Business Ombudsman on VAT: invoice suspensions stabilised but it has to be reduced by many times

On August 25, 2023, a meeting of the Business Ombudsman Council with the leadership team of the Ministry of Finance, State Tax Service and the Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy was held. In the spotlight of the meeting were VAT issues, BOC recommendations in this field, as well as upcoming amendments to the Decree No. 1165.

The meeting was attended, in particular, by the Chairman of the VRU Committee on Finance, Tax and Customs Policy Danylo Hetmantsev, Deputy Minister of Finance Svitlana Vorobey, Acting Deputy Head of the State Tax Service of Ukraine Yevhen Sokur, Business Ombudsman of Ukraine Roman Waschuk and Deputy Business Ombudsman Tetiana Korotka.

The main focus was laid on the latest draft amendments to the Decree No.1165 to ensure maximum effect in reducing the number of taxpayers facing tax invoices suspension. Thus, BOC insisted on the broadest possible application of the taxpayer’s positive history indicators in accordance with the proposals previously agreed within the framework of working groups, which would enable actual SMKOR operation digitalization. At the same time, to prevent tax evasion, reasonable reservations are admissible to counter outright system manipulation, so it was agreed to work them out (in such a way that the essence of amendments and their positive effect for business would not change).

The Business Ombudsman pointed out a positive progress on aspects in a number of BOC recommendations, particularly in terms of: introducing an administrative appeal of decisions on the taxpayer’s riskiness and refusal to accept tax data tables; improving analysis and forecasting functionality as regards legislative changes; active involvement of the Verkhovna Rada in resolving problems; availability of data on key indicators (the payer profile introduction) expected in the nearest future.

Meanwhile, Mr. Waschuk noted that although in fact the number of payers suffering from monthly tax invoices suspension had considerably decreased (as compared to October-December 2022), stabilization has stopped at a level 3-4 times higher than desired. According to data for the second quarter of 2023, 28% of enterprises faced TIs/ACs suspension, which was still unacceptable.

Further room for development is clear. According to the previously announced target by the Chairman of the VRU Committee, it is about 0.2% of suspended TIs/ACs, according to the Business Ombudsman position, it should also be less than 10,000 businesses per month (now this number is around 24,000).

One should bear in mind that each confirmation procedure on the tax invoice, regarding the data table or exclusion from a risky payer category actually represents a micro-verification of payers, the results of which are often (according to informal requirements of the tax authority) direct settlement indicators adjustment with the budget (refusing a tax credit, payment of taxes to the budget).

The meeting attendees agreed to continue being in a close and open dialogue to fix painful business issues and build up attractive Ukrainian business environment.

We would like to remind you that earlier, based on its own initiative investigation results, BOC issued a number of recommendations to improve tax invoices registration system.

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