HOW TO PROPERLY RESPOND TO TAX AUTHORITY REQUESTS: INSTRUCTIONS
The right of tax authorities to send requests demanding information regarding certain aspects of a taxpayer’s business activity, as well as the procedure for sending such requests, is clearly defined in Articles 20 and 73 of the Tax Code of Ukraine.
When receiving such a request, a business has several options for how to respond, and each option may lead to specific consequences.
Option 1: Deliberately ignore the tax authority and provide no response
In our opinion, this approach is an extreme measure and may provoke the most negative reaction from the tax authority. According to tax legislation, failure to provide a response to a request is a direct basis for initiating an unscheduled tax audit.
Additionally, it is important to take into account new provisions of the Tax Code regarding automatic exchange of tax information, under which:
Failure to respond to a request, or submitting incomplete information or documents by a taxpayer, financial agent, or other person to a request sent under the grounds defined in clauses 6–8 of subparagraph 73.3.1 of paragraph 73.3 of Article 73 of the Tax Code — results in a fine equal to 5 minimum monthly wages for each such case (as of 2023 — 33,500 UAH).
Failure to submit, or submission of incomplete information or documents to a tax authority request in other cases under Article 73 of the Tax Code — results in a fine equal to 1 minimum monthly wage for each such case (as of 2023 — 6,700 UAH).
Please note: payment of such fines does not release the taxpayer from the obligation to provide the requested information.
Option 2: Provide a response stating that the tax request does not meet legal requirements
A tax request must meet the requirements established by the Tax Code of Ukraine and by the Procedure for periodic submission of information to tax authorities and receipt of information based on written requests. These requirements relate not only to the grounds for issuing a request, but also to its form and method of delivery to the taxpayer.
In practice, many tax requests lack clearly defined circumstances indicating a potential violation of tax legislation, or simply do not comply with legal requirements.
Option 3: Comply with the request and provide explanations and all documents requested
In practice, many taxpayers decide to provide everything requested — and sometimes even more — despite the request not meeting legal requirements.
Before taking such a hasty step, you must remember: providing unnecessary or poorly reviewed documents may significantly increase the risk of additional tax assessments and fines.
To avoid unintentionally creating grounds for a documentary off-site audit, we recommend involving LBASE attorneys in preparing a response to the tax authority’s request.
17.08.2023
Tax audits 2023
