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 Most entrepreneurs complain about the significant amount of taxes, the high tax burden and the inability to conduct business in such conditions. This, in turn, affects the emergence of reflections on the implementation of cost optimization, including tax payments. Therefore, there is a terminology of “white” and “black” accounting among accountants. So let’s understand this concept and assess all the risks of the latter.

 “White” is one that is conducted officially at the enterprise, ie provides for the submission of all necessary reports in the amount prescribed by law, without intentional concealment of certain information. In addition, the obligatory feature of such work is only the official implementation of all payments (if the cash method of calculation, it is the appropriate fiscalization and recording of cash income). Such a company does not hide its income and pays all debts to the budget. Also, such a company does not artificially overestimate costs.

 There is no concept of “black” or double-entry bookkeeping in the legislation. However, it is very common. In the case of its maintenance, only part of the income is reflected, and the rest of it is hidden from official reporting.

Usually this type of activity includes:

  • issuance of wages “in envelopes” without deducting personal income tax, military duty and without payment of the amount of accruals of the single social contribution;
  • the presence of unaccounted amounts of cash in the enterprise;
  • use of assets that are not on the balance sheet of the organization and are not leased;
  • concealment of part of income to reduce taxes.

 Detection of the above signs is usually the basis for unscheduled inspections, and in the worst case – a search. Such actions can be taken by the State Tax Service of Ukraine, the State Labor Service, the National Police, the Prosecutor’s Office, etc.

If the fact of illegal activity has been documented, the employer and his officials will be liable for the following types of liability:

  • Financial responsibility in accordance with the Labor Code of Ukraine (for the payment of wages without accrual and payment of SSC and taxes).
  • Administrative liability under the Code of Ukraine on Administrative Liability.
  • Financial responsibility according to the norms of the Tax Code of Ukraine.
  • Financial liability under the Law ” On the collection and accounting of a single contribution to the obligatory state social insurance № 2464-VI (for non-accrual, non-deduction and non-payment of personal income tax).
  • Criminal liability.

 Here we should pay attention to Art. 212 of the Criminal code of Ukraine – evasion from payment of taxes, fees (obligatory payments). Bringing this type of liability can actually block all business activities of the company, as the seizure of a bank account or VAT limits will make it impossible to make various payments.

 Prikhodko & Partners recommends that you keep only “white” accounts and use only legal methods of calculating total income and expenses. If you have any questions – our lawyers and accountants will provide a qualified answer.

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