Editor's Note: The Kyiv Post posed the following tax questions to lawyers Alex Frishberg of strategic alliance of Frishberg & Partners and the Ukrainian Foundation of Advocates, Roman Blazhko of Lavrynovych & Partners, Yuriy Zaluskyy of Baker & McKenzie and Taras Rozputenko of Gvozdiy & Oberkovych. Their full responses to Kyiv Post staff writer Vlad Lavrov's questions can be found online at www.kyivpost.com. Answering questions below is Alex Frishberg, a co-founder of Kyiv-based strategic alliance of Frishberg & Partners and the Ukrainian Foundation of Advocates.
KP: What steps should you have to take if a tax inspector comes? How different are your actions if it’s a planned rather than a surprise check? What documents do the inspectors need to show you to prove that their arrival is authorized?
Alex Frishberg:First of all, whenever you are confronted by a tax inspection “visit,” you should verify his/her identity and the legal grounds for the visit. Note that a tax inspection can be either (a) scheduled or (b) off-schedule on-site inspection of documents, which is carried out at the location of taxpayer or location of the object of property right with regard to which such inspection is carried. “Surprise visits” by tax inspection are unusual. Instead, there must be adequate notification given to prior to any tax inspection, not later than 10 calendar days prior to such inspection. Moreover, while tax inspection officials have the right to initiate the on-site inspection of documents, the actual inspection of all grounds, provided for by the Tax Code, may take place only after presentation or prior dispatch (in cases defined by the Code) of the following documents:
- instruction for carrying out such inspection, with the date of issuance, the name of the local tax body, administrative details of the order on carrying out the inspection, name and details of the subject (object) under inspection, purpose, type (scheduled or off-schedule), grounds, commencement date and duration of inspection, position and last name of the official who will carry out the inspection. Significantly, such instruction is valid only if it bears the signature of the head of the tax body or their deputy and is affixed by the tax body’s seal;
- copy of the order on carrying out the inspection;
- staff certificate of the persons indicated in the instruction for carrying out the inspection.
Failure to present or dispatch to the taxpayer of the above documents, or presentation of documents executed with violations of the above requirements, is sufficient legal grounds for not allowing the tax officials to carry out the inspection.
KP: What documents do they have a right to demand from you?
AF: If the tax inspection has complied with the above requirements, the taxpayer is obliged to provide to the tax officials to the fullest extent all documents that belong or are related to the subject of inspection. As a rule, during the inspections all documents available on-site are requested. Indeed, the authorities (powers) of tax inspectors are defined in the Article 20 of the Tax Code. As can be expected, they are quite broad, but during the inspections the authorities must act exclusively within the limits of their authorities and in accordance with the order on carrying out the inspection, namely, to request from the manager only those documents, which are related to the scope of inspection.
KP: What are your rights during the actual inspection?
AF: During inspection, the taxpayer has certain rights, including the right to be present, to familiarize oneself with and to receive the acts of inspections, prior to signing such acts. In case the taxpayer has comments to the contents (text) of the prepared acts, he has the right to sign them with such reservations and to submit to the tax body written objections in accordance with the procedure, set forth by the Tax Code. In case of disagreement with the act prepared per results of the inspection the tax payer has the right to provide their objections within 5 working days from receipt of such act. And, of course, there is the right to appeal the decisions, acts (or inactivity) of the officials and the clarifications provided by the tax body.
In case of request to provide written explanations, one can always make use of the Article 63 of the Constitution of Ukraine (right for legal protection and for refusal to witness against oneself), to refuse from communication with inspectors and seek for legal help.
KP: Under what circumstances can they block entry and exit to your office and confiscate documents and computer servers?
AF: In many cases, the tax inspection tries to shut down the taxpayer’s office during inspection, and to confiscate various documents and, importantly, computers. We stress that, except for measures within the investigation of a criminal case, supported by the respective order of the investigation authority, tax inspectors have no right to either block entrance/exit or withdraw original documents or any material objects, including computers or any parts thereof. The grounds and the procedure for arrest of the taxpayer’s possessions are defined in the Article 94 of the Tax Code.
Alex Frishberg is a co-founder of Kyiv-based strategic alliance of Frishberg & Partners and the Ukrainian Foundation of Advocates.
Kyiv Post staff writer Vlad Lavrov can be reached at [email protected].
