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
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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 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 |
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.
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State Tax Service of Ukraine |
In process
— comments:
Implementation of the Law No.1797 dated 21 December 2016 "On Amendments to the Tax Code of Ukraine to Improve the Investment Climate in Ukraine" is still in process of its' eventual implementation. It is aimed at simplifying tax administration and is an important part of the reform of the SFS. This is a joint work of the VR deputies, experts and business representatives dating back to the last year.
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To ensure that the local tax authorities are trained and prepared to effectively support the taxpayers with all kinds of issues arising in connection with the implementation of VAT electronic administration. Besides, the State Fiscal Service shall promptly collect information about typical problems arising in connection with the VAT electronic administration followed by the practice of issuing formal clarifications. State Tax Service of Ukraine |
In process
— comments:
This recommendation has been discussed many times during the meetings between the BOC and the SFS. Although, the SFS provides taxpayers with explanations of the most typical problems, the territorial tax authorities are usually not ready to effectively support taxpayers for all types of issues arising from the functioning of the electronic system of VAT administration.
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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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State Tax Service of Ukraine |
Implemented
— comments:
In 2017, the SFS and the State Treasury of Ukraine implemented the transparent, informative and user-friendly interface of the electronic record system aimed at providing taxpayers with the information on the status of their VAT accounts. Such electronic office provides comprehensive information to the taxpayer, so that the taxpayer is now enabled, albeit not to the full extent, to reconcile the information in the electronic administration system with the records of the VAT reports.
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State Tax Service of Ukraine |
Implemented
— comments:
See the Law No.1797 dated 21 December 2016 "On Amendments to the Tax Code of Ukraine to Improve the Investment Climate in Ukraine".
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State Tax Service of Ukraine |
In process
— comments:
On October 21, 2015, the Ministry of Finance has issued the Order No.916 "On approval of the procedure for registration and filing of complaints by taxpayers and their review by the controlling bodies".In particular, in accordance with the Order No.916, the review of the complaint materials in a closed meeting takes place with the participation of the authorized representative of the BOC; the BOC has the opportunity to file its own objections.However, the administrative appeal procedure needs further improvement.
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To amend the Resolution of the CMU No.39 dated 17 January 2011, as well as Joint Order of the State Fiscal Service of Ukraine and the State Treasury of Ukraine No.68/23 dated 3 February 2011, to clearly state that the state treasury departments shall promptly pay to the taxpayer the VAT refund confirmed by a valid court ruling and with no further confirmation from the tax authorities. State Tax Service of Ukraine |
Implemented
— comments:
The Law No. 1797 of 21.12.2016 provides for the introduction of an automatic VAT refund register. This is a new transparent approach to VAT refunds. However, for the purpose of the corresponding payment, it is necessary that the tax authorities in the field make relevant information about the court decision "in force" to the Tax Bloc.
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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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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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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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State Tax Service of Ukraine |
In process
— comments:
Local control agencies are vested with servicing functions only; whereas the control is transferred to the MD SFS.The procedure for holding liable remains difficult to apply, enabling the officials to evade disciplinary liability.
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State Tax Service of Ukraine |
Not started
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State Tax Service of Ukraine |
In process
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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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Instances of abuse of power by the tax authorities in launching criminal proceeding based on the results of the tax audit or against the taxpayer's officials shall be eliminated. Prevention of fraud and malpractice in the course of launching and performing of tax criminal investigations could be guaranteed by "checks and balances" system and personalized liability of the tax authorities' officials. The BOC will address these issues in its systemic report for the forth quarter of 2015 on abuses of criminal procedural law by law-enforcement agencies. State Tax Service of Ukraine |
In process
— comments:
In 2016, the Methodological Recommendations were amended respectively. The number of criminal proceedings has generally decreased. Only in rare cases the criminal proceedings are initiated before the administrative appeal procedure completed.
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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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State Tax Service of Ukraine |
In process
— comments:
Pursuant to Article 78 of the Tax Code of Ukraine the unscheduled documentary tax audit shall be appointed if at least one of the grounds specified in the article is applicable.There is a positive dynamics, however, – the number of unscheduled tax audits somewhat reduced. At the same time, it appears that the risk-oriented system is virtually never employed in practice.At present, the issue of including the taxpayers to the plan of audits became rather significant. According to the Tax Code, the plan shall be issued for the entire year. However, since February 2018, the SFS began to make massive changes to the plan of audits in violation of direct provision of the Tax Code.
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State Tax Service of Ukraine |
In process
— comments:
The statistics is disclosed to public on the SFS web-site, but its form and information content shall be improved.
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To guarantee the transparency and objectivity of the administrative appeal procedure by mandatory involvement of experts to be engaged in consideration of the taxpayers' complaints. Such experts shall be independent from the State Fiscal Service and the Ministry of Finance. Involvement of experts shall be mandatory irrespective of the amount of additional tax liabilities charged and fines and penalties imposed. State Tax Service of Ukraine |
Implemented
— comments:
On 21 October 2015, the Order No.916 "On approval of the procedure for registration and filing of complaints by taxpayers and their review by the controlling bodies" was adopted.In particular, according to the Order No.916, the consideration of the complaint materials may take place with the participation of the BOC’s and Minfin's authorized representatives; the BOC is entitled to submit its own objections. Yet, the administrative appeal procedure needs further improvement.
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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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State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its’ practical application is still very limited. Both the SFS and the local tax authorities apply, as a rule, fiscal approach to the interpretation of the provisions of the Tax Code.Therefore, in practice this principle almost never applies. The exception is the established position of the Supreme Court or the official position of the Ministry of Finance.
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State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its' practical application is still very limited.
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State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its' practical application is still very limited due to a large number of current disputes (around 100,000). At the same time since the 2016, all appeals to the Supreme Court are subject to the SFS's prior approval.
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