One of the problems that has a highly negative impact on the viability of any enterprise is its inclusion in the list of risky taxpayers. In this case, running a business effectively becomes impossible. Being on such a list gives rise to several doubts and uncertainty on the part of your partners regarding the quality of goods, services, tax compliance, etc. It would help if you took the necessary actions promptly to avoid blocking tax invoices, which ultimately threatens bankruptcy. Therefore, excluding an enterprise from the list of risky ones is a task of a high level of complexity that requires an urgent professional solution. The Law Range Lawyers Association specialists have repeatedly assisted in this matter and know what measures to take depending on the characteristics of a particular case, considering constantly updated judicial practice and a list of by-laws.

 

Reasons for Assigning Risk Status

Inclusion in such a list occurs based on the Cabinet of Ministers resolution dated December 11, 2019, number 1165. This regulatory document specifies specific reasons for considering a taxpayer a risk:

 

  • During registration, Invalid (lost) and divided documents were used.
  • The company was registered to someone who does not exist, has died, or is missing.
  • Decor carried out by a person not interested in conducting financially-economic activity.
  • The payer is registered (re-registered), while business activities are implemented without management’s knowledge.
  • Lack of a bank account with the legal entity-payer.
  • Ignoring the need to submit tax reports for VAT – there is no reporting for the last 2 periods.
  • Tax reporting on the company’s profits for the previous period was not filed.

 

Separately, paragraph 8 can be interpreted quite widely. We are talking about a situation where regulatory authorities have tax information about a specific enterprise obtained as part of the performance of their supervisory tasks and functions. This information determines the taxpayer’s riskiness. The ambiguity of this legal phenomenon lies in the fact that the tax service independently determines the status of such information, indicating the riskiness of the activity.

 

A business activity is considered risky if goods (services) are purchased or sold in interaction with counterparties who are already in a dangerous status. This definition applies if goods and services are produced without material resources or staff. Enterprise risk criteria allow the tax service to block a tax invoice (TI) until the payer submits documents confirming the regulatory authority’s erroneous assumptions. A commission operating at the regional level considers evidence of “innocence.”.

 

Important! If excluding an enterprise from high-risk VAT payers remains unfeasible, you should go to court to appeal this decision. In any case, this process is considered quite complex and, therefore, requires a professional approach.

 

Checking the Enterprise for Risk

In most situations, the recognition of legal entities as risky comes as a surprise to their owners. This is explained by the fact that tax authorities need to inform the taxpayer in writing about his inclusion in the specified list and report the results of the Commission meeting. Practice shows that even a personal written request for information on this issue could be more effective. As a rule, taxpayers learn they have been recognized as a “risk” when registering a TI/CC stopped during the business day.

 

Therefore, an enterprise is checked for riskiness independently in the taxpayer’s electronic account. To do this, you need:

 

  1. Click on the “EAS VAT” tab.
  2. The next step is the “Monitoring TI/CC” tab.
  3. Next, go to the “Compliance with risk criteria” tab.

 

The last tab is where the taxpayer can find out that he was included in the relevant list and learn why this happened.

 

 Conditions for Company Exclusion From the List of Risky Companies

As soon as it becomes known that a taxpayer has been assigned risk status, it is necessary to provide conditions under which it would be possible to remove it quickly. We are discussing preparing all the required documents to prove that the Regional Commission’s decision needs to be revised. You cannot treat the provision of documentation and explanations from a formal point of view, as this will negatively affect the progress of the case as a whole.

 

Other conditions for excluding a payer from the risk list:

 

  • Lack of specifics on the part of the tax authority that initiated the suspension of registration of the TI.
  • There is no protocol decision regarding the tax service’s violation of the legally established procedure for adding a payer to the list of risky ones, for example.

 

An essential condition for excluding a taxpayer from the list of risky taxpayers is the availability of professional legal support. Practice proves that it is tricky to independently demonstrate to the tax service that you are right, especially in complex, complicated cases when, in addition to contacting the tax service, you must go to the courts in various instances. Each situation is individual, and even if you have certain general information, you must be able to apply it correctly in practice. Against this background, cooperation with lawyers and lawyers of LA Lawrange will ensure the quick and effective exclusion of the enterprise from the list of risky payers.

 

Methods for Excluding Tax Risks

If the Commission recognized the enterprise as risky, that is, there are two ways to solve this problem:

 

  • Apply to the Regional Commission with an application to exclude a legal entity from the risk list (procedural method).
  • Going to court.

 

Both options have their characteristics, but the most important thing is that each complements the other.

 

Critical! A strong argument in favor of using the procedural method first and then the judicial process is that judicial practice on this issue is based on a formal approach in most cases. Because of this, the taxpayer’s failure to contact the Commission may be a reason to deny the claim.

 

As practice shows, cases of a favorable Commission verdict are not uncommon. In addition, the consideration of such an application is processed relatively quickly.

 

Based on the Decision of the Commission

According to the requirements of the Laws of Ukraine “On electronic documents and electronic document management”, “On electronic trust services” and the Procedure for the exchange of electronic documents with regulatory authorities, approved by the Ministry of Finance, the taxpayer must contact the regional Commission, providing clarifying information on the problem that has arisen and electronic copies of documents.

 

The package of documentation required to consider the issue of excluding a business from the risk list may consist of:

 

  • Foreign economic contracts and other agreements, as well as amendments to them.
  • Agreements, powers of attorney, and acts of the Board of Directors are used by persons involved in the purchasing products at implementation and are specific transactions for the taxpayer.
  • Primary documentation regarding the supply/purchase of goods or services, storage and transportation, loading and unloading of products, and warehouse documents (inventory lists). For example, you can familiarize the Commission with invoices/invoices, acts of acceptance, and transfer of goods (work performed, services) linked to the applicable standard forms and invoices.
  • Documents are used in payments for goods and services and bank statements from personal accounts.
  • Documents that will serve as evidence of product compliance with the quality established by law (we are talking, for example, about all kinds of declarations, quality passports, certificates of conformity). As a rule, the use of such documentation at an enterprise is provided for either by a specific agreement or current legislation.
  • Licenses and permits (applies to activities subject to licensing).
  • Other certificates, extracts, and acts may indicate the taxpayer’s non-compliance factors riskiness.

 

Resolution No. 1165 defines an approximate list of documents, which in practice can be compiled exclusively on an individual basis, considering the reasons for including the payer in the list of risky ones.

 

The Commission must decide on the issue under consideration on the day of its meeting (7 days from the date the application is submitted). If this does not happen, the payer is excluded from the list of risky ones.

 

Suppose you want to exclude an enterprise from the list of risky taxpayers. In that case, you should provide a package of documents to the regional Commission within 365 days from the moment when the suspension of registration of tax invoices began to take effect. However, considering the martial law in the country, any temporary restrictions in this regard have been lifted. Against this background, the critical role in timing is still played by the taxpayer’s desire to resolve the problem as soon as possible, allowing his business to function normally. In addition, if you receive a refusal from the Commission, you can re-apply to it with an additional, corrected package of documents.

 

Judicial Order

The exclusion of a taxpayer from the risk category can also occur through a judicial appeal (in case of an adverse verdict at the previous stage). When deciding, the Commission is often guided by Procedure No. 117, approved by the Cabinet of Ministers in February 2018, proving to the court that it only fulfills its duties. At the same time, the court quite typically does not see any violations about the payer on the part of the tax authority.

 

For this reason, solving the difficulty in court requires an exclusively qualified legal approach. Only in this case will it be possible to guarantee that the court will be provided with thoroughly substantiated reasons for filing a statement of claim, eliminating the risk of a refusal to appeal.

 

It is permissible to appeal the Commission’s verdict within the time limits provided by law. When using an administrative challenge, the claim must be filed within 3 months from receipt of the relevant decision. If you did not use the administrative appeal procedure, you can go to court within 6 months from the date of violation of your rights by the tax authority.

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When refuting the riskiness of the taxpayer, it is essential to consider the presence (or absence) of the ability to perform work, provide services, supply goods, etc. It is necessary to consider actual transactions with counterparties, confirm the implementation of business activities, and the absence of any claims from the police. Suppose the payer needs more resources to conduct business activities. In that case, it is possible to justify receiving such resources (equipment) from its contractors under lease agreements, contracts, etc.

 

Also, an experienced lawyer can refute arguments regarding the riskiness of counterparties (including buyers), which the tax service often uses to prove its case. To exclude a business from the list of risky ones, one should be guided by the principle of individual responsibility of the taxpayer, the essence of which is the inability of such a person to be responsible for the actions (or inaction) of his counterparties. This is because the concept of “good faith of the taxpayer” does not mean that the payer must fulfill the obligations of control over his counterparty.

 

Important! The main task when going to court is to provide evidence that will remove doubts about the fictitiousness of the enterprise and convince of the reality of conducting activities in the relevant field. This can be done by the experienced human rights defenders of LA Lawrange, who are well acquainted with judicial practice on this issue.

 

Factors for Reversing Risk Decisions

There are several factors in the presence of which (or at least one) the court will invalidate the Commission’s decision to add a taxpayer to the risk list:

 

  • The Commission’s action is not by the Procedure–the Procedure for making the relevant decision has been violated, provided for by Order No. 1165, based on which conclusions can be drawn about a violation of the requirements of Article 19 of the Constitution of Ukraine.
  • The Commission’s ignorance of the need to correctly fill out the “tax information” column — the decision to include an enterprise in the risk list is quoted in paragraph 8 of the Criteria without indicating what kind of “tax information” became the basis for the adoption of the corresponding document.
  • No motives and reasons for adding a person to the risk list, like evidence confirming this, as well as documents and references to them.

 

Thus, paying attention to the details of a company’s risk issues is critical. This determines how successful the exclusion of the VAT payer from the list of risky enterprises will be in the future.

 

How to determine a Positive Payer History?

A favorable tax history can be used to challenge the decision of the regional Commission. Specific indicators determine it, for example:

 

  • The volume of supplies to TI/CC for 500 thousand UAH and transactions for goods/services this month for transactions with the VAT payer does not exceed 50 thousand UAH.
  • The taxpayer constantly registers the TI/CC in the Unified electronic register of tax invoices during any four reporting months over the last six months within the framework of conducting business activities using the same code for goods/services.
  • The balance of fixed assets for the payer for the profit of a legal entity at the end of the reporting period is from UAH 5 million, and this amount can be observed in reports according to which the deadline for its submission precedes the calendar day for calculating such an indicator (subject to certain conditions).
  • The VAT payer owns, under the lease, land plots for economic purposes with an area of ​​at least 200 hectares or municipal or state – at least 0.5 hectares.
  • The unified social contribution per employee for the last 12 months is twice as high as the paid unified social contribution with a minimum salary (subject to certain conditions).

 

Why You Should Contact Lawrange

Excluding a VAT payer from the list of risky enterprises is a rather complex process that requires professional legal support. The future fate of the business depends on the correctness of the measures and actions taken. Without qualified legal support, you can make several mistakes that will lead to a deterioration in your company’s situation, up to a complete stop of its activities. Experienced attorneys and legal experts at Lawrange LA will not allow this to happen and will take the following measures:

 

  • They will carefully analyze the grounds indicated by the tax authority.
  • They will determine why a legal entity is included on the risk list.
  • They will help to collect the most complete package of documents proving the groundlessness of inclusion in such a list.
  • They will provide legal support as part of the administrative appeal of the Commission’s decision.
  • They will formulate and send a statement of claim to the court to appeal the regional Commission’s unsatisfactory decision.
  • They will defend your interests in court proceedings.

 

We provide detailed consultations when providing legal assistance in resolving an issue with exclusion from the risk list. With our help, a complete package of necessary documentation can be prepared, and all stipulated deadlines can be met, significantly increasing the chances of a successful trial.

 

Conclusions

Adding a company to the list of risky ones is a severe test since invoices are blocked, followed by a deterioration in the business’s reputation (counterparties apply sanctions or stop cooperation). In such a situation, the taxpayer must be ready to defend his interests at each stage of the appeal, provide the necessary evidence, and refute the risk status assigned to him as quickly as possible. At the same time, it is essential to understand that the system for identifying unscrupulous payers is imperfect – payers are often added to the list of risky ones without sufficient justification, informal intimidation is used due to their risk status, etc. Against this background, qualified legal assistance from Lawrence JSC specialists will guarantee compliance with your rights and prompt problem resolution.

 

 FAQ

How Frequently Indicators of a Payer’s Positive Tax History Are Updated?

This occurs in paragraph 11 of Procedure No. 117. Thus, the State Fiscal Service calculates mounthly indicators used to determine the taxpayer’s positive tax history monthly. The indicators are available in your electronic account until the 10th day following the reporting month.

 

How to Avoid Being Included in the List of Risky Taxpayers?

The primary condition is a preventive analysis of each counterparty, cooperation with which may be the cause of such an issue.

 

What Advantages and Opportunities Are Provided to the Enterprise After It Is Excluded From the List of Risky Ones?

The taxpayer can continue its activities without reputational or financial losses.

 

ORDER AN EXCLUSION OF AN ENTERPRISE FROM THE LIST OF RISKY ONES