Southern Mining denies tax authorities’ accusations of violations in dividend payments

Southern Mining denies the claims of the State Tax Service of Ukraine (STSU) that it violated tax and legal regulations when paying dividends to shareholders in 2017-2019. This was reported to GMK Center by the press service of Southern Mining.

“In this case, Southern GOK acted in strict compliance with the Tax Code and international law that were in force during the period of dividend payment in 2017-2019. The Cypriot companies that are shareholders of the asset provided Southern Mining with all the necessary documents to apply the withholding tax rate on dividends. In its actions, Southern Mining was guided by the explanations of the Tax Service of Ukraine and court practice in force at the time,” Southern Mining said in a statement.

The company says that the administrative courts of first instance and appellate courts did not consider the case on the merits but canceled the tax notices, primarily citing the moratorium on tax audits during the war.

“At the same time, the Supreme Court of Ukraine changed the previously established practice of a moratorium on tax audits and, without proper study of the case file, actually assumed the powers of the court of first instance and made a new decision that was negative for Southern Mining,” the plant’s press service emphasizes.

The document also emphasizes that the instability of tax policy and judicial practice, as well as their retroactive application over time, create serious risks for investors and negatively affect the development of Ukrainian business. Southern Mining will continue to defend its rights by all legal means.

The reason for this statement was that, following a complaint filed by the State Tax Service, the Supreme Court ordered Pivdennyi Mining to pay UAH 3.7 billion to the state budget: the main payment of UAH 2.98 billion and fines of UAH 0.8 billion. According to the tax authorities, these are taxes and fines for the unlawful use of tax benefits when paying dividends to Cypriot companies. According to Ruslan Kravchenko, Head of the State Tax Service, the tax authorities found that the company had transferred UAH 29.8 billion in dividends to shareholders from Cyprus over three years. The dividends were paid at a preferential tax rate of 5%, and UAH 1.49 billion was paid to the budget.

As a reminder, the tax authorities have recently stopped refunding VAT to some mining and metals companies. Irresponsible actions of the State Tax Service of Ukraine result in the industry’s companies losing working capital, the shortage of which is particularly acute in times of war and becomes a significant obstacle to the stable operation of Ukrainian export-oriented businesses.

As GMK Center reported earlier, despite the war, the mining and metals sector remains a key sector of Ukraine’s economy. The contribution of the mining and metals industry, including supply chains, to Ukraine’s GDP increased to 7.2% in 2024 (5.7% in 2023). This was due to an increase in steel production (+21.5%) and iron ore production (+55.2%).