In case of violation of tax law the following types of liability are arisen:
- Financial (prescribed by Tax Code of Ukraine)
- Administrative (prescribed by Code of Ukraine on Administrative Offenses)
- Criminal (prescribed by Criminal Code of Ukraine)
Each type of legal liability has special rules of applying, including different limitations periods.
As provided by the article 102 of the Tax Code of Ukraine, the period during which Tax authorities of Ukraine are entitled to chase tax payers for tax offences is:
1095 days (i.e. 3 years)
from the last day of the end of the end of the period, during which the tax return’s is filed; and/or end of the end of the period, during which the taxes should be paid, that were accrued by tax authorities; or from the moment of the actual application of tax return.
If the tax return is updated, the maximum period is renewed. In other words, the 1095-day period is accounted from the moment of filing the adjustment statement of the tax return.
If within this maximum period the tax authority has not been defined the amount of tax obligations, the taxpayer would be free from responsibility (including the discharge from penalty interest), and the dispute regarding such tax return would not be a subject of administrative process or litigation. (article 102 of Tax Code of Ukraine ).
The maximum period is not applied (article 102.2 of Tax Code of Ukraine), i.e. tax obligations would be accrued or tax compensation litigation would be initiated at any time, in case of:
- Tax return for accrued period has not been filed;
- Official of the taxpayer (or taxpayer – individual) has been charged with tax evasion or a lawful resolution regarding termination of criminal case is in place due to non-rehabilitating grounds.
The maximum period is stopped (article 102.3 of Tax Code of Ukraine), i.e. would not been accounted during the period of existence of the following circumstances and would be resumed after their removal:
- Tax authority is prohibited to carry out an inspection of tax payer due to banning court ruling;
- Taxpayer is outside of Ukraine, and, if such absence is continuous and is equal to or more 183 days.
Types of financial sanctions for evasion of Personal Income Tax (PIT) and/or military contribution in accordance with the Tax Code of Ukraine:
Article of Tax Code of Ukraine
Failure to submit, a submission with violation of stated periods, a submission of inaccurate or incomplete tax declaration or with mistakes of amounts of income accrued (paid) for the benefit of the taxpayer, and the amount of tax withheld therefrom, shall such inaccurate information or mistakes result in reduction and/or increase of tax liabilities of the taxpayer and/or which lead to the change of the taxpayer
Penalty – UAH 510,
Submission of documents containing information on taxable objects of individuals or on tax payment without indication of taxpayer’s tax identification number , or by using false taxpayer’s tax identification number, except for the cases specified by art. 119.2 of Tax Code of Ukraine
Penalty – UAH 170
Defining of tax liability of the tax payer by the tax authorities themselves for such reasons:
– non-filing of tax return in time (art. 54.3.1 of Tax Code of Ukraine);
– violation of rules of tax accrual, deduction and payment to the respective budgets, confirmed by tax audit (art. 54.3.5 Tax Code of Ukraine)
Penalty – 25 % of amount of defined tax liability,
Non-payment of approved amount of tax obligations within the period, specified by Tax Code of Ukraine
Penalty for late payment:
– for up to 30 calendar days inclusive, starting from the last day of due payment of tax obligation – 10% of the paid amount of the tax debt;
– for more than 30 calendar days – 20 % of the paid amount of the tax debt.
Failure to calculate, withhold and/or pay (failure to transfer) of taxes by the taxpayer, including by a tax agent before or at the time of payment of income in favour of another taxpayer
Penalty in amount:
– 25% of tax amount, to be calculated and/or paid to the budget;
– 50% of abovementioned amount – for consequent violation in 1095-day period;
– 75 % of abovementioned amount – committing a similar offense in 1095-day period for a third time or more
Stipulated by this article penalties shall not apply, when the non-accruing, non-deduction and/or non-payment (non-revaluation) of the PIT are independently disclosed by the tax agent during the recalculation of this tax and is corrected in next tax periods during the tax (reporting) year in accordance with the rules of the Tax Code of Ukraine.
In accordance of clause 1.6 article 161 part 10 chapter ХХ of the Tax Code of Ukraine, the payers of military contribution have the same tax liabilities as the PIT-payers. Therefore, liability for violence of military contribution payment is the same as for similar offences with regards to PIT.
It is necessary to remember, that apart from penalties, there is another type of financial sanction – the interest fine. According to the art. 129 of the Tax Code of Ukraine, the interest fine is set as a percentage of the timely unpaid tax liability, which became a tax debt, or to a tax liability accrued by the taxpayer itself or by the tax authority.
In case of violation of the terms of payment of PIT and/or the military contribution, a fine calculated on the basis of annual discount rate of the National Bank of Ukraine with 120% index, effective on each day of non-payment of PIT and/or the military contribution, and calculated as follows:
P = S х CD: 100% х UNBU х 1,2 / D
Where: P – amount of penalty that accrued on the actual repayment of tax debt;
S – the actual repaid amount of tax debt;
CD – number of days of tax liability delay;
UNBU – the highest among discount rates of the NBU, effective on the date of tax debt appearance or on the day of its repayment;
1,2 – Index for calculation 120% per annum;
D – number of days in a year.
Brought action for financial liability of taxpayer does not release the taxpayer from bringing actions for administrative or criminal liability (if there are appropriate reasons) (art. 112 of Tax Code of Ukraine).
Actions can be brought for administrative liability in cases of non-charging or non-payment to budget of PIT amounts at the time of such profit payment to the individuals, personal income tax payment to be paid by companies, institutions and organizations (unless such payment is allowed by the law), failure to notify or late notification the State Tax authorities in specified form about the income of citizens..
The sanction for this offence is warning or penalty in amount as of UAH 34 to UAH 51. (art. 1634 of the Code of Ukraine on Administrative Offenses).
Under the art. 38 of the Code of Ukraine on Administrative Offenses, an administrative penalty could be imposed no later than two months from the date of the commission of the offense, and in case of a continuing offense, no later than two months from the date of its revealing.
The administrative penalties are imposed:
- only on the basis of inspection of the supervisory authorities;
- in regard to officials of the companies, and not to the company itself (the same as financial liability);
- with consideration of the statute of limitations provided in art. 38 Code of Ukraine on Administrative Offenses – 2 months.
Criminal liability applies in case of committing a socially dangerous act, in this case – non-payment of taxes for a significant amount.
The sanctions for tax evasion, under the art. 212 of the Criminal Code of Ukraine, are applied in accordance with the amount of unpaid taxes, namely tax evasion:
- in case of significant amounts (more than UAH 960 500) shall be penalized with a fine of UAH 17 000 up to UAH 34 000 or by prohibition to occupy certain positions or engage in certain activities for a term up to three years. The limitation period is 2 years.
- in cases of larger amounts (more than UAH 2 881 500) – shall be penalized with a fine of UAH of UAH 34 000 up to UAH 51 000, with the deprivation of the right to occupy certain positions or engage in certain activities for a term up to three years. The limitation period is 2 years.
- in cases of significantly large amounts (more than UAH 4 802 500) – shall be penalized with a fine of UAH 255 000 up to UAH 425 000 with the deprivation of the right to occupy certain positions or engage in certain activities for a term up to three years and with the forfeiture of property. The limitation period is 10 years.
A person who committed an abovementioned act shall be discharged from criminal liability if he/she pays taxes, duties (compulsory payments) and indemnifies the State for the damage caused by late payment (fiscal penalties, fines) prior to the institution of a criminal case against him/her – p.4 art. 212 of the Criminal Code of Ukraine.
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