Author: Uliana Luchkevych, lawyer at F&P
A planned inspection of a business is an integral part of economic activity, regulated by Ukrainian legislation. However, business owners are not always prepared for such inspections, which can lead to significant financial costs and legal consequences. That is why it is crucial to prepare your business in advance, following a set of important rules. In this article, we will discuss the 10 main rules for business directors to ensure effective preparation for a planned inspection in accordance with Ukrainian legislation.
1. Timely Monitoring of Changes in Legislation
Changes in legislation are a frequent occurrence, and the business director must stay updated on new requirements to avoid violations. In particular, it is essential to track changes in tax legislation, especially the Tax Code of Ukraine (TCU), as well as laws regulating labor relations, environmental standards, and other critical aspects of business activity.
Example: In 2023, amendments to the Tax Code of Ukraine were passed concerning changes to corporate income tax rates, which may affect the calculation of a company’s tax liabilities. Directors should regularly monitor such changes and promptly adjust their financial reports.
2. Correct Accounting and Documentation Management
According to the Law of Ukraine “On Accounting and Financial Reporting”, every business is required to keep accurate financial records and submit reports on time. During inspections, regulatory authorities check not only tax returns but also the accuracy of income and expense records and compliance with reporting requirements.
Example: During an inspection, it might be found that records of transactions involving fixed assets are improperly kept, which may result in a fine under paragraph 120.1 of the Tax Code of Ukraine. In this case, all relevant documents should be organized in advance for inspection.
3. Reviewing and Updating Employment Contracts
Proper execution of employment contracts and compliance with the Labor Code of Ukraine (LCU) is a key aspect of preparation for an inspection. Inspecting authorities may focus on whether employment contracts meet legal requirements concerning minimum wage, working conditions, leave payments, and the existence of documentation confirming employment.
Example: During an inspection, authorities from the State Labor Inspection may find that certain employment contracts have not been properly executed, leading to penalties under Article 265 of the Labor Code.
4. Updating Founding Documents
According to the Law of Ukraine “On Business Associations”, businesses must keep their founding documents up-to-date. In particular, changes to the company’s charter, changes in the list of founders, or organizational and legal form must be appropriately reflected in the registration documents.
Example: If the company changes its legal address or ownership structure, this must be reflected in the registration documents and updated in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations.
5. Timely Payment of Taxes and Fees
Businesses must fulfill their tax obligations on time, in accordance with the Tax Code of Ukraine , ensuring compliance with deadlines for VAT, corporate income tax, social security contributions, and other mandatory payments. Failure to do so can lead to significant fines and penalties.
Example: In 2023, tax authorities began more actively inspecting businesses that abuse the simplified taxation system. If tax payments are found to be overdue, substantial fines may be imposed under Article 123 of the Tax Code.
6. Reviewing Contracts with Contractors
It is important to ensure that all contracts with contractors signed by the company comply with legal requirements, are properly executed, and are stored in the company’s archives. The Civil Code of Ukraine regulates the issues of contract formation, performance, and consequences of breach of terms.
Example: During an inspection, a contract with a contractor may be found to lack provisions regarding payment terms or delivery of goods, leading to financial penalties or demands for the return of funds.
7. Complying with Occupational Health and Safety Requirements
According to the Law of Ukraine “On Occupational Health and Safety”, businesses are obligated to create safe working conditions, conduct safety training, organize medical examinations for employees, and more. Violations of these requirements during an inspection can lead to fines.
Example: Identifying safety violations, such as the absence of personal protective equipment in the workplace, can result in serious sanctions from the State Labor Inspection.
8. Preparing Staff for the Inspection
It is essential to conduct training for employees regarding their rights and responsibilities during the inspection, as well as to prepare them for providing necessary documents to the regulatory authorities. This will help avoid disorganization during the inspection and minimize the likelihood of errors.
9. Ensuring Access to Documentation
Inspection authorities must have access to all necessary documents for the inspection. The director should organize a procedure whereby responsible personnel can promptly provide the required documents to the authorities without violating the Law of Ukraine “On Access to Public Information”.
10. Engaging Lawyers for Preparation
Professional legal support is an essential component of preparation for a planned inspection. Lawyers can help assess legal risks, verify compliance with legal requirements, and reduce the likelihood of fines.
Conclusion
Preparing for a planned inspection is a comprehensive process that requires attention to detail and a thorough approach. By following these rules, you will not only reduce the risks of sanctions but also ensure the stable and secure operation of your business in a rapidly evolving legal and economic environment.
Don’t risk the safety of your business! Contact professionals!
If you want to ensure your business is ready for inspection and avoid potential legal issues, reach out to our law firm “Fedoryshyn & Partners”. . We will provide qualified legal advice, assist with business process optimization, and offer reliable legal support at every stage of your company’s operations.
