As practice shows, in Ukraine, tax inspectors often abuse their powers during inspections and may demand additional documents that do not relate to the period being inspected.
We will tell you how legitimate such actions are and what you need to know to protect your rights.
Is it possible to seize original documents?
According to the Law of Ukraine “On the Basic Principles of State Supervision (Control) in the Sphere of Economic Activity” (hereinafter referred to as the Law of Ukraine No. 877-V of 05.04.2007), during inspections, it is not allowed to seize original financial, economic, accounting and other documents, as well as computers and their parts, from business entities, except in cases provided for by criminal procedural legislation.
To seize original documents, an investigator needs a court order on temporary access to documents (search).
What documents does a tax inspector have the right to receive?
The legislation provides for both the right of regulatory authorities to receive documents from business entities and the obligation of business entities to provide such documents. However, such a right of auditors is not absolute.
In cases where unscheduled tax audits are conducted, the law clearly limits its subject matter – only those issues, the need for which to verify which became the basis for carrying out an unscheduled measure, with the obligatory indication of these issues in the order for carrying out a state supervision measure.
This means that an inspector conducting an unscheduled tax audit can only request those documents that relate to the subject matter of such an audit.
Article 10 of the Law of Ukraine No. 877-V of 05.04.2007 directly provides for the right of a business entity to demand that the audit be terminated if the regulatory authority has gone beyond the scope of the audit.
Not long ago, there was another restriction for regulatory authorities regarding the request for copies of documents, which was formed in judicial practice, namely: the resolution of the Supreme Court of Ukraine dated 09.12.2019 in case No. 826/11830/18 stated that a business entity should not be liable for failure to provide documents, the mandatory maintenance of which is not established by current legislation.
Thus, the tax inspector has the right to require a business entity to provide only those documents that relate to the subject of the audit and which are mandatory for maintenance in accordance with the requirements of current legislation.
Protection of commercial secrets during a tax audit.
Law No. 877-V dated 05.04.2007 does not limit the right of regulatory authorities to access documents that constitute commercial secrets. However, the legislation obliges officials of the regulatory authority to keep commercial secrets and confidential information of a business entity, and also imposes on them the obligation to ensure a special regime of protection and access to information that is a commercial secret, in accordance with the requirements of the law (Part 14, Article 4).
What is a commercial secret?
According to Article 505 of the Civil Code of Ukraine, a commercial secret is information that is secret in the sense that it is, in its entirety or in a certain form and set of its components, unknown and not easily accessible to persons who usually deal with the type of information to which it belongs, in connection with this it has commercial value and has been the subject of measures adequate to the existing circumstances to maintain its secrecy, taken by the person who legally controls this information. A commercial secret may be information of a technical, organizational, commercial, production and other nature, with the exception of those that, according to the law, cannot be classified as a commercial secret.
To protect its own interests, a business entity is obliged to ensure internal procedures that would guarantee the preservation of confidential (secret) information. These may include provisions on confidential information and work with it, restrictive inscriptions on documents (“Secret”, “Access restricted”).
It should be noted that timely and professional legal support is the key to protecting the interests of the company, professional responses to inspectors’ requests and appealing the results of the inspection.
Lex Consulting is a law firm, an expert in the field of tax law and investments, which carefully approaches each need or problem of a business, provides qualified protection thanks to a professional team and acquired experience.
