An individual entrepreneur providing freight transportation services in the Kyiv Region turned to the Business Ombudsman Council for assistance. The entrepreneur operates under the general taxation system and pays tax on net profit — the amount of income reduced by business-related expenses.
The issue arose after the Main Department of the State Tax Service in the Kyiv Region conducted a scheduled tax audit of the entrepreneur’s activities for 2019–2023. Following the audit, the tax authority assessed UAH 3.9 million in additional taxes.
The grounds cited were an alleged mismatch between the entrepreneur’s fuel and spare parts expenses over four years and the “average” consumption rates for that type of vehicle, discrepancies with average annual fuel prices, and the absence of detailed records of spare parts installed on each individual vehicle.
The entrepreneur disagreed with these conclusions and filed complaints with the State Tax Service of Ukraine and the Council.
The Council thoroughly reviewed the audit materials and found that the tax authority’s conclusions relied on averaged fuel consumption indicators taken from the Internet, which do not account for the real operating conditions of a carrier (such as local terrain, loading in the fields, and weather factors). The Council also determined that using average annual fuel prices to recognize expenses in an individual entrepreneur’s accounting is unjustified, since expense accounting is based on primary documents (including receipts showing the actual price paid for fuel), rather than on annual averages. In addition, under the current procedure for keeping income and expense records for sole proprietors, maintaining detailed spare-part installation logs for each vehicle is not mandatory.
The Council set out these findings in writing and presented them to the State Tax Service of Ukraine during the complaint review. As a result, the State Tax Service of Ukraine took into account the entrepreneur’s and the Council’s arguments and canceled the decision to assess UAH 3.9 million in additional taxes.
