Appealing a factual audit

In recent years, tax authorities have become one of the most common tools for monitoring the activities of individuals selling goods online. The tax service pays particular attention to online stores, social media pages, and marketplaces whose activities, in the opinion of regulatory authorities, bear the hallmarks of entrepreneurship but are carried out without state registration as an individual entrepreneur. However, experience shows that a significant number of such audits are carried out with violations, and their results can and should be appealed.

What is a factual audit and when is it applied?

An actual audit is a form of tax control conducted without prior notice to the taxpayer and aimed at verifying compliance with legal requirements regarding cash handling, settlement transactions, licenses, employment relationships, and business activities. Its legal basis is clearly defined by the Tax Code of Ukraine.

At the same time, it's important to understand that the mere presence of an online website, product catalog, or online ordering doesn't always indicate entrepreneurial activity. To be considered a business, a combination of criteria is required, including:

1. systematicity;
2. independence;
3. profit-oriented;
4. real income generation.

Typical violations during inspections of online stores

In practice, tax authorities often equate any online sales with business activity. Cases are common where actual audits are conducted without proper grounds, in excess of authority, or without following established procedures.

The most common violations include the lack of legal grounds for conducting an actual audit, improper execution of the tax authority's order, the review of issues not covered by the actual audit, and the use of inadmissible or inappropriate evidence. Often, the tax authority fails to prove systematic activity, fails to establish the source and amount of actual income, and bases its conclusions solely on assumptions.

Legal mechanisms for appealing inspection results

The results of an actual audit can be appealed both administratively and in court. An administrative appeal requires filing a complaint with the highest tax authority, but in practice, this is not always effective. A judicial appeal, on the other hand, allows for a comprehensive review of the legality of the tax authority's actions and the evaluation of all evidence through a competitive process.

During legal proceedings, verifying the legality of the audit itself is crucial. If it is established that the actual audit was ordered or conducted in violation of the Tax Code, the courts will typically declare the tax notices-decisions unlawful, regardless of the audit findings.

Judicial practice and the importance of professional protection

Judicial practice in disputes regarding online stores without registered sole proprietorships is gradually evolving in favor of taxpayers. Courts increasingly emphasize the need to prove the entrepreneurial nature of the activity, rather than the formal fact of the sale of goods. The correct legal classification of the individual's actions, analysis of financial transactions, and compliance with procedural rules by the tax authority play an important role.

Professional legal support during a tax audit and subsequent appeals not only minimizes risks but also completely eliminates illegal additional assessments, fines, and financial penalties.

An actual tax audit of an online store without a registered sole proprietorship is not always legal or justified. In most cases, tax authorities commit significant violations, which become grounds for successfully appealing their decisions in court. A sound legal position, analysis of evidence, and timely legal assistance are key factors in protecting an individual's rights in tax disputes.

To obtain legal advice regarding appealing tax audits, please fill out the form on our website, and our lawyer will contact you shortly.