The Business Ombudsman Council provides recommendations to state bodies on the basis of individual cases and in accordance with published systemic reports. Here we have collected information on the implementation status of systemic recommendations only.
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Report name
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Issued recommendations
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Execution status
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Systemic report "Problems with administering business taxes in Ukraine" |
To ensure stability of respective laws and regulations, once the deficiencies in the VAT electronic administration functioning are eliminated, so that they will remain unchanged (or significantly unchanged) for a significant time. If the sense of predictability is achieved, it would enable the taxpayers to plan their activities accordingly and significantly decrease administrative expenses covering the cost of adjustment to the new rules and regulations. Ministry of Finance |
Implemented
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To amend the Tax Code to set out a clear procedure for calculation and payment of penalties imposed for late VAT refund. It shall be clearly stated in the Tax Code that the amount of penalty shall be paid to the taxpayer irrespective of the fact of its' receipt of reconciled VAT refund.
Ministry of Finance |
Recommendation is no longer relevant
— comments:
The relevant amendments were proposed by the BOC during the discussion of amendments to the Tax Code of Ukraine in October-December 2016. However, the proposals were not approved by the working group at the Ministry of Finance.
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To amend the Tax Code to provide for personal disciplinary, administrative and financial liability of the officials of the tax authorities for unlawful delays with processing VAT refunds.
Ministry of Finance |
In process
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The State Budget of Ukraine shall reflect consolidated VAT amount (i.e., the difference between the income from VAT and expenses for VAT refund). For this purpose the Budget Code of Ukraine shall be respectively amended. In our view, if implemented, such an approach would allow overthrowing traditional argumentation of the tax authorities that VAT refund is effectively limited by the limits foreseen in the State Budget. Ministry of Finance |
Implemented
— comments:
In the state budget, starting from 2016, planned VAT receipts from goods (works, services) produced in Ukraine are reflected as a balance between tax collection and reimbursement. The same principle is envisaged in the approved budget for 2019.
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It could be expedient to officially recognize the VAT refund amounts due to businesses as internal state debt. Such state debt shall be subject to restructuring according to mechanisms amicably agreed in negotiations between the tax authorities and businesses. The selection of the mechanisms should be flexible enough to allow restructuring with the account of specifics of particular case and business. Ministry of Finance |
Recommendation is no longer relevant
— comments:
The launch of the automated registry of VAT refund is foreseen by the Law No.1797 dated 21 December 2016.On 17 January 2018, the CMU adopted a draft law governing VAT refund to tax payers that filed their refund applications prior to 1 February 2016, though failed to be refunded from the state budget.Additionally, the draft law governs the issue of the VAT refund claimed for recovery before February 1, 2016, but denied by the SFS as of 1 January 2017 (the taxpayers were not entitled for budget refund) and in respect of which the court decision to grant budgetary refund to the tax payer has become effective.Thus, the draft law will ensure fair conditions for the tax payers during the period of referring to the provisions of the Tax Code on the matters of VAT refund from the state budget according to applications registered within the Temporary Registry and on applications in terms of which the administrative and court proceedings have been completed.
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To revise the Procedure of Taxpayers’ Record Keeping to significantly narrow down the scope of discretionary power currently vested with the tax authorities. In particular, the following amendments are worth being considered:
the grounds for launching verification of the tax payers’ location by the tax authorities shall be limited to include only limited and specific number of instances to be directly envisaged in the legislation (for instance, during a tax audit of a taxpayer deemed to be in violation of its duties);
if the information on the taxpayer’s location is properly confirmed through the State Registrar, this should be regarded as the sufficient proof for tax authorities; moreover, in this case tax authorities shall not be entitled to carry out such verification for certain reasonable period of time (for instance, one year).
Ministry of Finance |
Implemented
— comments:
Commencing March 2016, the fiscal authorities are no longer entitled to issue the form 18-OPP (notice on the absence of legal entity at its location).Respective provisions have been excluded from the Procedure for Taxpayer Registration pursuant to the Order of the Ministry of Finance No.375 dated 18 March 2016.
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The administrative appeal procedures available to the taxpayers willing to challenge the results of the tax audits shall be effective and time-efficient, rather than formalistic as it often appears to be (please see Section "Administrative appeal" for details). While appointing and performing the tax audit, the tax authorities shall strictly comply with the procedures prescribed by the law, and the supervising authorities shall ensure such compliance in an effective manner. The Tax Code shall be amended to specify particular sanctions to be imposed on the officials of the tax authorities for procedural and other violations during appointment and performance of the tax audit. Such sanctions shall be personalized and variable (from reprimand to dismissal and fine) depending on the degree of violation by the particular official.
Ministry of Finance |
In process
— comments:
Although this recommendation has been discussed repeatedly, the extent of its' practical implementation remains quite limited.
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To forbid the tax authorities to initiate criminal proceedings against the taxpayer's officials based on the results of the tax audit until the taxpayer's tax obligation is duly acknowledged (i.e., until the administrative appeal and / or consideration in a court are finished). If the results of the tax audit are successfully challenged by the taxpayer in court, the criminal proceedings initiated merely based on results thereof, shall be immediately ceased. Ministry of Finance |
In process
— comments:
Article 56.22. of the Tax Code of Ukraine provides as follows: "If a taxpayer challenges a decision of a control authority to the court or through the appropriate administrative procedure, such taxpayer cannot be accused of tax evasion exclusively on the ground of such decision of the control authority until the proceedings have been ultimately settled by the court or through the appropriate administrative procedure."
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To reflect in the Tax Code and enforce in practice the approach evidenced by a widespread judicial practice, whereby minor mistakes or deficiencies in primary documents cannot be used as a ground for charging additional tax liabilities, penalties and fines on the taxpayer. Ministry of Finance |
In process
— comments:
The Supreme Court in its decisions specifies that the facts of the occurrence of errors in executed primary documents or the absence of individual ones, shall not, as such, constitute the ground for the conclusions on the absence of the actual business transaction, - provided that the other data or evidence prove otherwise. The implementation of this recommendation requires preparation of a special explanation of the SFS with concrete examples of such errors.
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To increase the timing for administrative appeal by the taxpayer, while the timing available to the tax authority for providing feedback to the appeal shall be decreased. This timing could be fixed at traditional 30 calendar days for both parties. Ministry of Finance |
Recommendation is no longer relevant
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To amend the Tax Code to foresee personal administrative and financial liability of the officials of the tax authorities for instances of malpractice and nonprofessional behaviour. Ministry of Finance |
In process
— comments:
The respective amendments to the legislation are being approved by the Ministry of Finance together with the relevant regulatory authorities.
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