According to the Tax Code of Ukraine (hereinafter referred to as “NKU”) and other by-laws of Ukraine, the tax authority has three opportunities to obtain information (documents) from a business entity (hereinafter referred to as “SG”).

Request for information;
Checking;
Counter reconciliation.
1. Request for information

A. Regulatory basis for the request: clause 73.3 of Art. 73 NKU and the provisions of the Resolution of the Cabinet of Ministers “On approval of the Procedure for the periodic submission of information to the state tax service and the receipt of information by these bodies upon written request” dated December 27, 2010 under No. 1245 (hereinafter referred to as “Resolution No. 1245″).

B. Duty of the SG to provide information (documents):

Controlling bodies (hereinafter referred to as “KO”) have the right to apply to taxpayers and other subjects of information relations with a written request for the provision of information necessary to perform the functions and tasks assigned to the KO, and its documentary confirmation (clause 73.3. Article 73 CPU).

I would like to draw your attention to the fact that the GCC is not prohibited from submitting a request to business entities of the SG from another tax authority, to which the SG does not belong geographically or which is not accountable to this tax, that is, any tax authority (on the grounds specified in clauses 3 of clause 73.3. Article 73 of the GCC, clause 12 of Resolution No. 1245) can invite the necessary information or documents upon request to the SG.

Information and documents are provided by the KO free of charge (clause 73.1. Art. 73 of the GCC and clause 2 of Resolution 1245).

B. To whom the request may be directed:

Individuals (residents and non-residents of Ukraine, including a private entrepreneur);
Legal entities (residents and non-residents of Ukraine) and their separate divisions;
uniting citizens;
religious organizations;
subjects of power;
The National Bank, banks and other financial institutions;
international organizations.
(Clause 3 of Resolution 1245).

D. Grounds for sending a written request:

A written request for the submission of information is sent to the SG if there is at least one of the following grounds:

1) based on the results of the analysis of tax information, facts were revealed that testify to a violation by the taxpayer of tax, currency legislation, legislation in the field of prevention and counteraction to legalization (laundering) of proceeds from crime, or the financing of terrorism and other legislation, control over the observance of which is entrusted to CI ;

2) to determine the level of ordinary prices for goods (work, services) during inspections and in other cases provided for in Article 39 of the GCC;

3) the inaccuracy of the data contained in the tax declarations submitted by the taxpayer has been revealed;

4) a complaint has been filed against the taxpayer about the failure of such a taxpayer to provide the tax invoice to the buyer or about violation of the rules for filling out the tax invoice;

5) when conducting a counter reconciliation;

6) in other cases determined by this Code.

(Clause 3 clause 73.3. Art. 73 of the GCC, clause 12 of Resolution No. 1245)

The request must contain the following information:

references to the norms of the law, according to which the body of the state tax service has the right to receive such information;
grounds for sending the request;
a description of the requested one, and, if necessary, a list of documents confirming it.
The request must be printed on the letterhead of the state tax service, signed by the head (deputy head) of the KO and must contain a list of the requested information and documents confirming it (clause 10 of Resolution No. 1245).

D. Deadline for providing a response to the request:

As a general rule, taxpayers and other subjects of information relations are obliged to submit the information specified in the KO request and its documentary confirmation within one month from the day following the day of receipt of the request.

But, when, based on the results of inspections of other taxpayers or based on the results of the analysis of tax information, facts are revealed that indicate possible violations by the taxpayer of tax, currency and other legislation, control over the observance of which is entrusted to the bodies of the state tax service (author’s comment: this means virtually ALL legislation, for which a request can be sent to the KO), the taxpayer is obliged to provide explanations and their documentary evidence for a mandatory written request from the state tax service authority within 10 working days from the date of receipt of the request (clause 5, clause 73.3. article 73 of the GCC and clause 14 of Resolution No. 1245).

Having carefully analyzed the above provision, we can conclude that the legislation actually establishes a 10-day deadline for providing a response (explanation) to the tax authority upon request.

Compliance with the deadlines for fulfilling the request is of paramount importance, because in the event of a delay by the SG in providing a response (explanation) to the KO, this is the basis for conducting a documentary unscheduled audit of such a taxpayer (clause 78.1.1. Clause 78.1. Article 78 of the GCC)

Judicial practice on the appointment of an unscheduled documentary check, in case of failure to provide an explanation within the time limit established by law, is as follows: when deciding to conduct a documentary unscheduled field check on the basis of clause 78.1.1. p. 78.1. Art. 78 NKU, KO must adhere to the following sequence of actions:

  • proper drawing up of the CR and sending a mandatory written request to the taxpayer;
  • the actual receipt by the taxpayer of such a request, that is, the delivery of the request to the signature of the official (official) person of the taxpayer or the authorized representative of the taxpayer or return to the tax authority a mail notification on the delivery of such a request to the taxpayer;
  • the expiration of a period of 10 working days from the date of receipt by the taxpayer of a written request from the tax authority;
    the taxpayer’s failure to provide the tax authority with written explanations and documentary evidence of the essence of the request received, and only after all these points have been completed, the CB has the right to appoint an unscheduled documentary audit in accordance with cl. 78.1.1. p. 78.1. Art. 78 NKU (Resolution of the Kharkiv Administrative Court of Appeal of 03/21/2013 in case No. 820/96 / thirteenth).

E. Methods of sending the request and the moment of receiving the request by the SG:

The request can be directed:

mail to the tax address (registration address) SG;
on receipt of the SG official;
using telecommunication means with the imposition of an electronic digital signature of the state tax service body.
The moment of receiving the request of the SG:

The request is considered delivered if:

it was sent by mail in a letter with acknowledgment of receipt to the tax address of the SG;
provided on receipt to the subject of information relations or his official;
in the case of sending in electronic form using telecommunication means with the imposition of an electronic digital signature of the state tax service body – in case of receipt of a delivery notification generated by the software (clause 13 of Resolution No. 1245).
E. Requirements for copies of submitted documents:

KO asks to provide copies of all requested documents certified by an authorized person of the SG, but today, neither in the GCC, nor in Resolution No. 1245, there is no procedure for how copies of these documents must be certified, and whether they must be certified at all. But KO, guided by the old edition of clauses 20.1.6. Clause 20.1 of Art. 20 NKU, insists on certification by the enterprise of all submitted copies with the seal of the enterprise and the signature of the head of the SG. Let me remind you that the provision of the above paragraph was changed in 2013 so that certified copies must be provided to the CB only during the verification process, and not the request.

Thus, we can conclude that copies of documents in response to a request may be submitted not certified by the head of the enterprise and without an SG seal imprint. But if there is a desire and time, or if you do not want to conflict with the CR on this issue, then you can still certify the documents. If there are a lot of documents, then they can be stitched with a thread, each sheet is numbered with a pen and on the last sheet, on the back side, glue the threads with a small sheet with the inscription: “stitch, numbered and stamped on ___ page” indicate the position (preferably the head) SG, signature date list, seal (if any).

Note KO is prohibited from seizing the originals of primary, financial, economic, accounting and other documents, except for cases provided for by the criminal procedural legislation (clause 85.5. Art. 85 of the GCC).

E. What must be in the letter answers (explanation):

number and date of the request of the state tax service body, to which a response is provided;
information requested by the body of the state tax service (and clause 15 of Resolution No. 1245).
G. Grounds for refusal to provide information (documents) upon request:

If the request is made in violation of the requirements set out in the first and second paragraphs of clause 73.3. GCC, the taxpayer is released from the obligation to provide a response to such a request (clause 5, clause 73.3. Art. 73 GCC).

Advice: even if the CR request is made in violation of the requirements of clauses 73.3. Art. 73 NKU, it is still worth writing a response to the request, where you reasonably state the reason for not providing information (documents), referring to the regulatory framework for refusing to provide information (documents), this will protect you from accusations by KOs regarding failure to provide information (documents) at the request of KO.

However, a reasonable and legal refusal to provide documents does not guarantee the SG from sending another document, already drawn up on the basis of clause 78.1.1. p. 78.1. Art. 78 GCC – when the KO will require documents already during the documentary unscheduled inspection. Refusing to provide information to the KO, the SG should immediately prepare for: either an unscheduled inspection or an appeal in court of an order to appoint such an inspection.

There is a positive jurisprudence for the SG, when the court agrees with the arguments of the latter that general phrases of KOs in the request, like – “establishing doubtfulness in the fact of operations” cannot be the basis for providing documents for such a request and, as a consequence, the appointment of an unscheduled inspection in accordance with the provisions .78.1.1. p. 78.1. Art. 78 NKU. According to the court, it is impossible to determine from such a phrase: by whom and when the doubtfulness was established in the fact of the operations, what exactly this doubtfulness consists in and what evidence it is confirmed by (Resolution of the Kharkov Administrative Court of Appeal dated 03.21.2013. In case No. 820 / 96 / thirteenth). However, in our country it will push back the case law, so each individual court can make decisions at its own discretion, without taking into account judicial practice.

2. Verification

The issue of a tax audit is a rather voluminous issue, therefore, this article will only highlight aspects of the provision of documents by KO based on the audit.

A. Regulatory framework: concept, types, grounds for conducting inspections and more – Art. Art. 75 – 86 NKU.

B. The duty of the SG to provide information (documents) to the CR:

KOs have the right to request and study, during audits, primary documents used in accounting, registers, financial, statistical and other reports related to the calculation and payment of taxes, fees, payments, compliance with the requirements of the legislation, control over compliance with which is entrusted to KOs (p. clause 20.1.6. clause 20.1. article 20 GCC).

The SG is obliged to provide the KO officials in full with all documents belonging to or related to the subject of the audit. This obligation arises for the SG after the start of the audit. In large taxpayers, there is an additional obligation to provide the requested documents in electronic form (clause 85.2. Article 85 of the GCC).

B. Beginning of the check: any check begins with the receipt of an order to conduct such an check by the head of the SG, or by a person authorized by the principal by proxy (clause 78.4. Art. 78 of the GCC).

D. List of documents:

Usually, the order indicates a list of documents that must be provided by the KO, if this list is not available, it is advisable to draw up a letter to the KO, where it is indicated that due to the absence of documents in the order, please explain what documents are needed to conduct the KO check.

One copy of the letter is provided to the inspector, and the other, against receipt of receipt indicating the date of receipt, position and name of the inspector (or, better “and” marks of the office of KO receipt) will remain in the SG. It is advisable to carry out any communication in writing against receipt of receipt. This will protect the SG from unfounded accusations by the KO regarding the failure to provide documents or information during the audit.

D. Terms of submission of documents:

The TCU does not have a provision on the deadline for providing information during the audit, only the beginning of the need to provide documents is established – such a duty arises for the taxpayer after the start of the audit (clause 85.2. Art. 85 of the TCU). Thus, we conclude: unless otherwise indicated in the order itself, the deadlines for submitting documents are determined by the time of the inspection itself, based on the type of entity (small, large or “other” enterprise that is being inspected) and the type of inspection (planned or unscheduled (Art. 75 -80 NKU)).

Let me remind you the timing of inspections, clause 82.1. Art. 82 GCC determines the duration of documentary scheduled inspections (Art.77 GCC), should not exceed:

30 working days for large payers;
10 working days for small businesses;
20 business days for other taxpayers.
The period for checking the decision by the head of the KO can be extended by 15, 5 and 10 working days, respectively.

p. 82.2. Art. 82 GCC determines the duration of documentary unscheduled inspections, (Art. 78 GCC), should not exceed:

15 working days for large payers;
5 working days for small businesses;
3 working days for FL-P without the use of hired labor;
10 business days for other taxpayers.
15 working days for large taxpayers, for small businesses – 5 working days, for individuals – entrepreneurs who do not have employees, subject to the conditions specified in paragraphs three to eight of this clause – 3 working days, for other taxpayers – 10 working days.

The term for checking the decision by the head of the KO may be extended by 10, 2 and 5 working days, respectively.

p. 82.3. h. 82 of the GCC established that the duration of actual inspections, (Art. 80 GCC), should not exceed 10 days, and may be continued for 5 days.

It is advisable to provide all documents to the inspector, after a thorough check by an accountant and a lawyer, not at the end of the check, but usually as soon as possible. All documents must be handed over according to the acceptance certificate, even for inspection. If there are a lot of documents, then they need to be stitched, numbered with a pen and at least a general description (for example, consignment notes with the counterparty “LLC” X “, in the amount of 25 pieces), in order to avoid accidental loss of documents during, or checking, or identifying the absence to their references in the Act.

E. Additional rights of KO:

Officials of KOs have the right to receive duly certified copies of primary financial, economic, accounting and other documents from the SC. Such copies must be certified by the signature of the taxpayer or his official and sealed (if any). It is prohibited to seize the originals of primary, financial, economic, accounting and other documents, except for cases provided for by the criminal procedural legislation (clause 85.4., Clause 85.5. Art. 85 of the GCC).

E. If documents with commercial secrets are transferred:

Documents containing commercial secrets or are confidential are transferred separately with an indication of the official (official) person who received them. The transfer of such documents for their examination, study and their return is drawn up by an act in any form, which is signed by an official of the KO and SG (clause 85.3. Art. 85 of the GCC). At the request of the inspector to provide information of a commercial nature, you can offer the latter to sign an agreement on non-disclosure of commercial secrets with penalties, in case of their disclosure (the basis is an order of the head of the SG). There is a chance that after such a proposal is submitted, the need for such documents will disappear. It should not be forgotten that the competitive struggle, today, has many forms, thus, although the SG will partially protect itself from the disclosure of confidential information.

E. If the representative of the KO asks for copies of documents:

Receipt of copies of KO documents is documented by a description A copy of the inventory drawn up by the officers (officials) of the KO is handed over to the signature of the SG. If the taxpayer or his legal representative refuses to certify the description or to sign the receipt of a copy of the description, then the KO officials who receive the copies make a note of refusal to sign (clause 85.7 of Art. 85 of the GCC).

3. Counter reconciliation

A. Regulatory basis for the request: clause 73.5 of Art. 73 NKU provisions of the Resolution of the Cabinet of Ministers “On Approval of the Procedure for Conducting Counter-Reconciliation by State Tax Service Bodies” dated December 27, 2010 under No. 1232 (hereinafter referred to as “Resolution No. 1232″).

B. The concept of counter-reconciliation – counter-reconciliation consists in comparing the data of primary accounting and other documents of a business entity, carried out by the state tax service authorities, in order to documentary confirmation of economic relations with the payer of taxes and fees, as well as to confirm the relationship, type, volume and quality of transactions and calculations carried out between them, to clarify their reality and completeness of reflection in the taxpayer’s accounting (clause 2, clause 73.5. article 73 of the GCC, and clause 2, clause 1 of Resolution No. 1232).

Q. The most important thing to remember is that cross-reconciliations are not tax audits.

Based on the results of the counter-reconciliation, a certificate is drawn up, which is signed by the SG and KO officials and personally handed to the SG against receipt or sent to the business entity at its address (location, tax address) by registered mail with acknowledgment of receipt (clauses 3.4 p. 73.5. Article 75 GCC).

D. Differences between cross-checking and a request for information:

In case of counter-verification, the state tax service body (initiator) sends to the state tax service body (performer), which is registered with the SG, a request for a counter-check to confirm the taxes and data charges received from the payer. The counter reconciliation can be carried out by the state tax service body (initiator) independently if the company is registered with the same state tax service body where the taxpayer is located, or within the same locality (clause 3 of Resolution No. 1232).

D. Deadline for submitting information for cross-reconciliation:

The deadline for providing information on counter reconciliation is one month from the date of receipt of the request (clause 5. Clause 73.5 of article 73 of the GCC).

The State Tax Administration of Ukraine issued “Methodological Recommendations for the Organization and Conduct of Cross-Reconciliation by State Tax Service Bodies”, approved by Order of the State Tax Administration of Ukraine dated April 22, 2011 N 236, this is an internal document of the KO, which establishes the internal interactions of tax authorities, an algorithm for drawing up and submitting requests to if necessary, carry out a counter reconciliation.

Yours faithfully,
Author, Leonid Viktorov.

Material prepared for the weekly “YURIST & ZAKON”