Resolution of the Cabinet of Ministers of Ukraine № 1165: more effective counteraction against minimizers, more protection of conscientious taxpayers’ rights

Tax risk monitoring system upon the registration of tax invoice / calculation adjustment (TI / CA) has proven itself as an effective tool in counteraction against the VAT minimization schemes. During its existence, it has been changed several times and with each new iteration it has performed its function more and more effectively, namely: it became a deterrent to irresponsible taxpayers who receive tax benefits illegally, while ensuring the rights and guarantees of the law-abiding taxpayers.

As of today, the procedure for suspension of the TI / CA registration is regulated by the Resolution of the Cabinet of Ministers of Ukraine as of 11.12.2019 № 1165 “On approval of the procedures for suspension of the tax invoice / calculation adjustment registration in the Unified register of tax invoices” which came into force on 01.02.2020.

Resolution № 1165 is a result of broad and long-lasting dialogue between executive authorities, law enforcement agencies, people’s deputies, public members and business representatives. From now, the Cabinet of Ministers of Ukraine has approved the risk criteria for the VAT taxpayers which eliminate all contradictory points that occurred during the validity of the Resolution of the Cabinet of Ministers of Ukraine № 117 as of 21.02.2018 which dealt with the approval of such criteria by the SFS. Another significant change is the withdrawal of decision-making procedure on registration / refusal for registration of the tax invoice / calculation adjustment in the Unified register of tax invoices from the legal regulation of the Resolution № 1165. However, this procedure was approved by the Order of the Ministry of Finance № 520 as of 12.12.2019.

Changes to the signs of unconditional registration and indicators of positive tax history, in case of compliance with which the registration of the TI / CA in the Unified register of tax invoices is not stopped – became an important innovation in the Resolution № 1165. Thus, the taxpayer is interested in the timely and complete payment of the VAT, other taxes, fees and single social contribution which encourages compliance with the labor law, in terms of formal employment.

Changes to the criteria by which automated monitoring were made in order to prevent formation of fictitious tax credit by dishonest taxpayers who adjust to the signs and indicators by which the TI / CA is registered in the Unified register of tax invoices. These changes will help to fill in the budget and prevent the minimization schemes.

Herewith, the Regulation № 1165 ensures better protection of the taxpayers’ rights. In particular, the decision to register or refuse to register the TI / CA in the Unified register of tax invoices as a result of consideration of explanations and copies of documents from now cannot exceed 5 working days. In particular, from now decision regarding permission to register or refusal to register the TI / CA in the Unified register of tax invoices as a result of consideration of explanations and copies of documents cannot exceed 5 working days. Previously, the maximum term was 7 working days.

Given that all decisions on registration / refusal on registration of the TI / CA in the Unified register of tax invoices are made by a regional level commission, from now the taxpayer can appeal against the decision on administrative refusal, which provides quick pre-trial solution of the dispute.

In addition, if the business entity is included in the list of risk taxpayers, from now the taxpayer has the opportunity to submit the information and copies in the electronic form regarding the denial of compliance with the risk criteria of documents to the regional commission which is obliged to make the relevant decision within 7 working days.

Disputes regarding the taxpayer’s compliance / non-compliance with the risk criteria were solved in such way. Time spent by the taxpayer to solve this issue is reduced and need to visit the controlling authority is eliminated.

STS regularly holds coordination meetings with the leadership of the Security Service of Ukraine, State Bureau of Investigations, State Fiscal Service and other law enforcement agencies, which aim to increase the effectiveness of combating fraudulent schemes, including the value added tax sphere. Tax Service is also actively working with the Ministry of Finance and Committee of the Verkhovna Rada on further improvement of the monitoring system both in terms of legislation and in terms of effectiveness in combating malpractice and ensuring the rights of honest taxpayers.