The Law of Ukraine
On the Procedure for Payment of Taxpayers' Liabilities
to Budgets and State Purpose Funds
Date of Entry into Force:
April 1, 2001
The Law determines the procedure of settlement of liabilities of legal entities and natural persons to budgets and state purpose funds. To such liabilities refer payment of taxes, duties, obligatory payments, fine and penalties which are calculated for violation of terms of payment of taxes.
The Law also determines the procedure of settlement of liabilities on fine and penalty for violations in the sphere of external economic activity.
The Law determines full list of bodies of state power, which refer to control bodies. Thereto authorities of bodies controlling levy of different taxes are set.
The Law establishes the rule pursuant to which assets of a taxpayer, including monetary funds, may be collected forcibly on account of settlement of its tax liabilities exclusively on decision of court (arbitration court). Thereof imposition of the respective tax debt on executive prescriptions of notaries shall not be permitted.
The procedure of giving tax declaration to the control body is determined. Tax declarations shall be accepted by control body without prior examination of indicated in them indices. The Law sets the terms of giving tax declarations depending on the reporting period. Control body is entitled to determine the amount of tax liability of a taxpayer in case, if a taxpayer does not give tax declaration in the fixed terms or data of documentary examinations of taxpayer's activity testify about reduction or overstating of the sum of its tax liabilities stated in tax declarations.
A new procedure of determination of amount of taxpayer's liabilities according to indirect method came into force since January 1, 2000. The above methods will be applied in the following cases:
- a tax payer did not submit tax declaration in a set term;
- impossibility to determine location of such payer, location of natural person;
- a taxpayer avoids to give the information set by the legislation;
- in other cases.
By means of indirect method tax liability is determined on estimation of spending of a taxpayer, growth of its assets, quantity of persons who are hired by it as well as by evaluation of other elements of tax bases, which are approved for calculation of tax liability regarding particular tax pursuant to the Law. The method of determining of the sum of tax liabilities by indirect methods shall be approved by the Cabinet of Ministers of Ukraine.
The Law stipulates the mechanism of resolution of disputes between taxpayers and control bodies. In case, if the norm of the law or other normative legal act or norms of different laws or different normative legal acts permit different interpretation of rights and liabilities of taxpayers or control bodies, the decision shall be made in favor of a taxpayer.
The Law regulates the mechanism of clarification by control bodies of some provisions of tax legislation. Tax clarification is making public of official interpretation of some provisions of tax legislation by control bodies authorized thereto. Tax clarification does not have effect of normative legal act. The taxpayer is entitled to obtain any tax clarification as well as the one given to other tax payer free of charge.
The Law determines the procedure of tax pledge. Tax pledge is a method of guaranteeing of unsettled taxpayer's tax liability to the state. The right of tax pledge shall be applied to any taxpayer's assets which were in his ownership or under full economic jurisdiction. The property, which is in tax pledge, may be freely used by a taxpayer in its economic activity, except sale, lease, investment of pledged property or its liquidation. The property in tax pledge shall not be pledged again.
For any transactions with assets a taxpayer shall coordinate its actions with tax inspector who represents tax body. The Law determines the mechanism of such coordination. Tax inspector is entitled to prohibit transaction in case, if judging by his conclusions pricing conditions and/or forms of settlement during such transaction will cause decrease of taxpayer's ability to clear off tax debt on time or in full volume.
The Law sets cases of tax pledge termination and relieve of taxpayer's assets from tax pledge. In particular, to such cases refer: settlement by a taxpayer of tax debt, acknowledgement of debt irrecoverable, death of a natural person, expiry of terms of case.
The Law entitles taxpayers to receive guarantee from a bank-resident concerning settlement of tax debt. In this case tax body shall refuse pledge of taxpayer's assets. Under tax guarantee agreement bank-guarantor shall be responsible before tax body for proper fulfillment of liabilities on settlement of tax liability or tax debt. In case a taxpayer does not fulfill liabilities on settlement of tax liability or tax debt, bank-guarantor shall be responsible for such settlement.
Administrative arrest may be also imposed on taxpayer's property. Arrest of assets may be applied, if:
- a tax payer violates the rules of alienation of assets which are in tax pledge;
- a natural person who has tax debt is leaving abroad;
- a taxpayer is acknowledged insolvent;
- a taxpayer refuses conducting of documentary examination;
- there are no certificates about state registration of subjects of entrepreneurial activity.
Arrest of taxpayers' assets may be also applied to commodities which are produced, storaged, transported or sold with violation of requirements determined by the customs legislation or legislation on excise imposition. The assets may be arrested for the term up to 96 hours starting from the hour of signing the respective documents by the head of tax body. Decision of the head of tax body regarding arrest of assets may be appealed by a taxpayer in administrative or court procedure.
Administrative arrest of taxpayer's assets shall be terminated in case if:
- decision of the head of tax body about such arrest was cancelled;
- tax debt of a taxpayer was settled;
- taxpayer was liquidated also due to bankruptcy;
- the third person presented to tax body the proper evidences that it owns the arrested assets;
- the deadline of administrative arrest terminated;
- the court approved decision about stopping of administrative arrest pursuant to requirements of legislation on bankruptcy issues;
- the taxpayer presented certificate about state registration of subject of entrepreneurial activity.
The Law establishes the procedure of sale of assets which are in tax pledge. Sale of such assets shall be carried out in case, if other stipulated by this Law measures on settlement of tax debt did not result in a positive way.
The Law entitles taxpayers to pay their tax liabilities by installments or postpone them. In order to pay tax liabilities by installments or postpone their payment the taxpayer shall pay interests in amount not less than rate of the National Bank of Ukraine. Permit to pay by installments or postpone tax liabilities shall be given by tax body.
Provisions of the Law as regards to tax pledge and administrative arrest of taxpayers' assets came into force since October 1, 2001. Also since October 1, 2001 came into effect provisions of the Law concerning taxpayers' right to pay tax liabilities by installments and postpone them.
For violation of tax legislation of Ukraine penalties shall be imposed on a taxpayer in amounts determined by this Law. Penalty amounting ten minimum personal tax-free incomes (UAH 170) shall be levied for not presenting of tax declaration in the term set by the legislation. In case a taxpayer sold assets which are in tax pledge without prior consent to it of tax body, it shall additionally pay fine amounting one hundred percent of the sum of tax debt as regards to which the right to tax pledge arose.
Pursuant to the Law taxpayers have the right to write off their tax debt (except fine and penalty), which arose for December 31, 1999 and has not been settled for the day the Law came into effect.
Tax debt, which arose in the period from January 1, 2000 until January 1, 2001 and has not been settled for the day this Law came into effect, at taxpayer's wish may be paid by installments for the term up to 60 months with payment of interest.
Fine and penalty calculated on tax debt for January 1, 2001 shall be written off taxpayers.