Appealing an order to conduct an actual audit

Appealing an order to conduct an actual audit is one of the most effective tools for protecting taxpayers' rights at the initiation stage of audit activities. The Tax code of Ukraine clearly defines the grounds on which a regulatory authority has the right to order such an audit. Let's examine this issue in more detail. We will also touch on the services provided in this context by the tax lawyers at "Prikhodko&Partners".

Legislative procedure and grounds for issuing an order for inspection

Unlike scheduled events, an actual audit is conducted at the taxpayer's actual location, without prior notice. This often creates an element of surprise. However, the law establishes an exhaustive list of circumstances for issuing the relevant order. These include obtaining information about:

• violations in the circulation of excisable goods;
• violations in the conduct of settlement transactions;
• the presence of unregistered employment relationships;
• the results of a financial statement analysis that indicate risks.

It is important to understand that a simple reference to a legal provision in an order without specifying specific factual grounds makes such a document legally vulnerable.

Requirements for the content of the order

The requirements for the content of an order to conduct an audit are defined by Article 81 of the Tax code. The order must contain the following information:

• date of issue;
• name of the regulatory authority;
• last name, first name, and patronymic of the officials who will conduct the inspection;
• a clearly defined period of time covered by the inspection.

The grounds for the inspection must be stated, with reference to the relevant subclauses of the code, as well as the start date and duration of the inspection. Missing even one of these details or providing them inaccurately constitutes a serious procedural violation. For example, if the order does not specify the specific address of the facility where the inspection is to take place, such a document cannot be considered properly executed, since the actual inspection is tied to a specific location.

Admission to inspection – as an implementation of the order

Access to an inspection is a legally significant action, effectively signifying the taxpayer's recognition of the inspectors' authority. The order issuance procedure stipulates that, prior to the inspection, State Tax Service officials must present:

• referral for inspection;
• a copy of the order;
• your service identification.

The payer has the right to inspect these documents and receive a copy of the order against signature on the referral. It is at this stage that the key dilemma arises: to permit or not to permit. If the payer considers the order unlawful and permits inspectors, they effectively miss the opportunity to appeal the order in the future, since the inspection process has already begun.

Recent judicial practice confirms that an appeal of an order is only possible at the conclusion of the inspection or in the event of denial of access. If access is denied, the taxpayer is required to provide a written explanation explaining the violations committed by the State Tax Service.

Typical mistakes the State Tax Service makes when issuing orders

Typical errors made by tax authorities when issuing orders often become the basis for a successful appeal. The most common mistake is a formal approach to presenting the grounds for the order. Tax authorities often limit themselves to general statements about receiving information from government agencies or third parties, without detailing what information they are referring to or what facts it confirms.

Errors in identifying the audit target also frequently occur, such as providing an incorrect name of the business entity or its address.

Another violation is exceeding the scope of authority or including in the order questions that cannot be the subject of the actual audit.

Therefore, it is important to ensure that the grounds stated in the order correspond to the actual circumstances, as the lack of justification for the appointment of an audit measure is an independent basis for recognizing the order as unlawful.

Judicial appeal of the order

Appealing an order in court is the primary means of protecting a taxpayer's rights if they believe the audit is unfounded. A claim is filed with the administrative court requesting the order be overturned.

The main argument in court is usually the lack of documentary evidence of the circumstances that served as the basis for the order. Since the burden of proof in administrative proceedings rests with the regulatory body, the State Tax Service must provide the court with evidence that served as the basis for the audit, such as consumer complaints or internal analysis data.

If the order is appealed simultaneously with the denial of access, the taxpayer should prepare to defend against a possible tax lien, which the tax authorities may initiate through the courts in response to the denial of access. However, if the court finds the order unlawful, all subsequent actions by the tax authorities and their findings automatically become null and void.

How can we help you?

You can contact the tax lawyers at "Prikhodko&Partners" Law Firm for the following services:

1. advisory assistance;
2. legal support in dealing with the State Tax Service;
3. assistance in defending your legal interests in administrative court.

If you need a consultation or assistance from a tax attorney, please use the contact information on the website or leave your number, and we will contact you shortly.