De-risking of the enterprise

The status of the risk VAT payer is the result of the decision of the DPS commission at the regional level. Such a decision is made in the event that tax officials see the company as one of the risk criteria. As a rule, the majority of such decisions are made under item 8. However, as the practice of lawyers working in the field of tax law shows, the actions of representatives of the State Tax Service are far from always justified. Specialists of the “Prikhodko&Partners” law office regularly face similar problems of clients and know how to help. Let’s consider in more detail the risk criteria, as well as how the status of a risky VAT payer can be challenged. De-risking the enterprise is one of the most popular client requests we work with.

Key criteria of the VAT payer’s riskiness

The following points are among the main criteria by which a company can be classified as risky taxpayers:

• use of lost or forged documents during registration;
• reregistration of business for those people who do not exist;
• company registration without the consent or knowledge of the owners;
• its registration without real intentions to conduct economic activity;
• the criminal record of an official of the enterprise, in respect of which there is a sentence that has entered into force, has not been extinguished or not removed;
• failure to submit tax returns during the last two reporting periods.

And finally, we will consider point 8, which was already discussed above. It refers to the presence of DPS representatives regarding the riskiness of the business transaction specified in the tax invoice or adjustment calculation. Despite the fact that the representatives of the DPS should explain why they consider the business transaction to be risky, in the vast majority of cases the taxpayer receives rather vague and generalized wording in this regard. Another significant factor is that the blocking of invoices and adjustment calculations is affected by the automated system through which their registration takes place. It takes into account a set of indicators, after which it can issue a decision to stop the invoice or calculate the adjustment.

As for the mentioned point 8, it can be about the participation of either the company itself or its counterparties in the implementation of risky operations. Also, tax officials sometimes indicate the inconsistency of the sold goods or services with the purchased ones. Another reason for the application of clause 8 may be the purchase of goods from one of the counterparties, which itself has a risky status. Sometimes it can also be the inability to trace the actual supplier in the logistics chain. In a word, the reasons can be different.

The decision of the tax office and the format of its appeal

The resolution of the Cabinet of Ministers of Ukraine dated December 11, 2019 № 1165 “On approval of the procedures for the suspension of registration of tax invoices/calculation of adjustments in the Unified Register of Tax Invoices” regulates the format of sending the decision of the DPS to the taxpayer. This regulatory act also contains requirements for the content of the decision.

Therefore, when such a decision is made by the regional level commission, its representatives send the document through the automated system “Single window for submission of electronic documents”. The taxpayer receives the decision on the same day it is made.

Current legislation provides for a 10-day period to appeal the decision in an administrative procedure. This method of appeal is also called procedural. An administrative appeal provides that the taxpayer sends a complaint and an accompanying package of documents to the DPS. These can be the following documents:

1. foreign economic contracts, as well as annexes to such contracts;
2. documents confirming the authority of persons who are recipients of products necessary for carrying out operations;
3. primary supply documents;
4. documents aimed at confirming the conformity of products.

It is worth noting that the list of accompanying documentation attached to the complaint is individual in each case. So here you should contact those lawyers who really specialize in tax law and will be able to provide you with high-quality support not according to template schemes, but taking into account the specifics of a specific situation.

Appealing the decision of the DPS in court

In addition to the procedural method of appeal, when a VAT payer or his representative applies to the tax office, a judicial method is often used. In such a case, the decision of the tax authorities regarding the riskiness of the company is appealed in the administrative court.

When it comes to representing interests in court, this requires professional legal assistance all the more. You will receive it if you contact the specialists of the Prіkhodko&Partners law office. We are well versed in tax law in general and the issue of de-risking the enterprise in particular.