paid for them, and the company paid the tax to the state budget.

Subsequently, the Southern Office of the State Audit Service conducted an audit and concluded that contracts for the major renovation of residential buildings using budget funds are exempt from VAT. According to the auditors’ calculations, 726,993 hryvnias of this tax were improperly included in the cost of the work.

Following the audit, the department demanded that the contractor return the funds as unjust enrichment, and after the contractor refused, the department filed a lawsuit.

During the hearing, the judge agreed that, under the Tax Code, such work may indeed qualify for a tax exemption. At the same time, the judge noted that all 26 contracts were signed by mutual agreement of the parties. They remain in force, and officials did not file any claims to invalidate the contract provisions regarding the inclusion of VAT in the price of the work.

Given the established practice of the Supreme Court, it is impossible to recover such funds as unjust enrichment without first declaring the relevant contract terms invalid. 

Юлія Калабайда