LLC Tax Audit Support in Ukraine

Tax audit of a limited liability company is always a serious challenge for business that can lead to million-hryvnia tax assessments, fines, account blocking and even criminal liability for management. Professional legal support helps protect company from unjustified tax service claims, minimize financial losses and preserve business reputation.

LLC Tax Audit: Grounds, Procedure and Deadlines

LLC tax audit is conducted based on the Tax Code of Ukraine, particularly Articles 75-82, which detail procedure, deadlines and party rights.

Audit grounds are divided into two types. Scheduled documentary audit is appointed according to annual plan-schedule approved and published on State Tax Service official website. Each LLC can check whether included in current year plan. Audit cannot be conducted more than once per year.

Unscheduled audit is appointed in cases: clarifying calculation submission reducing tax liabilities by more than 10%, reporting data unreliability detection, untimely reporting submission exceeding 30 days, violation information receipt from other state bodies, taxpayer counterparty verification necessity.

Documentary scheduled audit periods: for small enterprises – up to 10 working days, for medium enterprises – up to 20 working days, for large enterprises – up to 30 working days. Unscheduled audit may last up to 15 working days. Taxes for period not exceeding three years may be audited.

Types of LLC Tax Audits

Legislation provides three main tax audit types, each carrying different risks for company.

Desk audit is conducted at tax authority premises after declaration submission without special decision and taxpayer notification. Tax authorities analyze reporting indicators, compare with counterparty data, verify logic and arithmetic calculation correctness. For VAT declaration, audit period is 30 calendar days, for other taxes – until end of next reporting period.

Documentary audit involves inspector visit to LLC location or document research at tax premises. This is the most serious audit type during which tax authorities have right to demand any primary documents, interview employees, inspect premises and assets, conduct inventory.

Factual audit is aimed at establishing LLC presence at registration address, trade rules compliance, cash register application, actual activity volume correspondence to declared. Such audits are often unexpected and conducted without prior notification.

Director and Accountant Rights and Obligations During Audit

Responsibility distribution between LLC director and chief accountant during tax audit is important for protecting each person’s interests.

LLC director bears responsibility for tax accounting organization, reporting submission timeliness, company activity information reliability, tax legislation compliance. Upon violation detection, precisely director may be held administratively or criminally liable.

Chief accountant is responsible for accounting maintenance correctness, reporting indicator reliability, tax calculation justification, primary document preservation. Accountant may bear responsibility for calculation errors or improper document execution.

LLC representative rights during audit: to be present during all auditor actions, provide explanations and objections, familiarize with audit act, provide objections within 5 working days, appeal tax actions, engage lawyer at any stage.

LLC obligations during audit: present auditors with direction and certificates, ensure premises access, provide documents according to audit subject, ensure inspector workplace, not obstruct lawful tax actions.

Typical Tax Authority Violations During LLC Audits

Tax authorities often commit procedure violations that may become weighty grounds for audit result appeal.

Audit subject and period exceeding – most common violation. Inspectors often go beyond issues defined in direction or audit periods not indicated. All assessments for such periods or issues are unlawful.

Audit period violation without proper extension by tax authority head decision. If audit lasted longer than established period, this is grounds for recognizing results as invalid.

Non-provision of act familiarization and objection submission right – LLC must receive act copy and have at least 5 working days for objection preparation. Notice-decision issuance earlier than this period is gross violation.

Using information obtained with law violation – for example, counterparty data without proper reliability verification, or information obtained from anonymous sources.

Economic conclusion justification absence – tax authorities must not only assert about violation but also prove it documentarily. Assumptions and guesses cannot be assessment grounds.

What Documents Has Tax Authority Right to Demand From LLC

Document volume that tax authorities can request during audit is clearly regulated by legislation.

During documentary audit, tax authority has right to demand: charter documents and change registration documents, counterparty contracts (suppliers, buyers, landlords), primary documents (invoices, acts, bills, payment orders), accounting and tax record registers, financial and tax reporting for audit period, goods and funds movement documents, bank statements and bank contracts, employment contracts and salary accrual documents, fixed asset ownership documents, other documents related to audit subject.

Tax authority cannot demand: documents for periods not covered by audit, documents unrelated to issues defined in direction, founder and employee personal documents unrelated to LLC activities, third party commercial secrets without consent.

Important: LLC has right to receive written document request with clear list and necessity justification. Inspector oral demands are not mandatory for execution.

Lawyer’s Role During LLC Tax Audit

Professional lawyer support significantly reduces LLC risks and helps minimize audit negative consequences.

At preparation stage, lawyer verifies audit appointment ground lawfulness, analyzes direction for procedural requirement compliance, conducts tax reporting audit for potential risk identification, prepares documents and eliminates obvious deficiencies, instructs director, accountant and employees about their rights.

During audit conduct, specialist ensures presence at all inspector procedural actions, controls procedure, deadline and audit subject compliance, records tax authority violations in writing, consults on auditor question and demand responses, objects to unlawful actions and document demands.

Upon audit act receipt, prepares substantiated objections referencing legislation and judicial practice, engages independent experts (tax consultants, auditors), collects additional evidence to refute tax conclusions, formulates legal position for further appeal.

At appeal stage, develops defense strategy (administrative or judicial appeal), prepares complaint or statement of claim, represents LLC interests in tax authorities and courts, petitions for judicial examination appointment, collects judicial practice favoring LLC.

LLC Tax Risks: VAT, Profit Tax, Salary Taxes

Each tax type carries specific risks that need understanding for effective defense.

VAT risks are most critical for LLC. Tax authorities actively identify work with shell company counterparties and refuse tax credit to entire supply chain. UERTI discrepancies when supplier failed to register tax invoice or registered with errors lead to buyer tax credit right refusal. Export operations are checked especially thoroughly – from export confirmation to currency receipts.

Profit tax risks are related to expense recognition. Tax authorities often object to expense classification: operations with counterparties having fictitious signs, expenses without proper documentary confirmation, expenses without economic feasibility, operations between related parties at non-market prices.

Salary taxes – another risk zone. Tax authorities identify salary payment “in envelopes” through fund movement analysis, discrepancies between official incomes and employee expenses, tax base understatement through employee execution as individual entrepreneurs or under civil contracts instead of employment.

LLC Director Liability Following Audit Results

Company director as executive body bears personal responsibility for tax violations detected during audit.

Administrative liability arises for accounting rules violation, untimely reporting submission, audit obstruction. Fines may range from 510 to 1700 hryvnias depending on violation type.

Financial liability – director may be held liable for damage compensation caused to LLC through tax assessments if personal fault proven. Participants may file claim for director recovery of assessed tax and fine amounts.

Criminal liability may arise under Article 212 Criminal Code of Ukraine (tax evasion) with unpaid tax amount exceeding 3000 non-taxable minimums. Punishment – from fine to imprisonment up to 10 years depending on evasion size.

Director defense is built on proving: personal intent absence for tax legislation violation, accounting maintenance obligation assignment to qualified accountant, reasonable business practice compliance, decision-making based on professional consultations.

Lawyer helps delineate responsibility between director and accountant, prove manager action good faith, protect from unjustified accusations.

Tax Notice-Decision: Appeal Procedure and Deadlines

Following audit results, tax authority issues tax notice-decision determining assessed tax, penalty sanctions and penalty amount. This decision is not final and subject to appeal.

Appeal periods – 10 calendar days from notice-decision receipt date. Missing this deadline may lead to automatic debt collection from LLC accounts.

LLC can choose two appeal paths: administrative (complaint to higher-level controlling authority – Main State Tax Service Department or State Tax Service of Ukraine) and judicial (claim to administrative court). Both paths can be used sequentially.

Administrative appeal has important advantage – automatically suspends notice-decision execution until complaint review. This gives time for additional argument preparation and evidence collection. Complaint review period – 20 working days with extension possibility up to 60 days.

Judicial appeal requires professional legal preparation. Statement of claim must contain detailed notice-decision illegality justification, references to legislation norms and Supreme Court judicial practice. All collected evidence is appended to claim.

Effective appeal strategy includes: procedural violation analysis during audit, assessed amount calculation methodology appeal, judicial tax examination appointment, economic operation reality proving, positive Supreme Court practice use.

Judicial Practice in LLC Disputes With Tax Authorities

Supreme Court decision analysis allows identifying key legal positions helping LLCs win tax disputes.

Taxpayer good faith principle – LLC cannot bear responsibility for violations committed by counterparties if company itself acted in good faith. Tax authorities must prove precisely taxpayer bad faith, not only supply chain counterparties.

Economic operation reality more important than counterparty formal defects. Even if supplier has fictitious signs, taxpayer retains tax credit and expense right if proves actual goods or services receipt.

Taxpayer decision lawfulness presumption – if legislation allows different norm interpretation, taxpayer choice is considered lawful. Tax authorities cannot impose their interpretation without violation proof.

Procedure compliance – courts consistently cancel notice-decisions upon procedural violation detection: deadline exceeding, audit subject exceeding, objection right non-provision, unreliable data use.

Limitation periods – tax authorities cannot assess taxes for period exceeding 1095 days (3 years), except cases of proven intentional evasion with criminal offense signs.

Why Choose Dextra Law

Dextra Law legal company has many years’ experience supporting LLC tax audits of various scales – from small enterprises to large companies with billion-hryvnia turnovers.

Our advantages:

• Deep tax dispute expertise – we handle dozens of tax cases monthly
• Comprehensive approach – we support from audit beginning to court decision execution
• Quick response – we understand business time value and act promptly
• Individual strategy – no template solutions, each case unique
• 98% of court cases end in our clients’ favor

If your LLC was appointed tax audit, you received audit act or assessment notice-decision – contact Dextra Law. The earlier we begin protecting your interests, the more chances to avoid assessments or minimize them. We will protect your business!

Frequently Asked Questions