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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.

Report name
Issued recommendations
Execution status

Systemic report "Administering taxes paid by business"

The Ministry of Finance of Ukraine and the State Tax Service of Ukraine – to develop and submit for approval, while the Cabinet of Ministers of Ukraine – to approve (i) draft amendments to the Procedure for Maintaining the Unified Register of Tax Invoices, approved by the Cabinet of Ministers of Ukraine Resolution, dated December 29, 2010 No. 1246; or (ii) a separate legislative act governing practical implementation of the rule set forth in paragraph 13 of Clause 201.10 of Article 201 of the TCU. Such amendments should introduce procedure enabling taxpayers to approach tax authority with the statement/application that TI/AC lodged for registration was not processed in the due time and enclose relevant evidence thereto. Having reviewed such statement/application, tax authority should, within reasonable time, issue a conclusion, constituting ground for making corrections with the URTI (so that the date when TI was proved to have been lodged for registration would be specified as the date of its actual registration).

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The Ministry of Finance of Ukraine and the State Tax Service of Ukraine - if necessary, to develop and submit to the Cabinet of Ministers of Ukraine, and the Cabinet of Ministers of Ukraine – to submit to the Verkhovna Rada of Ukraine the Draft law of Ukraine introducing amendments to paragraph 73 of subsection 2 of section XX "Transitional Provisions" of the TCU, by replacing in the first paragraph and in the second paragraph words and figures "prior to December 31, 2019" with words "prior to entry into force of the Law of Ukraine" On Introducing Amendments to the Tax Code Ukraine Aimed at Improving Tax Administration and Elimination of Technical and Logical Inconsistencies in Tax Legislation".

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To issue a new official explanation to withdraw the previous ones and advise taxpayers and tax authorities that the current wording of Article 120-1 of the TCU does not allow imposing penalties for breach of registration deadline or failure to register ACs containing negative VAT amount with the URTI since the basis for the penalty is a negative amount.

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The Ministry of Finance of Ukraine and/or the State Tax Service of Ukraine - if necessary, to develop and submit to the Cabinet of Ministers of Ukraine, and the Cabinet of Ministers of Ukraine – to submit to the Verkhovna Rada of Ukraine the Draft law of Ukraine introducing amendments to Article 120-1 of the TCU providing that, while determining basis for imposing the fine, an absolute value (module) of the amount of VAT in the TI/AC shall be employed.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The Ministry of Finance of Ukraine and the State Tax Service of Ukraine - to develop and submit for the approval of the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to submit to the Verkhovna Rada of Ukraine the Draft law of Ukraine introducing amendments to Article 120-1 of the TCU. Such amendments should provide that if taxpayer is subjected to penalty (financial sanction) foreseen by Article 123 of the TCU due to accrual by tax authority of VAT liabilities or reduction of the amount of VAT refund due under particular transaction related to supply of goods/services – penalties provided for in paragraph two of this paragraph and clause 120-1.1 of this Article shall not apply to such a taxpayer. Alternatively, amendments may be introduced to clause 201.10 of Article 201 of the TCU, where a special period for registration of TI / AC in case of accrual of VAT liability by tax authority could be specified, starting from the date when the respective VAT obligation acquires “agreed” status.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To undertake all required measures (including organizational and technical), which will ensure:

 

  • Restoring SEA VAT indicators of those VAT payers whose registration had been annulled and subsequently renewed, without the need for the taxpayers to go to courts requesting restoration of such indicators.
  • Transferring SEA VAT indicators from one VAT payer to another in case of corporate reorganization, without the need for taxpayers to go to courts requesting transfer of such indicators.
  • Saving SEA VAT indicators in case of closure and opening new e-account in the SEA VAT (except for certain cases when such indicators should not be saved, if such cases are clearly stipulated by the law).
  • Implementing court decisions obliging STS/SFS (their regional bodies) to adjust the registration limit and/or other indicators of VAT payers in the SEA. The STS should be able to promptly correct indicators in the SEA manually, based on an internal document (order, the working group conclusion, etc.) issued by respective officials. The implementation of court decisions should be ensured within a reasonable time-limit upon their entry into force (within the period not exceeding 1 month), provided that the court decision was sent by the court to the STS/SFS (its regional authority) or handed over to their representative.

 

If it is necessary to implement foregoing recommendations - to develop and submit to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to approve draft amendments to the Procedure No.569 and/or other delegated legislative acts.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To undertake all required measures (including organizational and technical), which will ensure implementation of court decisions obliging to release VAT payers’ registration limits or funds on e-accounts in the SEA. Such court decisions should be implemented within a reasonable period of time upon their entry into force (not exceeding 10 calendar days), provided the court decision was sent to the STS/SFS (its regional authority) or handed over to its representative.

 

If it is necessary to implement foregoing recommendations - to develop and submit to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to approve draft amendments to the Procedure No.569 and/or other delegated legislative acts.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To issue a letter of explanation binding for all regional tax authorities (or another similar document, such as methodological guidelines, internal procedure of the STS, etc.), and/or, if necessary, to develop and submit for approval to the Cabinet of Ministers of Ukraine (while the Cabinet of Ministers of Ukraine – to approve) a package of amendments to the Procedure No. 1165 to:

 

1) Refine and specify list of instances, when taxpayers should be qualified as those which match clause 8 of taxpayers’ risk criteria set forth in Annex 1 to the Procedure No.1165 (in particular, it should be specified that this clause can be used only in case of signs of sham business transactions in regard of which a taxpayer issued TIs/ACs to buyers - VAT payers, thus enabling the latter to form a VAT tax credit at the expense of probably “sham” VAT or transfer an allegedly “sham” VAT to third parties);

 

2) Establish minimal standards of substantiation (justification) of decisions evidencing adherence of a taxpayer to risk criteria. It should be clearly stated that such decisions must include at least the following information:

  • exact sources of tax information used;
  • what business transactions are risky, with indication of names of counterparties and their Tax IDs; types of business transactions; codes of types of goods or services;
  • reference to specific signs evidencing risky nature of such business transactions.

 

3) Determine that decisions of regional level commissions on adherence to risk criteria and on rejection of taxpayers’ data tables can be appealed by taxpayers with the STS in accordance with Article 56 of the TCU, and such appeals should be considered under the Procedure No.916, unless a special procedure of their consideration is established by law.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The State Tax Service of Ukraine and the Ministry of Finance of Ukraine – to develop and submit to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to submit to the Verkhovna Rada of Ukraine the Draft Law of Ukraine introducing amendments to Clause 56.23 of Article 56 of the TCU to directly foresee the possibility of appeal of decisions on adherence with risk criteria and on rejection of taxpayers’ data tables in accordance with the procedure set forth in that Clause. After introduction of such amendments to the TCU, - the Procedure No. 1165 should be amended accordingly.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The State Tax Service of Ukraine and the Ministry of Finance of Ukraine - to develop and submit for approval to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to approve draft amendments to the Procedure No. 1165 and/or Procedure No. 1246, which would introduce a deadline within which suspended TI/AC must be registered with the URTI in accordance with the court decision. Such a term should be reasonable (to allow the STS to ensure its strict following) and should not exceed 15 calendar days from the date when the court decision enters into force. After such amendments entered into force, all episodes of missing the specified deadline shall be the basis for carrying out official internal investigations by the STS and bringing guilty persons to liability.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The State Tax Service of Ukraine and the Ministry of Finance of Ukraine - to develop and submit to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine – to submit to the Verkhovna Rada of Ukraine the Draft Law of Ukraine introducing amendments to the TCU, which will vest the taxpayer with the right to receive from the State Budget of Ukraine interests at a rate equal to 120% of the discount rate of the NBU, established at the time of accrual of interests, for the entire period during which such a taxpayer was unlawfully deprived of a right to form VAT tax credit or reduce its VAT tax liabilities, and to have the amount of its registration limit in the SEA VAT increased accordingly, due to illicit refusal to register suspended TI/AC with the URTI. Interests should be accrued from the date of entry into force of the decision of the relevant Commission on refusal in registration of TI/AC till the day when TI/AC is actually registered with the URTI on the basis of a court decision.

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

Revoke the SFS’s letter dated November 29, 2019, No. 35/99-99-11-04-04-18, the letter of the Ministry of Finance dated November 8, 2017, No.11310-09-10/30469 and other similar explanatory and informational documents denying principle of “indisputability” of the VAT tax credit confirmed by TIs/ACs registered with the URTI during the period of SMKOR’s functioning.

 

Issue a new explanatory letter - and introduce amendments to respective sources of secondary legislation and internal rules and regulations of the STS (including the Procedure No. 543 or a more recent equivalent) - to expressly acknowledge that the taxpayer’s VAT tax credit confirmed by the TI/AC registered with the URTI during the period of the SMKOR’s functioning cannot be reduced based on tax audit’s findings.

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

The State Tax Service of Ukraine and the Ministry of Finance of Ukraine - to develop and submit to the Cabinet of Ministers of Ukraine, while the Cabinet of Ministers of Ukraine - to submit to the Verkhovna Rada of Ukraine the Draft Law of Ukraine on introducing amendments to the TCU, which would establish that the amount of VAT tax credit confirmed by TIs/ACs registered with the URTI during the period of validity of para 201.16 of the TCU - cannot be reduced by tax authority based on tax audit findings, with exceptions directly stipulated by the TCU (which, if stipulated, may include the case of discovering a criminal offence committed by persons involved in the preparation, registration or receipt of such TI/ACs, as well as the preparation of primary documents confirming business transactions to which such TI/ACs relate).

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To complete filling the Temporary Register of Applications for VAT Amounts Refund submitted prior to February 1, 2016, in whose regard as at 1 January 2017 the VAT has not been refunded;

 

To ensure including expenditures necessary to refund foregoing amounts of VAT to the draft State Budget of Ukraine for 2021 (and, if necessary - in the subsequent years) to be submitted to the Cabinet of Ministers of Ukraine (while the Cabinet of Ministers of Ukraine – to ensure preservation of such expenditures in the version of the draft State Budget of Ukraine submitted to the Verkhovna Rada of Ukraine).

Cabinet of Ministers of Ukraine
State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To ensure adjustment of technical settings of ITS "Tax Block" (and other automated systems) to ensure that information on amounts of VAT refund agreed by results of adjudication is entered into with the VAT Refund Register immediately after entry into force of the relevant court decision, regardless of the cassation process (except cases where the court of cassation by its ruling suspended the effect or enforcement of the court decision).

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

Ensuring practical possibility of writing off arrears amount under the unified social contribution, as well as penalties and fines accrued on it, to individual entrepreneurs who, as at the date of the Law No.592 entry into force included information about themselves in the USR and made an entry on activity termination (i.e. took separate actions established by paragraph 9-15 of Section VIII "Final and Transitional Provisions” of the USC Law, but as at the date of Law No.592 entry into force have pending arrears under the USC emerged in the period from January 1, 2017, to the date of registration of their activity termination);  

 

Abolition of legal grounds for accrual by the tax authority of the single contribution for June-August 2020 to persons who used the mechanism established by the paragraph 9-15 of Section VIII "Final and Transitional Provisions" of the USC Law, and received a positive decision on full or partial write-off regarding the USC arrears, accrued since January 1, 2017, as well as the relevant fines and penalties;

 

Establishing legal consequences of delaying by the supervisory authority the time for issuing notices for payment of debt (arrears) as well as decisions on penalties and accrual of fines for non-payment (non-transfer) or late payment (late transfer) of a unified social contribution.  

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To amend the Procedure No.435 with respect to:  

  • introduction of a mechanism for self-correction of errors by the USC payers regarding monetary indicators values declared in the report on the amounts of accrued income of insured persons and the amount of accrued unified social contribution;   
  • provision for the possibility and establishment of the procedure for withdrawal of the USC report submitted by the privileged person;   

 

To amend the Instruction No.449 regarding: 

  • establishing the obligation to add a detailed calculation of arrears amount under the unified social contribution to the notice issued by the tax authority, which is sent (furnished) to legal entities and individuals;      

 

To bring the procedure for consideration by the supervisory authorities of appeals against payment notices on arrears under the unified social contribution for the obligatory state social insurance fund and on decisions on accrual of fines and imposition of penalties in line with the USC Law and harmonize it with the Procedure No.916.

Ministry of Finance

Not started - new recommendation

To develop draft amendments to the TCU aimed at:

 

1) Clarifying rules governing application of top (maximum) single tax rate (paragraph 293.7 of Article 293 of the TCU);  

2) Clarifying rules governing single tax payer’s re-registration during the calendar year by an individual entrepreneur, who, as at the beginning of the calendar year, had an ongoing registration (i.e. did not submit a separate application for transition to a simplified taxation scheme) and during this year:  

  • voluntarily switched to payment of other taxes and fees, but attempts to return to a simplified taxation system;
  • registered termination of business activity, after which re-registered as an entrepreneur and attempts to qualify for the simplified taxation system;        

3) Cancelling liability in the form of loss of the right to enjoy the simplified taxation system in case of receiving income corresponding to the SIC codes contained in the USR, but not reflected in the Register of Single Tax Payers (clause 7 of sub-paragraph 298.2.3 of paragraph 298.2 of Article 298 of the TCU). 

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To create a working group to re-consider current approach to the level of liability established in the TCU for taxpayer’s illegal staying on the simplified taxation system.

Ministry of Finance

Not started - new recommendation

The State Tax Service of Ukraine – to issue a letter of explanation on the following areas (issues):

a) Transactions having no reasonable economic reason (no business purpose):     

  • provide detailed explanations about criteria employed for identifying transactions having no reasonable economic reason (business purpose);
  • provide examples demonstrating tax authority’s approach employed while proving the lack of a reasonable economic reason (business purpose) in certain commercial transactions;

b) CPT’s advances while paying dividends:     

  • Confirm correctness of employing CPT’s real object of taxation for Q4 of the reporting year;
  • Dismiss usage of “anticipated” object of taxation to be received by dividing the object of taxation for the whole year by 12 and multiplying by 3 (as provided for by existing letters of the SFS);

c) Recordation of exchange rate differences under liabilities expressed in foreign currencies: 

  • set out clear criteria for determining whether non-resident companies are a subsidiary, associate, or a joint venture, a branch, a representative office or other division of companies - borrowers,
  • provide a list of criteria (non-exhaustive) proving that the obligation owed to non-residents under loan agreements was such that prepayment thereof was not planned and improbable in the near future;

d) Debt-to-equity swap and increase of a debtor entity’s own capital at the expense of additional contributions:    

  • confirm that entities applying IFRS in their activities may recognize their liabilities settled if the creditor (who is not a related party) has forgiven the existing debt;
  • at the same time, however, make a reservation that:
  1.  corresponding obligation’s reduction will affect the entity’s income only if the creditor is a third party and not the owner (participant, shareholder) of the respective debtor in such obligation; and that
  2.  size of an owner's share, as well as claims received in exchange (to seek refund, payment of dividends, etc.) do not matter when applying this criterion.

 

The Ministry of Finance of Ukraine – issue a letter of explanation or a generalized tax consultation clarifying methodology of application of the TCU’s provisions on the foregoing matters.   

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To amend the Procedure for Forming Plan-Schedule of Scheduled Documentary Tax Audits of Taxpayers, approved by the Order of the Ministry of Finance of Ukraine No. 524, dated June 2, 2015, to align it with the norms of the Law of Ukraine, dated January 16, 2020, No. 466-IX, which would contain an exhaustive list of cases falling under the notion of “technical error” as the reason for adjusting plan-schedule for the purposes of application of Article 77.2 of the TCU. In no case shall such a list broaden the tax authorities’ powers

Ministry of Finance

Not started - new recommendation

To set an annual KPI for the State Tax Service of Ukraine to measure effectiveness of the risk-oriented approach. The KPI should measure the ratio of scheduled to unscheduled (i.e., initiated by the tax authority) audits of taxpayers in the reporting period, as well as should provide for a gradual increase in the number of scheduled audits and a decrease in unscheduled ones.

Ministry of Finance

Not started - new recommendation

Enable taxpayers, representatives of the Business Ombudsman Council, the Ministry of Finance of Ukraine, as well as local controlling authorities and other authorities to participate in consideration of complaint’s materials by teleconference or videoconference. For this purpose:

1) The Ministry of Finance of Ukraine – to ensure introduction of appropriate amendments to the Procedure for Registration and Filing Complaints by Taxpayers and Their Consideration by Tax Authorities, approved by the Order of the Ministry of Finance of Ukraine dated October 21, 2015 No. 916.

2) The State Tax Service of Ukraine – to implement the relevant technical capability.

State Tax Service of Ukraine
Ministry of Finance

Not started - new recommendation

To establish new KPIs for the STS, which would measure results of consideration of taxpayers' objections to tax audit reports. Meanwhile, the STS shall ensure (1) collection of maximum amount of relevant information, including names and surnames of tax authorities’ officials regularly rendering unsubstantiated decisions; and (2) publication of key indicators of such statistics on the STS’s website.

Ministry of Finance

Not started - new recommendation

To establish new KPIs for the STS in terms of administrative appeal – such KPIs to be set separately for each department involved and, accordingly, separately assess performance of these KPIs. The relevant statistics should be regularly published in full on the STS official website.

Ministry of Finance

Not started - new recommendation

To approve a new composition of the Expert Council with preserving current balance between public sector, business associations and expert community. To appoint at certain administrative position in the Expert Council (one of the deputies of the head, etc.) an official who will have an organization of the Expert Council’s work among his/her key responsibilities and who will have sufficient powers to organize its effective operation.

 

Systemize issues requiring issuance of the GTC (based on proposals that received from members of the Expert Council and information from other sources about current problems in the tax sphere), approve and bring to attention of members of the Expert Council a plan of work of the MoF on issuance of GTCs. Such a plan should include, inter alia, a list of all draft GTCs (topics for GTSc) that MoF plans to process with establishing their priority (taking into account opinions of members of the Expert Council), the order and terms of consideration. Such a plan should be regularly updated or replaced by a new one for the next period (for example, a quarter or six months).

 

Increase the frequency of meetings of the Expert Council, bringing it at least to the figure specified in paragraph 11 of Regulation on the Expert Council on preparation of GTCs of the MoF, approved by the Order of the MoF dated November 20, 2017, No. 948 (“Meetings of the Expert Council are held as needed, but at least once a quarter”.).

 

Increase a number of drafts GTCs discussed and voted in every meeting of the Expert Council up to at least 5.

 

Use extensively within the period between meetings of the Expert Council a practice of processing drafts GTCs remotely through exchange of amendments and comments and voting in the electronic form.            

Ministry of Finance

Not started - new recommendation

To establish a special procedure for submission and consideration of taxpayers’ appeals to correct TICs’ accounting indicators that the taxpayer considers false (incorrect) by the STS;

 

To oblige controlling authority either to correct respective controversial TIC’s data (information) within the established term or to substantiate its correctness in writing;

 

To establish procedure for prompt and unconditional TIC’s data correction enabling enforcement of court decisions directly related to the disputed TIC’s data (e.g. decisions recognizing calculation of the tax liability - which appears in TIC as debt - as being groundless), including court decisions, whose resolutory parts does not expressly oblige tax authority to make such a correction.

Ministry of Finance

Not started - new recommendation

Systemic report “Big challenges for small business”

To ensure transparent and efficient functioning of the ECA in accordance with the best international practices. When taking final legislative steps to launch the ECA, it is recommended that the CMU, the MinFin and the MinEconomy carry out additional analysis of:

 

а) the level of the ECA’s capitalization and state support so that the institution could cover as many businesses as possible, including SMEs, and make their own functionality more accessible and

 

b) the support areas outlined in Art. 8 of the Law, first of all in the context of their consistency with the identified priority sectors of the Export Strategy.

Cabinet of Ministers of Ukraine
Ministry of Finance
Ministry for Development of Economy, Trade and Agriculture of Ukraine

In process

Systemic report "Main problems faced by business in customs sphere"

To elaborate and approve Inter-Agency Instruction on interaction of customs and law enforcement authorities. Such a document should, among other things, regulate (1) time limits for customs clearance, including liability (sanctions) for failure to observe such time limits; (2) restrictions with respect to the number of actions aimed at retrieving samples of the declarant’s goods; (3) communication between customs and law enforcement agencies in the course of such interaction.

State Tax Service of Ukraine
Ministry of Finance
Ministry of Internal Affairs of Ukraine
State Security Service of Ukraine

In process

Systemic report "Problems with administering business taxes in Ukraine"

To eliminate the requirement of depositing the balance of VAT accounts with operational cash from the Tax Code due to its’ non-compliance with the best international practices and harmful effect for the day-today activities of the taxpayers. Thus, VAT electronic administration shall cease to be employed as a tool for replenishing state budget through cash advances and start performing its core administrative function.

State Tax Service of Ukraine
Ministry of Finance

Recommendation is no longer relevant
— comments: Respective amendments were proposed by the BOC during the discussion of amendments to the Tax Code of Ukraine in December 2015. However, the proposals were not approved by the Ministry of Finance.

Systemic report "Problems for businesses as a result of the military situation in the east of Ukraine and the annexation of Crimea"

To amend the Law “On the 2015 State Budget of Ukraine” and provide the necessary expenditures to compensate businesses for 2014 and to fully reimburse them for expenses in 2015. Given the number of mobilized individuals, the amount of budget funds required to cover the arrears for 2014 is UAH 1.6bn, while an additional UAH 955mn is needed to completely cover this compensation in 2015.

Ministry of Social Policy
Ministry of Finance

Implemented
— comments: The Law of Ukraine "On the 2015 State Budget" No.80-VIII dated 28 December 2017 stipulates a new budget program under the code 2501350 “Compensation to enterprises, institutions and organizations within an average salary of employees called up to serve in the military during mobilization period for a specified term.