The administrative seizure of a taxpayer’s property is an exceptional way to ensure that the taxpayer fulfills his obligations.
Grounds for arrest:
According to clause 94.2. Article 94 of the Tax Code of Ukraine (hereinafter referred to as the TCU), the seizure of property can be applied if one of the following circumstances becomes clear:
• the taxpayer violates the rules for the alienation of property that is in a tax lien (in accordance with clause 88.1 of article 88 of the Tax Code, the property of a taxpayer with a tax debt is transferred to a tax lien, and such a transfer does not require any written form, that is, if the taxpayer has any debt to the budget, then the property of such a payer is transferred as a tax lien and if the taxpayer decided to sell it (donate, etc.), then this is a reason for arrest)
• an individual with tax debt travels abroad
• the taxpayer refuses to conduct a documentary or factual audit if there are legal grounds for it or the admission of officials of the fiscal service;
• there are no permits (licenses) to carry out economic activities, as well as in the absence of a cash register registered in the manner prescribed by law;
• there is no registration of a person as a taxpayer with the fiscal service, or when a taxpayer who has received a tax notice or has a tax debt takes actions to transfer property outside Ukraine, hide it or transfer it to other persons;
• the taxpayer refuses to carry out an inspection of the state of safety of property that is in the tax lien;
• the taxpayer does not allow the tax administrator to draw up the act of the inventory of the property that is transferred to the tax lien.
• the taxpayer refuses to carry out an inventory of fixed assets, inventories, cash in accordance with the requirements of the GCC.
This list is exhaustive, therefore, if the taxpayer did not carry out the above actions, then the fiscal service will not have the legal right to seize property.
Possible objects of arrest:
• any property of the taxpayer, except for the property that is not subject to seizure * and
• funds in the taxpayer’s bank accounts.
Types of arrest:
• A complete seizure of property is a prohibition on the taxpayer’s exercise of the rights to dispose or use his property.
• A conditional seizure of property is a restriction of a taxpayer on the exercise of ownership rights to such property, it consists in the mandatory prior receipt of permission from the head of the relevant fiscal service for the taxpayer to carry out any operation with such property.
On the application of administrative seizure of funds in the taxpayer’s bank account.
According to clause 94.6.2 of clause 94.6 of Art. 94 NKU, the arrest of funds on the taxpayer’s account is carried out solely on the basis of a court decision by applying the fiscal service to the court. According to Article 1074 of the Civil Code of Ukraine, limitation of the client’s rights to dispose of funds in his account is not allowed, except in cases of limitation of the right to dispose of the account by a court decision.
The seizure of funds in the taxpayer’s account is carried out solely on the basis of a court decision after the appeal of the fiscal service body to the court. A bank or other financial institution releases funds from arrest by a court decision.
Termination of the administrative arrest of the taxpayer’s property.
In accordance with paragraph 94.19 of Art. 94 GCC sets the following list of grounds:
• absence, within 96 hours from the moment of the seizure, of a court decision recognizing the seizure as justified;
• repayment of the tax debt of the taxpayer;
• elimination by the taxpayer of the reasons for the application of administrative arrest;
• liquidation of a taxpayer, including as a result of a bankruptcy procedure;
• provision of the relevant supervisory authorities by a third party with appropriate evidence that the seized property belongs to the property rights of this third party;
• cancellation by a court or supervisory authority of the decision of the head of the supervisory authority to arrest;
• a court decision to terminate the administrative arrest;
• submission by the taxpayer of permits (licenses) to carry out activities, as well as a document confirming the registration of the registrars of settlement transactions carried out in accordance with the procedure established by law, except for cases specified by law;
• actual inventory of fixed assets, inventories, cash by the taxpayer, including the withdrawal of inventory balances, cash.
How to protect yourself from possible arrest.
1. The usual advice from a lawyer is not to break the law and at least once a month monitor the status of payment of taxes and filing reports in the taxpayer’s personal account. After all, an individual entrepreneur, in accordance with the provisions of Part 1 of Article 52 of the Civil Code of Ukraine, is liable for obligations related to entrepreneurial activity with all his property, except for property on which, according to the law, collection cannot be levied *.
2. Perhaps, before starting a business, free yourself of valuable assets by presenting them to your minor children, wife or parents (depending on who you have the best relationship with).
3. To “make friends” with its bank manager, as a rule, the bank needs several hours for the bank’s lawyers to agree to the application of the court decision on the seizure of the client’s accounts. If by chance, an entrepreneur decides to withdraw all funds from the account during the period when the bankers decide on the seizure of funds, then this will be an accidental success for such an entrepreneur.
4. Have a good accountant and lawyer, whose advice can save you from the negative consequences described in this article. The monthly payment for the services of these specialists will be cheaper than the payment for the services of releasing property from arrest.
If such an arrest does occur, then contact a qualified lawyer for help.
* Property that is not subject to seizure:
According to Part 7 of Article 48 of the Law of Ukraine “On Enforcement Proceedings”, if the amount to be collected for enforcement proceedings does not exceed 20 times the minimum wage (20 * 3723 UAH = 74460 UAH), Foreclosure on the debtor’s only housing and the land plot on which such housing is located is not implemented.
Article 55 of the Law of Ukraine “On Enforcement Proceedings” defines a list of property that cannot be foreclosed under enforcement documents.
1. Items of daily household repair: dishes, bedding, hygiene products, personal items: clothes, shoes, all children’s things.
2. Medicines, glasses and other medical products.
3. Furniture – one bed and one chair for each person, one table, one wardrobe for a family.
4. One refrigerator per family.
5. One TV set, personal computer per family, one mobile phone per person.
6. The supply of drinking water, food products necessary for personal consumption by the debtor, his family members and his dependents – at the rate of three months or the money needed to purchase supplies of drinking water and food for the debtor, his family members and persons who are dependent on him – at the rate of three times the minimum wage in effect on the day of execution for each person.
7. Property necessary for the administration of religious cults and rituals by the debtor.
8. Fuel needed by the debtor, his family members and his dependents to prepare daily food and heat (during the heating season) a dwelling.
9. Used for purposes not related to the implementation of entrepreneurial activities, breeding, dairy and draft cattle (one unit), rabbits (two pairs), poultry (five units), feed necessary for keeping them before pasture. The seeds required for the next sowing and the unharvested crop – from individuals engaged in individual agriculture (except for land plots on which a penalty is imposed).
10. Agricultural implements – from individuals engaged in individual farming.
11. Technical and other means of rehabilitation that provide compensation or elimination of persistent restrictions on the life of people with disabilities and other categories of persons, a car with which, in accordance with the law, for medical reasons, a person with a disability is provided free of charge or on preferential terms.
12. Prizes, state awards, honorary and memorable signs, which were awarded to the debtor.
Article 73 of the Law of Ukraine “On Enforcement Proceedings” defines a list of funds that cannot be levied:
5) assistance in connection with pregnancy and childbirth;
6) a one-time benefit in connection with the birth of a child;
7) assistance in adopting a child;
9) help for children to single mothers;
11) assistance for treatment;
12) burial allowance;
13) monthly allowance in connection with the restriction of consumption of locally produced food products and personal subsidiary plots of citizens living in the territory exposed to radioactive contamination.