Procedure for Challenging Tax Notification Decisions
Tax relations between the state and taxpayers are often accompanied by the emergence of disputed situations. One of the tools used by control authorities to exercise their powers is the tax notification decision (hereinafter referred to as TND). However, taxpayers do not always agree with the conclusions of tax authorities. This creates the need to challenge the decision made.
In this article, we will cover:
- the concept of TND and its types;
- when and how to challenge the decisions of tax authorities;
- the features and procedure for administrative and judicial appeal;
- key points from case law.
The lawyers of the AA Lawrange are ready to provide practical advice for those facing unlawful decisions by tax authorities. Let’s begin with the definition of TND.
What Is a Tax Notification Decision (TND)?
A TND is an official written document issued by a control authority, including the State Tax Service (STS), and sent to a taxpayer (individual or legal entity). The purpose of the document is to fix the taxpayer’s obligation to pay a specified amount to the budget or make corresponding corrections to their tax reporting.
A TND is created separately for each type of tax, fee, and also for penalties provided by the Tax Code of Ukraine or other normative legal acts under the control of tax authorities. Additionally, according to Article 58 of the same code, a TND may include a penalty for violating the payment terms in the field of foreign economic activity.
Note! Within one TND, the monetary obligation is determined only for a specific tax. The number of TNDs sent to a taxpayer is directly proportional to the number of tax violations identified during inspections.
Types of Tax Notification Decisions
As mentioned above, TNDs are classified by their purpose and consequences for the taxpayer. According to the Tax Code, several main types of TNDs can be sent by STS specialists:
- Notification of tax obligation assessment. Sent when the control authority identifies a discrepancy between the obligation amount declared by the taxpayer in the tax return and the amount calculated by the tax authority. This applies to situations where tax obligations are underreported, the amount of budget refund is overstated, or the declared negative value of the taxable object for income tax or VAT is overstated.
- Notification of tax obligation reduction. Sent when an overstatement of the financial obligation declared in the tax return is identified. This means the taxpayer mistakenly reported a higher tax amount than required.
- Notification of tax obligation increase. Sent when an overstatement of the personal income tax amount that should be refunded from the budget is identified, particularly when claiming a tax discount.
- Notification of error. Sent when errors are found in determining the mandatory details of a tax invoice and/or if it is not registered in the Unified Register of Tax Invoices.
Each of these types of TNDs has specific features that directly affect the taxpayer’s financial obligations.
It is important to understand that receiving a TND is not only a statement of identified tax discrepancies but also a basis for paying the corresponding amount, and in some cases, for the imposition of penalties and fines. Ignoring a TND leads to negative consequences, including the creation of tax debt and subsequent enforcement actions for collection.
Grounds for Challenging a Tax Notification Decision (TND)
In fact, a TND is a conclusion made by a tax authority regarding the presence of grounds for paying tax. However, the taxpayer does not always agree with the content of such a decision, specifically with:
- the very fact of the tax obligation’s existence;
- the amount that has been assessed.
Erroneous tax assessments or incorrect calculations provide grounds for challenging the tax notification decision.
If you receive a TND that you disagree with, it is not advisable to ignore it or try to resolve the issue on your own. Turning to qualified lawyers at AA Lawrange is a wise decision that will guarantee the protection of your rights and financial interests.
Methods for Challenging Tax Notification Decisions
The procedure regarding how to challenge tax authority decisions is clearly regulated by paragraph 1 of Article 56 of the Tax Code. According to it, taxpayers have the right to resolve the issue in two ways:
- According to the rules of the administrative (out-of-court) procedure;
- According to the rules of the judicial procedure.
Challenging a TND should be considered as a sequential process, beginning with the administrative procedure and, if necessary, moving to the judicial procedure.
Administrative Procedure for Challenging Tax Authority Decisions
The administrative route has several advantages that make it an attractive option for taxpayers at the initial stage of the challenge. These advantages include:
- budget-friendliness, as there is no need to hire a qualified lawyer;
- the ability to buy time for gathering additional evidence, forming a clear legal position, and preparing for a court hearing if necessary.
Moreover, during the administrative challenge, the burden of proving the legitimacy of the tax obligation assessment lies with the tax authority.
The procedure for challenging tax notification decisions in the administrative procedure occurs in several steps.
| Step | Important details |
| 1. Preparation of the appeal. | The appeal is made in writing or through the taxpayer’s electronic cabinet. If necessary, copies of documents, calculations, and evidence are attached to the appeal. |
| 2. Notification of the tax authority. | Simultaneously with submitting the appeal to the higher authority, the taxpayer is obligated to notify the tax authority that issued the contested decision. |
| 3. Review of the appeal. | The control authority reviews the appeal within 20 calendar days from the date of receipt. However, the term may be extended, but not more than 60 calendar days.
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Important! In 2024, the Law of Ukraine No. 3603-IX came into effect, which introduces changes, specifically: the taxpayer has the right to be present during the review of the appeal either personally or through a representative, including in a video conference mode.
Judicial Procedure for Challenging Tax Authority Decisions
If filing an appeal through the administrative procedure does not lead to the desired result, the taxpayer has the right to approach the court. The judicial process is the most radical, yet effective, method when all possibilities for out-of-court dispute resolution have been exhausted.
The procedure for challenging tax notification decisions with the involvement of the court occurs in several stages.
| Stage | Explanation |
| 1. Preparation of the lawsuit. | It is submitted in electronic form via the “Electronic Court” system to the district administrative court of the claimant’s choice. All procedural requirements for drafting the claim must be adhered to (it must be legally substantiated, with clear arguments regarding the unlawfulness of the TND, supported by evidence confirming the taxpayer’s position), as any deficiencies will result in the lawsuit being left without progress. |
| 2. Payment of the fee. | Before submitting the lawsuit, the court fee must be paid according to the established rates. |
| 3. Initiation of the process regarding the distribution of the burden of proof. | In the judicial process, it is the tax authority that must prove the legitimacy of the issued TND. In other words, the tax authority must prove the justification of the issued TND. |
Moreover, a decision challenged in court cannot be re-challenged through the administrative procedure.
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Considering the precedents in judicial practice concerning tax disputes, it is important to note that courts, when assessing the legality of a TND, are not limited to a formal check of the presence of certain documents. On the contrary, they primarily examine the economic substance of the business transaction. This means that the presence/absence of specific documentation, as well as any deficiencies in its formalization, are not decisive in concluding the unreal nature of the business transactions.
Even the presence of a verdict regarding a fictitious counterparty is not an automatic confirmation of the invalidity of the taxpayer’s transactions – each case requires separate analysis. Similarly, an open criminal proceeding regarding a counterparty cannot be grounds for canceling a tax decision if there is no corresponding court verdict.
Thus, judicial protection requires the taxpayer not only to have a clear legal position, but also to understand the specifics of the judicial process and practice in tax disputes.
Consult with the lawyers of AA Lawrange if you are confused by numerous rules, do not understand all the nuances of how to challenge tax authorities decisions, or if additional questions arise.
Deadlines for Challenging a Tax Notification Decision
Adhering to deadlines is critically important for protecting the rights and interests of taxpayers, as missing them may result in the loss of the opportunity to challenge an unlawful decision made by the control authority.
Deadlines for Administrative Appeals
According to paragraph 3 of Article 56 of the Tax Code, a complaint about a TND or any other decision made by a controlling authority must be submitted to a higher-level authority within 10 business days following the day the taxpayer receives the decision. This day is considered to be:
- the day the TND is personally delivered to the taxpayer for signature;
- the day indicated on the postal delivery notice (if the TND was sent by mail);
- the day indicated on the delivery receipt (if the TND was sent electronically).
If the last day of the deadline for appeal falls on a weekend or holiday, the deadline is extended to the next business day.
Important! During martial law, the deadlines for challenging a tax notification decision, as defined by the Tax Code, are suspended. After the martial law is lifted, the deadlines will resume, taking into account the time that was remaining. This means that if you received a TND on February 20, 2022 (and martial law was declared on February 24, 2022), once martial law is lifted, you will have 6 business days to submit your complaint.
Deadlines for Judicial Appeals
The deadlines for appealing to court are regulated both by the Tax Code and the Code of Administrative Procedure of Ukraine. Let’s look at a few common cases.
- Situation when administrative appeal was conducted
According to paragraph 19 of Article 56 of the Tax Code, if the taxpayer has exercised their right to administrative appeal, the deadline for appealing to the court is 1 month following the completion of the procedure.
The completion day is considered to be the day when the taxpayer received the decision on the appeal, or if the decision was not sent to the taxpayer within the prescribed time, the appeal is considered to be satisfied.
- Situation when administrative appeal was NOT conducted
According to part 2 of Article 122 of the Code of Administrative Procedure and the practice of the Supreme Court, if the taxpayer has not exercised their right to administrative appeal, the deadline for appealing to court is 6 months from the day the taxpayer learned or should have learned of the violation of their rights.
What to Do if the Appeal Deadlines Were Missed?
If the taxpayer missed the 10-day deadline for administrative appeal for valid reasons, they have the right to submit a complaint along with a request for the extension of the deadline within 6 months (the counting starts from the day after the expiration of the 10-day deadline).
The request must include copies of documents that justify the reasons for missing the deadline. If the reasons are deemed valid, the higher-level control authority will restore the missed deadline.
Missing the deadline for judicial appeal of tax authority decisions is not a hopeless situation. Part 1 of Article 121 of the Code of Administrative Procedure explicitly states that the court may restore the deadline upon the request of a party to the case. The case will be considered by the court only if it is proven that the deadline was missed due to circumstances beyond the taxpayer’s control. The decision of the court on restoring the deadline or denying the request will be communicated to the applicant no later than the next day after it is issued (part 6 of Article 121 of the same code).
If you realize that you missed the deadline for appealing tax authority decisions, do not hesitate to seek advice from a qualified lawyer.
Which Government Authority Can a Taxpayer File a Complaint Against a Tax Notice-Decision With?
The administrative procedure involves the taxpayer submitting a complaint to a higher-level control authority. The specific authority depends on which authority issued the contested decision:
- If the tax notice-decision (TND) was issued by a district tax inspection, the complaint is submitted to the main office of the State Tax Service (STS) in your city or region.
- If the taxpayer disagrees with the regional decision, the complaint is submitted to the central office of the State Tax Service of Ukraine.
It is important to note that for contesting tax demands, a single-level system applies in the administrative procedure — appealing to the State Tax Service.
If the complaint filed during the pre-trial procedure is not satisfied (either fully or partially), the taxpayer can file an appropriate claim with the district administrative court, as chosen by the plaintiff.
Why Choose Legal Assistance From Lawrange in Tax Notice-Decision Cases?
If you are interested in a comprehensive approach to resolving issues related to tax notice-decisions, the lawyers at AA Lawrange know what to do.
We begin with a detailed analysis of your situation, assess the validity of the issued tax notice-decision, develop an optimal appeal strategy, and support you at every stage of the process: from preparing the administrative complaint to court proceedings.
Our goal is not only to inform you about how to appeal a tax authority decision, but also to ensure full protection of your rights and financial interests, minimizing risks and achieving a positive outcome.
Conclusions
The procedure for appealing tax notice-decisions is a complex process that requires knowledge of legislation and legal precedents. The existence of different types of tax notice-decisions, varying deadlines for filing requests under administrative and judicial procedures, as well as the specifics of court proceedings — these all need to be considered.
In case of receiving a tax notice-decision, we recommend not delaying, thoroughly reviewing the justification of the tax authority, gathering necessary documents, verifying the correctness of accounting records, and seeking professional legal assistance from Lawrange experts if needed.
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FAQ
How long does it take for the tax authority to review a complaint?
The review procedure usually takes 20 calendar days from the date of receipt. During this time, a decision must be made and sent. However, in some cases, the review period can be extended up to 60 calendar days, and the taxpayer must be notified of this.
Can a tax notice-decision be appealed in court if the administrative complaint was rejected?
According to the Tax Code and the Code of Administrative Procedure, the administrative and judicial procedures for appealing a tax notice-decision are separate methods of protecting taxpayers’ rights. If the taxpayer disagrees with the decision, they have the right to appeal in court.
However, this does not work in reverse. That is, if the tax notice-decision was appealed through the judicial process, it cannot be re-examined under the administrative procedure. Once the taxpayer chooses the judicial route, the administrative process is considered concluded.
What documents are needed to prepare a complaint against a tax notice-decision?
To submit a complaint against a tax notice-decision, the following information should be included: taxpayer details (full name for individuals or full business name, EDRPOU code, tax address), the name of the tax authority that issued the tax notice-decision, the details of the contested decision, justification for the appeal with references to relevant legal acts, and a list of additional documents, calculations, and evidence, if any.