Author: Aliona Yevtushenko, lawyer at F&P
The Law of Ukraine 3813-IX dated 18.06.2024 amended the Tax Code of Ukraine with subparagraph 69.41, which stipulates that during the period of martial law in Ukraine and until December 31 of the year in which martial law is terminated or canceled, special features of tax, fee, and payment administration are established for taxpayers with a high level of voluntary compliance with tax legislation, as determined by the controlling bodies specified in subparagraph 41.1.1 of paragraph 41.1 of Article 41 of the Tax Code of Ukraine (tax administration), as defined by this subparagraph.
In turn, on November 11, 2024, the Procedure for the Formation and Publication of the List of Taxpayers with a High Level of Voluntary Compliance with Tax Legislation, approved by the Order of the Ministry of Finance of Ukraine No. 495 dated October 7, 2024, registered with the Ministry of Justice of Ukraine under No. 1539/42884 dated October 14, 2024 (hereinafter referred to as the Procedure), came into force.
According to the Procedure, the List of taxpayers with a high level of voluntary compliance with tax legislation (hereinafter referred to as the List of taxpayers) is formed based on the tax reporting of the taxpayer submitted to the controlling authority within the deadlines established by the Tax Code of Ukraine, tax information from the information and communication systems of the State Tax Service, and other sources obtained in the manner and method defined by the Code.
The State Tax Service ensures the formation and approval of the List of Payers no later than the last working day of March, May, August, and November.
To determine the compliance of taxpayers with the criteria of taxpayers with a high level of voluntary compliance with tax legislation, the following data is taken into account:
1) tax reporting and amendments to it, submitted as of the calculation date:
– in March – for the previous reporting (tax) year;
– in May – for the first quarter of the current year and the second to fourth quarters of the preceding year;
– in August – for the I-II quarters of the current year and the III-IV quarters of the preceding year;
– in November – for the I-III quarters of the current year and the IV quarter of the preceding year.
2) paid amounts of tax, fee, and payment revenues.
Taxpayers with a high level of voluntary compliance with tax legislation include legal entities and individual entrepreneurs who simultaneously meet all of the following requirements:
1) The tax debt and/or arrears on other payments, the collection of which is entrusted to the controlling authorities, does not exceed 3000 non-taxable minimum incomes of citizens and no more than 30 days have passed since their occurrence.
2) absence of arrears in the payment of the single contribution to mandatory state social insurance.
3) compliance with the criteria defined in subparagraph 69.41.2 of subparagraph 69.41 of subparagraph 69 of section 10 of chapter XX “Transitional Provisions” of the Tax Code of Ukraine, depending on the chosen taxation system.
4) the absence of facts of violation by the taxpayer of tax obligations regarding the submission of reports and/or documents (notifications), including those provided for in Articles 39 and 39-2 of Section I, paragraph 46.2 of Article 46 of Chapter 2 of Section II of the Tax Code of Ukraine.
To determine the compliance of a taxpayer with this requirement, information regarding the absence of tax notification decisions in the form “PS,” issued for violations of the taxpayer’s obligations to submit reports and/or documents (notifications), including those provided for in Articles 39 and 39-2 of Section I, paragraph 46.2 of Article 46 of Chapter 2 of Section II of the Code for the last 12 months preceding the month of approval of the List of taxpayers, is used.
5) the absence of tax notifications-decisions issued to the taxpayer regarding violations of the deadlines for settlements on export and/or import operations over the past consecutive 12 months;
6) the absence of a decision on the compliance of the taxpayer with the risk criteria for value-added tax, made in accordance with the Procedure for suspending the registration of tax invoices / adjustment calculations in the Unified Register of Tax Invoices, approved by the Resolution of the Cabinet of Ministers of Ukraine dated December 11, 2019, No. 1165;
7) the absence of initiated procedures for the termination of a legal entity or the business activities of an individual entrepreneur;
8) absence of initiated bankruptcy proceedings (insolvency) against the taxpayer;
9) the absence of a decision regarding the taxpayer and/or its founders (participants), ultimate beneficial owners on the application of special economic and other restrictive measures (sanctions) in the manner prescribed by the Law of Ukraine “On Sanctions”;
10) the absence of the taxpayer and/or its founders (participants), ultimate beneficial owners being citizens of a state that is conducting armed aggression against Ukraine (except for citizens of such a state who have been granted the status of combatants after April 14, 2014);
11) the absence among the founders (participants), ultimate beneficial owners of the taxpayer of persons whose place of residence (location) is a state that is conducting armed aggression against Ukraine.
Therefore, as can be seen from the above, the taxpayer’s verification is carried out by the tax authority independently using electronic registers, in accordance with the Procedure. In turn, the taxpayer is not involved in any way in the process of verifying compliance with the criteria for taxpayers with a high level of voluntary compliance with tax legislation.
The list of taxpayers is published by the State Tax Service (STS) on its official website. The STS notifies the taxpayer about their inclusion/exclusion from the list of taxpayers by sending an informational message through the taxpayer’s electronic cabinet within 5 working days after the approval of the list of taxpayers in accordance with the relevant forms and procedures established by the Ministry of Finance (clause 2 of section VI of the Procedure).
Additionally, we inform you that the State Tax Service does not publish information about a taxpayer in the Register of Taxpayers if the taxpayer submits a refusal to disclose their data within 5 working days after receiving an informational notification from the State Tax Service about their inclusion in the Register of Taxpayers.
Features of tax administration for individuals included in the Register of taxpayers:
1) by the regulatory authorities are not initiated:
- actual inspections regarding the licensing of fuel storage activities exclusively for the purposes of personal consumption and/or industrial processing;
documentary unscheduled inspections, except for inspections:
- conducted exclusively at the request of the taxpayer;
- conducted on the grounds specified in subparagraphs 78.1.1 and 78.1.2 regarding transfer pricing control, 78.1.3, 78.1.5, 78.1.7, 78.1.8, 78.1.9, 78.1.12, 78.1.14, 78.1.15, 78.1.16, 78.1.19, 78.1.21, and 78.1.22 of paragraph 78.1 of Article 78 of the Tax Code of Ukraine;
- taxpayers for whom tax information has been received indicating violations of foreign exchange legislation by the taxpayer in terms of compliance with the deadlines for the arrival of goods in import operations and/or foreign exchange earnings in export operations;
- taxpayers engaged in the production and/or sale of excise goods, the organization and conduct of gambling activities in Ukraine (gambling business), taxpayers providing financial and payment services;
- documentary planned inspections, except for inspections of taxpayers engaged in the production and/or sale of excise goods, the organization and conduct of gambling activities in Ukraine (gambling business), and taxpayers providing financial and payment services;
2) The period for conducting desk and documentary audits of the taxpayer, as specified in subparagraphs 200.10 and 200.11 of Article 200 of this Code, is 5 and 10 working days, respectively. The provisions of this subparagraph apply to applications for the refund of the budgetary value-added tax compensation submitted by the taxpayer during the period of the taxpayer’s inclusion in the List of Taxpayers with a High Level of Voluntary Compliance with Tax Legislation;
3) Individual tax consultations are provided to the taxpayer exclusively by the central executive body implementing state tax policy within 15 calendar days following the day of receipt of the request, without the possibility of extending the review period. In case the territorial body of the central executive body implementing state tax policy receives the request mentioned in this paragraph, it is obliged to send it to the central executive body implementing state tax policy within the next working day after receiving such a request;
4) assignment of an official from the territorial body of the central executive authority responsible for implementing state tax policy to interact with the taxpayer (compliance manager);
5) the taxpayer’s receipt, upon request, within five days of information held by the controlling authority that may indicate tax risks in the activities of such a taxpayer, as well as consultations on mitigating such risks.
As of today, it is impossible to assess the effectiveness of the introduced features of tax administration for taxpayers with a high level of voluntary compliance with tax legislation. The main reason is the lack of established cases that would illustrate the practical application of these measures and their implementation in terms of tax compliance.
The success of the implemented institution will depend on the practical effectiveness of mechanisms such as automated compliance checks for taxpayers, provision of tax consultations, reduction in the number of audits, and the introduction of a compliance manager. Several clients of the law firm FEDORYSHYN & PARTNERS have expressed interest in implementing such an initiative; however, further observation and analysis are necessary for well-founded conclusions and recommendations.
