Criminal liability may be imposed for VAT fraud

15/ 02/ 2021

In early February, the Verkhovna Rada voted in the first reading for the draft law №3959-1 regarding amendments to the administrative and criminal legislation which are related to the implementation of activities of the Bureau of Economic Security. Unfortunately, again, there were some odious articles criminalizing VAT fraud. Thus, the wording of the draft law allows initiating criminal proceedings against the companys management only on the basis of the fact of filing an application for VAT refund and the decision of the tax authorities to refuse to refund until the dispute proceeds in court. Thus, lawmakers are proposing changes that will allow criminal cases to be initiated only upon the fact of determining the offense by an act of inspection, which is unacceptable. Currently, the tax legislation provides for the possibility of administrative and judicial appeal of the act of documentary inspection, and the facts stated in it cannot be considered established until all procedures for appealing such an act have been completed. In addition, the proposed amendments to the Criminal Code allow for a broad interpretation of taxpayers actions regarding the provision of knowingly false information by investigators and leave much room for public authorities on possible abuse of power and pressure on taxpayers. In practice, however, the tax authorities often make decisions to refuse to refund VAT, so taxpayers are forced to go to court to protect their rights and get their VAT refunded. According to business, such provisions of the draft law contradict the main priorities declared by the government such as facilitation of doing business and inadmissibility of pressure on the business. The European Business Association is convinced that the adoption of such rules is unacceptable. Therefore, business appeals to the Chairman of the Verkhovna Rada, Dmytro Razumkov, and to the peoples deputies with a call to withdraw the draft law №3959-1. It is important to create conditions for development, and not pressure on the transparent business. For your reference, the rule on criminal liability for VAT fraud was included in several drafts of the Law on the Bureau of Economic Security, however, it did not remain in the final version - the Law on the Bureau of Economic Security which was adopted. However, unfortunately, there are still attempts to legislate this rule. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

In early February, the Verkhovna Rada voted in the first reading for the draft law №3959-1 regarding amendments to the administrative and criminal legislation which are related to the implementation of activities of the Bureau of Economic Security.

Unfortunately, again, there were some odious articles criminalizing VAT fraud. Thus, the wording of the draft law allows initiating criminal proceedings against the company’s management only on the basis of the fact of filing an application for VAT refund and the decision of the tax authorities to refuse to refund until the dispute proceeds in court.

Thus, lawmakers are proposing changes that will allow criminal cases to be initiated only upon the fact of determining the offense by an act of inspection, which is unacceptable. Currently, the tax legislation provides for the possibility of administrative and judicial appeal of the act of documentary inspection, and the facts stated in it cannot be considered established until all procedures for appealing such an act have been completed.

In addition, the proposed amendments to the Criminal Code allow for a broad interpretation of taxpayers’ actions regarding the “provision of knowingly false information” by investigators and leave much room for public authorities on possible abuse of power and pressure on taxpayers. In practice, however, the tax authorities often make decisions to refuse to refund VAT, so taxpayers are forced to go to court to protect their rights and get their VAT refunded.
According to business, such provisions of the draft law contradict the main priorities declared by the government such as facilitation of doing business and inadmissibility of pressure on the business.

The European Business Association is convinced that the adoption of such rules is unacceptable. Therefore, business appeals to the Chairman of the Verkhovna Rada, Dmytro Razumkov, and to the people’s deputies with a call to withdraw the draft law №3959-1. It is important to create conditions for development, and not pressure on the transparent business.

For your reference, the rule on criminal liability for VAT fraud was included in several drafts of the Law on the Bureau of Economic Security, however, it did not remain in the final version – the Law on the Bureau of Economic Security which was adopted. However, unfortunately, there are still attempts to legislate this rule.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.