Jointly with the experts of the interactive tax platform TaxLink, the Ministry of Finance has prepared the draft law “On Amendments to the Tax Code of Ukraine on the Improvement of Mechanisms of Liability for the Violation of Tax Regulations”.

What’s it about?

The goal of the draft law is to reform and to update liability for the violation of the tax law. It contains more effective mechanisms for the settlement of tax disputes for taxpayers in cases, when they are not responsible for detected tax violations.

What is proposed?

Along with the definitions of tax-related corpus delict, it is proposed to introduce the principle “guilt-based responsibility” for taxpayers (which is applied in all fields of the Ukrainian legal system) replacing the current principle “responsible without guilt” applied to taxpayers. The draft law is proposed to be implemented following the concept of “mindful care”.

As per the proposed law, a taxpayer shall be considered guilty of a tax violation, if it is proven that it was possible for him/her to follow rules and norms whose violation is subject to sanctions as per the Tax Code of Ukraine, but he/she did not take sufficient steps to ensure the required compliance. Due to this, controlling authorities should be entitled to additionally examine the documents of a taxpayer confirming his/her mindful care.

Also, it is proposed to apply a system of mitigating factors and circumstances releasing from responsibility; this would allow to prosecute taxpayers for violations resulting, for instance, from the malfunction of the electronic tax reporting system.

Along with detailed regulations for the compensation of the illicit decisions of controlling authorities, the draft law also proposes a simplified procedure for this compensation. If a taxpayer whose rights were violated, has some problems proving the sum of damage, he/she can receive some fixed compensation sum.

The legal nature of delay penalties is proposed to be changed as well from a sanction tool to a tool meant to compensate the loss of the value of money in time.

Also, the draft law significantly extends requirements to the content of the tax authority notification-decision. It must contain a detailed description of the relevant circumstances which shall be properly proven as well as proper reasons of the respective controlling body to apply sanctions to a taxpayer.

What comes next?

Presently, there is a working group at the Ministry of Finance operating as a consulting entity and improving the draft law taking into account international experience. The conclusions of the working group’s meetings as well as proposals and remarks aimed to improve the document will be taken into account in the preparation of the final law text.