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Publications Blocking of tax bills

Blocking and unlocking of tax invoices in Ukraine

All value-added economic entities sooner or later encounter such a thing as the refusal to register a tax bill due to its blocking.


The procedure for freezing and registering tax invoices is provided for in a Decision of the Cabinet of Ministers of Ukraine 1165, which allows tax service employees, if there are certain grounds or formal grounds In the circumstances, decide to block the tax invoices.

What are the grounds for blocking tax bills

A clear list of them is in the CMR Regulation, but the main blockages occur on the following grounds:

  • First: Inconsistency of nomenclatures between the KTZ code input group and outgoing goods. 
  • Second: This is the difference between the volume of incoming/outgoing shipments.

The most interesting aspect of the study of the legislative background to this process is the blocking of tax invoices because of the fact that an enterprise is included in the group of so-called venture enterprises according to certain criteria.

As far as inclusion in risks is concerned, it is a separate conversation that requires careful and detailed examination. The Ordinance of the KMU, to which reference has already been made, provides for 8 paragraphs to be included.

As for the first seven points, it’s clear. The latter is rather blurred and in fact enables tax officials to regulate by blocking the possibility of registering tax bills or lifting such blockages. 

Since both listing and de-listing occur by the commission’s consideration of tax documents that are provided by the tax payer. The decision is based on the personal predisposition of the participants in the commission.

Paragraph 8 of the Order provides for the possibility of inclusion of a risk group on the basis of information about allegedly unlawful activities of the economic activity.

In practice, we have situations where a request is sent to the enterprise, or a request is sent to. This is the second time that the enterprise receives it or does not receive it. A report is written to the tax militia about the establishment of an enterprise by a certain place - the enterprise is not found there and then it is included in the list of risky. 

It would be nothing, maybe it makes sense, but once a business gets on the list, it actually loses the ability to act in the interests of its counterparties. The impossibility of registering the tax bill effectively prevents the counterparty of the enterprise from benefiting from the tax credit. 

Such blockages often occur before the end of the tax period, which in turn gives rise to certain thoughts. 
And then there are other situations that might be included in the risks. Based on the situation. Again, situations where the tax analysis of the activity of an enterprise results in the enterprise having a so-called tax burden below what the tax officer considers necessary in one form or another. activities, which is also not an entirely correct risk analysis, as business activities are carried out exclusively in the manner considered necessary by economic agents. Sometimes, in order to win the market, or in order to win customers, one has to take risks and incur certain costs - trade with a lower margin, which in the future leads to a lower burden than the tax officials would like.

Among the interesting reasons for inclusion in the list of risky ones, there are also cases where an enterprise falls on the list of risky ones due to the fact that there are 5 or 6 employees less than the tax one would like. For example, some activities can be carried out using outsourcing services, that is, there is no need to employ 10, 15, 20 people, while tax officials consider such activities risky.

In practice, it appears that neither the supervisory authority nor the taxpayer nor the court can explain the reasons for the listing.

So, you filed for a tax bill, and her registration was suspended. 

  • The first thing to notice is a receipt that will mark the base of the stop. By analyzing the receipt, you will know whether an error was actually made in the consignment note, such as a mistake in the product nomenclature code, or a subjective perception of the tax staff - the inclusion in the list on the basis of paragraph 8 of the order. 
  • If there is a second case, you should understand that there is a procedure for unlocking the consignment note. This involves filing an application to the Tax Invoice Release Commission. The Commission is a two-tier commission - the first level is territorial on the basis of the oblast tax, and the second level is on the basis of the State Tax Service of Ukraine. 

When submitting explanations, economic entities adhere to formalism and submit exclusively a tax consignment note on the basis of which the payment was made, The Committee notes with concern that the State party has not provided any information on the reasons for this payment and that the reasons given for this payment are limited to very small and narrow explanations.

I want to emphasize the need for explanations. Any grounds for blocking a tax bill must take into account the fact that the commission will make a decision based on its own convictions and the fact that you believe you have filed it properly does not in any way guarantee you that, that a regional-level commission, for example, would decide in your favor. 

Based on that, you must understand that sooner or later you will have to defend your legal position in court.

So, in order to be able to assert its legal position in court that the taxpayer wrongly decided to refuse registration of the tax bill, because when registering the tax bill, through the court procedure, It will be the annulment, illegality and illegality of the commission’s decision and the obligation to register the tax bill with the filing date.

This is important because, by submitting a tax bill without a complete package of documents, or by not properly providing an explanation that is not forthcoming, which would be superficial and would not reveal the essence of the business, you give the tax committee a legal basis to refuse to register you with the tax bill. And at the same time, if you submit a complete package of commission documents to unlock the tax bill in Ukraine, which will confirm not only the existence of a relationship with a specific counterparty, but also documents of the availability of adequate manpower, Availability of adequate capital stock. You will describe in the explanations the details of your activity, detail the order of payment between you and your counterparty - all of this essentially nullifies the legality of the grounds for refusing to register a tax bill.

It is clear that there is a chance that the tax board will refuse you, but when you file a lawsuit, when you provide such a package of documents, you will argue before the court that: 

  • First of all, the commission did not give a clear list of documents that you would like to see, and you will always see in the first decision of the examination of a complaint by a regional-level commission. For the most part, the grounds for refusal are not the provision of documents. In turn, if you have filed a full set of documents with extended explanations, that would practically be grounds for obtaining a positive decision in court.

How to unlock tax invoices in Ukraine

 

  1. With regard to the grounds for lifting the ban on tax invoices in 2021 in Ukraine, if we are talking about the grounds for inclusion in the list of risky ones, this ground can also be appealed in court. This is an understandable jurisprudence that supports economic agents. For the simple reason that the detailed analysis of decisions to refuse registration of a tax bill of lading, the decision to include enterprises in the list of risky employees of the tax does not in fact fulfil the procedural requirements concerning these issues. The decision to list at risk often does not refer to specific tax information as a basis for decision-making. The Court considers this a reasonable possibility of reversing the decision of the Tax Authority. 
  2. With regard to decisions to refuse to register tax invoices, the justification is often not for the provision of primary documents without specification, but rather without a clear list of documents, Economic entities cannot prove the validity of their activities to the tax authority without a clear list of documents, which means that it can also be considered as grounds for a positive court decision.

On this basis, in order to prepare the right ground for a possible judicial process, in order to prepare for the future, it is necessary to prepare very carefully for the provision of these explanations.  A complete package of documents should be provided, and explanations should be written correctly and competently to show that the activities of the enterprise are real, legal and profit-oriented. This effectively prevents tax officers from making a valid and legitimate decision to block a tax bill. 

At the same time, we should all be aware that there is sometimes an error, a technical error, an accounting error in the execution and registration of the consignment note, or a lack of control in the reconciliation process, or a lack of anythe documents, the tax invoices are issued in the wrong order and on the wrong grounds, or when the invoice has been issued for one amount and the payment is for another amount. It is understandable that all documents on specific activities should be perfect, should not contradict each other, and the text of one should refer to the text of the other, the understanding that one document cannot exist without the other, As a member of the household, you must have a well-formed family.

Outcome:
There is an understanding among economic entities that such legal provisions allow the tax administration to manually regulate the activities of entrepreneurs. It must be understood that you will most likely seek justice in a court of law, and in order to properly enter a court hearing to defend yourself as the law prescribes and enter the jurisprudence as it stands today, It is necessary to lay the bricks of this foundation even at the stage of filing for the release of the tax bill in 2021.

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