We would like to inform that, as evidenced by recent cases, the pre-trial investigation bodies in Ukraine have returned to the practice of mass registration of criminal proceedings for alleged tax evasion, based solely on the unagreed (i.e., under dispute) tax accruals. With this in view, we would like to clarify certain legal aspects and provide a brief explanation regarding the unlawfulness of such practices.
A systematic analysis of the current legislation indicates that, under Article 212 of the Criminal Code of Ukraine, criminal liability for intentional tax evasion committed by a taxpayer arises only when such actions result in actual non-payment to the state or local budgets, or to state target funds. Therefore, initiating a criminal investigation against a specific taxpayer, or for tax evasion in general, is only legally allowed when there is a confirmed fact of non-payment of the agreed tax obligations.
The Order of the State Fiscal Service of Ukraine No. 633 dated on July 18, 2016, as well as the official Letter of the State Fiscal Service dated on July 20, 2016, No. 4/99-99-14-03-03-13, confirm this interpretation and directly instruct pre-trial investigation bodies to register criminal proceedings for tax evasion exclusively on the basis of the agreed tax notifications-decisions, i.e., those tax accruals that have gone through all stages of administrative and/or judicial appeal.
Furthermore, paragraphs 56.18 and 56.22 of Article 56 of the Tax Code of Ukraine clearly stipulates that a taxpayer is obliged to pay a tax amount to the budget only when such an amount is agreed upon either voluntarily by the taxpayer, or through the procedure of appeals. If the tax authority’s decision is appealed by a taxpayer within administrative (pre-trial) procedures or in court, the notice of suspicion for tax evasion cannot be based solely on such a decision until the administrative appeal procedure has been completed or a final court judgment has been ruled.
It is also worth noting that this legal position has been confirmed by the Supreme Court of Ukraine, which has repeatedly emphasized that the tax legislation does not allow for the registration of criminal proceedings prior to the conclusion of judicial review of the tax audit results. The offense under Article 212 of the Criminal Code of Ukraine is considered completed only upon the actual non-payment to the budget within the timelines and of the amounts required by applicable tax laws.
Therefore, until tax liabilities are formally agreed upon, the taxpayer has no legal obligation to pay them. Consequently, until the disputed tax liabilities are agreed and the payment deadlines have passed, investigative bodies are not entitled to accuse a taxpayer of actual non-payment of taxes or to register a criminal case for tax evasion.
Based on the above analysis, several practical conclusions and recommendations can be drawn.
For Ukrainian enterprises and international business structures operating in Ukraine, it is important to take into account the risks associated with the initiation of criminal proceedings based on unagreed tax notifications-decisions, even in the absence of a final decision in the process of administrative appeal of tax assessments or a judicial ruling in a tax dispute. This requires a systematic approach to tax compliance, thorough documentation of transactions, and preventive legal support from local advisors and attorneys. For international business structures represented in Ukraine, as well as for Ukrainian companies, the situation demonstrates the necessity of developing a tax strategy based on the principles of legal certainty and proportionality inherent in European legal practice.
At the same time, these trends indicate the need for greater legal awareness of the distinction between administrative and criminal tax procedures, as well as the importance of obtaining proper legal advice and timely professional assistance in cases of tax audits, disputes, and registration of criminal proceedings.
Overall, the described practice highlights the relevance of transparent communication between taxpayers and supervisory authorities, as well as the necessity of further harmonization of Ukrainian procedural and regulatory standards with European principles for the protection of businesses and taxpayers’ rights.
We hope this information proves useful to you. Please note that this overview is preliminary and does not cover all potential legal nuances and risks, which may be addressed in a separate, more comprehensive legal consultation. Should you have any questions or require further information or assistance, please do not hesitate to contact us.
Author: Dmytro Dovzhyk, Attorney-at-Law and Partner at ArtesLex
27.01.2025
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