Tax audit of notaries

How often does the tax service audit notaries and why is this issue relevant?

Notaries are a separate category of self-employed individuals whose activities are regulated not only by the Tax Code of Ukraine, but also by the Law of Ukraine "On Notaries" and a number of bylaws of the Ministry of Justice.

Many people mistakenly believe that the Ministry of Justice exercises primary oversight over notaries, while in practice the tax service has its own levers of influence and often uses them.

As a lawyer, I frequently encounter situations where a notary receives an audit notice without understanding why exactly he ended up "in the field of view". Let's try to understand how often the tax authorities audit notaries, what questions they raise, and how to prepare.

Who and how checks notaries?

Notaries are self-employed individuals who are registered as taxpayers with tax authorities. They pay:

• personal income tax (18%),
• military tax (5%),
• unified social contribution (fixed amount, not less than the minimum).

The tax authority monitors the accuracy of the notary's income and expense records, the timely filing of reports, and the payment of taxes. Furthermore, as a specialized entity, the notary has additional responsibilities, such as verifying receipts for tax payments by both parties when certifying real estate purchase and sale agreements. If the tax authority discovers any discrepancies, an audit is almost guaranteed.

How often are inspections carried out?

Scheduled inspections

Notaries, like all self-employed individuals, can be included in the State Tax Service's inspection schedule. Formally, this can occur every three years, but in practice, it's less frequent. The primary criterion is the level of risk. If a notary reports and pays taxes on time, the chances of being included in the schedule are slim.

Unscheduled inspections

But they happen much more often. The reasons vary:

1. filing of amending declarations that reduce tax liabilities;
2. citizen complaints;
3. information from banks or other government agencies;
4. discrepancies between income reported by the notary and data obtained from the State register of property rights or other databases.

In my experience, unscheduled inspections of notaries occur at least 2-3 times more often than scheduled ones.

What exactly does the State Tax Service check?

• Book of income and expenses: the notary is obliged to keep it properly. Absence of entries or irregularity in them is a warning sign for the tax authorities.
• Payment of personal income tax and military tax: the primary focus is on the completeness of declared income. The tax authorities analyze bank account data, information from registries, and compare it with the financial statements.
• Unified Social Contribution: failure to pay the minimum contribution, even in a month without income, is grounds for a fine.
• Real estate transactions: the tax authorities carefully check whether the notary has properly monitored the payment of taxes by the parties to the transaction. Any error or omission may be considered a violation.
• Settlement transactions: if a notary uses a bank terminal or accepts cash, compliance with the legal requirements regarding the settlement transaction registrar is monitored.

How to prepare and minimize risks?

1. Maintain systematic records.
   Records must be kept regularly, and retain supporting documents.
2. Verify clients when certifying transactions.
   Ensure taxes are paid before signing the contract.
3. Monitor your reporting.
   It's best to review your tax return with an accountant or lawyer.
4. Pay the unified social tax on time.
   This is one of the most common grounds for fines.
5. Contact a lawyer immediately after receiving an audit notice.
   This will help you avoid errors in communication with the State Tax Service and protect your rights.

Tax audits of notaries are not uncommon. While scheduled audits may occur once every few years, unscheduled audits can occur at any time. The main risks are income accounting, timely payment of personal income tax and unified social contribution, and the correctness of tax control when certifying real estate transactions.

The key to security is transparent accounting, attention to detail, and a willingness to promptly respond to tax inquiries. Notaries should remember: even one formal error can result in financial penalties, but competent legal support significantly reduces these risks.