The moratorium on tax audits has been lifted.

On 9 November 2023, the Verkhovna Rada of Ukraine took a further step towards restoring comprehensive audit and inspection powers to the state tax authorities, which had initially been restricted due to the COVID-19 pandemic and subsequently due to the Russian Federation’s military invasion. This step takes the form of the adopted law amending the Tax Code of Ukraine and other laws of Ukraine regarding the lifting of the moratorium on tax audits (draft law No. 10016-d).

The law has not yet been signed, as a resolution has been submitted to parliament to repeal the Verkhovna Rada’s decision to adopt draft law No. 10016-d at second reading. What is more, the text of the law adopted at second reading is not even available on the Verkhovna Rada’s website, so, as they say, there may be surprises in store. However, given the wording of the bill prior to the second reading and the comments from members of the relevant committees, from 1 December 2023, taxpayers may face the following.

The resumption of all unscheduled documentary tax audits (prior to this date, audits were initially permitted only at the taxpayer’s request; subsequently, audits were added to cover compliance with payment deadlines in the field of foreign economic activity, as well as the validity of VAT refunds claimed or declared negative VAT balances). For the period from 1 December 2023 to 31 December 2024, the range of taxpayers who may be included in the schedule for scheduled documentary audits is being expanded, and the procedure for drawing up the schedule is being amended.

It is proposed to include in the schedule those taxpayers for whom:

• the level of income tax or VAT paid is 50 per cent or more lower than the level of payment of the corresponding tax in the relevant sector;

• accounts receivable are more than twice accounts payable;

• the total amount of expenses shown in the tax return on property status and income is 75 per cent or more of the total annual income declared in that return, provided that the total annual income derived from business activities amounts to UAH 10 million or more;

• the accrual and/or payment by a tax agent — a legal entity — of income in the form of wages at a rate lower than the average wage in the relevant sector in the relevant region (at the primary place of registration).

Figures on the level of payment of the relevant tax by sector and figures on the average wage in the relevant sector are to be published on the official website of the State Tax Service of Ukraine.

Amendments to the schedule for this period will be made on a monthly basis, and an audit of a taxpayer included in the updated schedule may be commenced no earlier than two months from the date of publication of the updated schedule.

Until 1 December 2024, no documentary audits (scheduled or unscheduled) will be carried out on single-tax payers in Groups 1 and 2 (except for audits related to the cessation of business activities or those carried out at the taxpayer’s request).

A moratorium is envisaged on the conduct of documentary and on-site audits of taxpayers whose tax address and/or tax-related assets (such as production facilities, retail premises) are, at the time of the commencement of the occupation/hostilities or potential hostilities, located in temporarily occupied territories of Ukraine, territories where active hostilities are taking place, or territories where potential hostilities may occur — until the last day of the month in which the relevant situation was resolved, and, in the event that the taxpayer changes their registered office to another territory of Ukraine — until the date of state registration of the change of registered office. At the same time, these restrictions do not apply to audits conducted at the taxpayer’s request, audits regarding compliance with payment deadlines in the field of foreign economic activity, on the validity of a VAT refund claim or a declared negative VAT balance, etc.

As they say, ‘taxpayers, brace yourselves!’

Read the article on the “Yurydychna Gazeta” website here.