Tax disputes

All individuals and legal entities in Ukraine pay taxes, and no one is immune from disputes over them. Tax disputes can relate to a variety of circumstances: accrual of fines, refusal to refund VAT, results of documentary audits, blocked tax invoices, or claims from the State Tax Service (STS). Most disputes are initiated by taxpayers who disagree with a decision of the fiscal authority.

Sometimes the problem can be resolved without a trial — by filing a complaint with a higher STS authority (administrative appeal). In other cases, you have to file a lawsuit with an administrative court. SION’s tax lawyers assist in both situations: we accompany disputes until they are resolved, defend the interests of clients, and have years of practice working with such cases.

Why you should trust SION. We:

• have experience handling tax disputes since 2011.
• find the essential arguments a client might miss on their own.
• never take actions that would worsen a client’s position.
• prepare and file all procedural documents correctly.
• provide advice and represent clients in court.
• stay with the client through every stage of the dispute, through to enforcement.

What are tax disputes and who is involved

A tax dispute is a conflict between a taxpayer and a controlling authority over the correctness of the assessment, withholding, or payment of taxes and fees. The main controlling authority in Ukraine remains the State Tax Service (STS), while criminal tax offenses have been investigated since September 2021 by the Economic Security Bureau of Ukraine (ESBU), which replaced the former tax police.

It is important to understand: administrative liability (additional assessments, fines, blocked invoices) and criminal liability for tax crimes (Article 212 of the Criminal Code of Ukraine) are separate procedures handled by different authorities, with different defense strategies. Our lawyers support clients on both fronts.

Tax advice

Tax consulting is in high demand among entrepreneurs and accountants. Clients come to us with questions such as:

• selecting the optimal taxation system;
• tax planning and optimization for business;
• VAT refunds and unblocking tax invoices in the Unified Register;
• payment of the single tax, land tax, or income tax;
• taxation of non-resident income;
• minimizing tax risks when signing contracts;
• taxation of royalties;
• how to act during an STS audit, and more.

We have accompanied businesses on tax matters for many years, tracking changes to the Tax Code of Ukraine and current Supreme Court case law. During each consultation, SION specialists assess the specific situation and prepare an individual defense strategy.

A reminder: under Article 52 of the Tax Code of Ukraine, a taxpayer may request an individual tax consultation (clarification) from the STS. It is provided free of charge in written or electronic form and entered into the unified register of individual tax consultations. Actions taken in reliance on such a consultation cannot be grounds for liability, even if the consultation is later changed or withdrawn. Our attorney helps prepare the request to the STS correctly.

Judicial procedure for resolving tax disputes

A significant share of the cases heard by Ukrainian courts concern taxes and compliance with tax legislation. Such disputes are considered under the Code of Administrative Procedure of Ukraine by district administrative courts at the location of the applicant or the defendant. For example, a Kyiv or Kharkiv-based business applies to the District Administrative Court of the respective region.

In the course of judicial resolution, we:

• analyze the situation and formulate a legal position and defense strategy;
• file objections to the audit report while it is still being finalized;
• prepare and file an administrative claim to cancel a tax assessment notice;
• represent the client at hearings in every instance;
• prepare motions, statements, and appellate or cassation complaints as the case proceeds;
• see the dispute-resolution process through to the end;
• monitor actual enforcement of the court decision and the release of any seized assets.

Resolving a dispute in the court of first instance usually takes several months; with appeal and cassation, it can take a year or more. Our specialists help clients get through this process with the least possible loss, protecting them from paying unlawfully assessed obligations or fines.

Article 122 of the Code of Administrative Procedure of Ukraine sets the deadlines for filing a claim in tax disputes:

• 6 months from the date the applicant learned or should have learned of the violation of their rights;
• 3 months from the date the decision on an administrative complaint was delivered (if a pre-trial appeal was filed).

Since August 1, 2023, most procedural and tax deadlines run as normal again — the blanket suspension of deadlines during martial law (clause 69 of subsection 10, section XX of the Tax Code) has been replaced by narrow exceptions for taxpayers who genuinely cannot meet their obligations on time due to hostilities or temporary occupation of their territory. Such circumstances must be documented, and our lawyers help with that. Deadlines must be strictly observed — we make sure they are not missed.

Tax disputes for individuals and sole proprietors

Ukrainian individuals and sole proprietors pay taxes somewhat differently from legal entities, and are split into several payer groups, so their cases have their own specifics. For example, retired sole proprietors are exempt from paying the unified social contribution (USC) for themselves if they have no employees, and self-employed sole proprietors cannot be charged the USC twice on the same basis — a position confirmed by consistent Supreme Court case law.

When filing a lawsuit, individuals and sole proprietors pay a court fee under the Law of Ukraine “On Court Fees”:

• a property claim (e.g., appealing a tax assessment notice) — 1% of the claim amount, but not less than 0.4 and not more than 5 times the subsistence minimum for able-bodied persons;
• a non-property claim (e.g., appealing a refusal to register a tax invoice) — 0.4 of the subsistence minimum.

Because the subsistence minimum is re-indexed each year by the state budget law, we calculate the exact fee as of the filing date. Our specialists study current Supreme Court case law on individuals to apply the latest legal positions.

Tax disputes for legal entities

Companies need not only to pay taxes correctly, but also to file accurate reports — and requirements change constantly. We track these changes and give the company up-to-date information during consultations, along with advice on how to legally optimize the tax burden.

If a dispute is looming or a penalty is threatened, it is worth getting advice in advance — this protects the business’s interests and helps organize record-keeping correctly to prevent penalties. If necessary, we help protect the company’s rights from unlawful STS actions or decisions by filing an administrative appeal or a lawsuit.

For judicial resolution of tax disputes, legal entities pay the following court fees:

• filing a property claim — 1.5% of the claim value, but not less than 1 and not more than 10 times the subsistence minimum for able-bodied persons;
• a non-property claim — 1 subsistence minimum for able-bodied persons.

Pre-trial appeal against decisions of tax authorities

Besides going to court, there is a pre-trial option for resolving disputes with the tax inspectorate — an administrative appeal to a higher STS authority under Article 56 of the Tax Code. This method is faster and cheaper, since it does not require paying a court fee. It can be used to appeal, among other things:

• a tax assessment notice imposing additional obligations or a fine;
• a decision to seize a taxpayer’s assets;
• a refusal to register a tax invoice or adjustment calculation in the Unified Register;
• a decision prohibiting transactions with assets under a tax lien.

An audit report itself cannot be appealed this way — only a decision made on its basis. The complaint must be filed within 10 business days of receiving the document (10 calendar days for tax assessment notices). If the deadline is missed for good reason (for example, presence in a combat zone), we file a motion to have it reinstated.

Even experienced STS staff can make mistakes due to misinterpreting the rules or a subjective assessment of the situation. To avoid paying excessive assessments and to avoid litigation, a well-drafted administrative complaint is often enough. If the STS fails to decide a complaint within the statutory deadline, the decision is deemed to be made in the taxpayer’s favor — we use this rule to our clients’ advantage.

Arbitration (commercial) tax disputes

Sometimes a dispute with a fiscal authority shifts from the administrative to the commercial track — for example, when recovering damages caused by unlawful actions of a controlling authority, or in disputes between counterparties where tax consequences are only part of the claim. In such cases we challenge unlawful actions or omissions of fiscal authorities where it is necessary to:

• appeal an STS decision connected to a related commercial dispute;
• unblock tax invoices;
• cancel incorrectly calculated additional assessments;
• recover overpaid taxes that the controlling authority refuses to return;
• cancel an unlawfully accrued penalty or fine.

We support such disputes in any city of Ukraine, helping clients restore their violated rights through experience, legal knowledge, and current case law. We take on even complex, multi-episode cases.

Common mistakes businesses make in tax disputes

Over years of practice, we have identified several mistakes that most often weaken a taxpayer’s position:

• Ignoring the audit report. Objections to the report must be filed within the statutory deadline — silence is treated as agreement with the auditors’ conclusions.
• Missing appeal deadlines. 10 days for an administrative complaint and months for a lawsuit pass quickly — without a lawyer it is easy to miss the date.
• Giving unprepared explanations to auditors. Verbal statements are recorded and can later be used against the taxpayer.
• Missing source documentation. The reality of a business transaction must be documented — this is required both by the Tax Code and Supreme Court case law.
• Ignoring the criminal-law dimension. If the assessed amount is large, it is worth assessing in advance the risk of criminal proceedings under Article 212 of the Criminal Code of Ukraine, and preparing for interaction with the Economic Security Bureau.

Tax dispute lawyer cost

An initial oral or online consultation is provided free of charge. The price beyond that depends on the scope and complexity of the matter: a one-off written consultation, handling a case during an audit, or full representation in court are each priced individually. Comprehensive subscription support (several consultations over a set period) is cheaper than one-off engagements. We quote the exact cost after the free initial consultation, once we understand the scope of work.

Our specialists have the experience to give clients a realistic forecast of outcomes. If you are unsure how to record a business transaction, we suggest a solution that leaves no room for doubt from the fiscal authority. For any question, we can find current explanations from regulatory authorities and relevant case law.

What the cost consists of

When going to court, the taxpayer pays the court fee (see the calculation above) and the fee for SION’s lawyer, which depends on the scope of work needed and the complexity of the case.

Legal fees, the court fee, and other litigation costs are initially paid by the applicant. However, it is possible to recover these costs from the losing party by court decision. We make sure the STS reimburses costs if it loses: we draw up a formal agreement with the client, track all expenses throughout the proceedings, and recover reimbursement based on these documents.

Disputes with fiscal authorities are a complex legal process that requires specialized legal knowledge and litigation experience. If you believe the STS has incorrectly calculated a monetary obligation or made a decision that contradicts the law, contact us. We will help prepare documents, file an administrative complaint against the fiscal authority’s actions, or file a lawsuit.

For detailed information and a cost estimate for our services, please email us at info@sion-ip.com.