Transportation documents: outcomes in case of absence of consignment note (TTN)

A consignment note (TTN) is a primary document that certifies the transportation of goods. It is important not only for transportation but also for tax reporting. In this article, we will discuss the consequences if an entrepreneur draws up a consignment note incorrectly and how to avoid them.

TTN and product cost

A consignment note is used to make payments for the transportation of goods. The driver of a vehicle must have an executed consignment note when transporting goods under a transportation contract. Together with other transportation documents, it becomes the basis for the calculation of income tax in accordance with subpara. 134.1.1 of the Tax Code of Ukraine.

In accordance with Clause 9 of the National Accounting Regulation (Standard) 9 “Inventories,” approved by the Order of the Ministry of Finance No. 246 dated October 20, 1999, and Clause 10 of IFRS 2, the cost of transportation of inventories is included in the cost of inventories. In the event that the consignment note is missing or incorrectly executed during the transportation of goods, the cost of transportation services cannot be included in the cost of goods. This is further clarified by the Tax Service in its explanations.

In the absence of transportation documents confirming the receipt of cargo transportation services, including a consignment note, which are considered to be primary documents and on which accounting is based, a taxpayer has no grounds to take into account the cost of such services in the formation of the cost of purchased (manufactured) and sold goods, performed works, or rendered services when determining the financial result before taxation in accordance with the accounting rules.

The Main Department of the State Tax Service in Ivano-Frankivsk region

TTN and tax incentives

VAT payers may use a tax credit to reduce the amount of taxation. This is outlined in Article 198 of the Tax Code of Ukraine.

The tax credit includes the actual expenses incurred in the purchase of goods. Transportation costs are confirmed by transportation documents, including consignment notes. In accordance with established court practice, the absence of a consignment note may result in the denial of a tax credit and lead to additional VAT charges.

The determining conditions for the formation of a VAT credit and expenses by a taxpayer, among others, are the availability of properly executed primary documents and the connection of business transactions, which are confirmed by the specified primary documents, with the economic activities of such a taxpayer.

Resolution of the Supreme Court dated August 03, 2022
in the case of the claim of an individual entrepreneur against
the Main Department of the State Tax Service in Odesa region

How do electronic consignment notes help to avoid mistakes?

The regulations governing the transportation of goods by road in Ukraine permit the preparation of a consignment note in either paper or electronic format. The use of electronic consignment notes (eTTN) is becoming increasingly prevalent. Ukraine is currently implementing a project to introduce eTTNs in domestic cargo transportation. Following the conclusion of martial law, the government has announced its intention to make eTTNs mandatory.

Providers offer convenient services for creating and signing an eTTN. The supplier may create the eTTN in their personal account on the online service or in a mobile application. The program generates an electronic consignment note based on a template, and the supplier is required to enter data about the participants in the transportation, the vehicle, etc. in the designated fields. In this case, the risk of errors is significantly reduced.