The State Tax Service wants to see your business before an audit: more data is becoming available

The State Tax Service is gradually changing the very principle of business oversight.

On 4 September, Lesia Karnaukh, Head of the State Tax Service of Ukraine, stated that combating the shadow economy should not be based solely on inspections.

One of the key tools is data and the exchange of data between government institutions.

The State Tax Service openly notes that government agencies, especially those operating in the financial sector, possess substantial volumes of information.

The task is to build a model of interaction in which this data makes it possible to identify actual risks more accurately.

At the same time, the State Tax Service is developing analytics and a risk-based approach to tax control.

This fundamentally changes the situation for businesses.

Previously, a tax audit was the main concern for entrepreneurs.

Now, a significant part of the work may take place before an inspector even arrives at the business premises.

The tax authority analyses information, identifies inconsistencies, and determines transactions where it sees a substantiated tax risk.

The State Tax Service also reports that the relevant framework of cooperation is being developed with:

– the banking sector;
– the Ministry of Finance;
– the National Bank of Ukraine;
– the Bureau of Economic Security of Ukraine;
– businesses.

Another important signal concerns the fragmentation of businesses through individual entrepreneurs, commonly referred to as FOPs.

The Head of the State Tax Service directly stated that the simplified taxation system is often used to split businesses and minimise taxes, and that this situation must change.

Therefore, for companies operating through a group of FOPs, the issue is no longer limited to whether their contracts are properly drafted.

The entire actual business model will matter:

– who truly manages the business activities;
– how funds move;
– who owns the goods;
– where personnel work;
– how prices are set;
– who bears the expenses;
– whether the FOPs are genuinely independent entrepreneurs;
– whether tax reporting reflects real economic activity.

At the same time, it is important not to exaggerate.

The State Tax Service has not announced the creation of any new “total control system.”

On the contrary, the tax authority’s official position is “not control for the sake of control,” but inspections where genuine risks exist.

However, this is precisely why another issue is becoming increasingly important for businesses:

not only whether you have violations, but also how your company appears to the analytical systems of the State Tax Service.

If data from different sources creates a risk profile, the next step may be an information request, suspension of tax invoices, an audit, or referral of materials to law-enforcement authorities, depending on the specific grounds and circumstances.

Therefore, a tax audit of the business model should be conducted not when the State Tax Service has already raised questions.

It should be conducted while such questions have not yet arisen.

You can seek legal advice now rather than need legal representation later.

Would you like to receive legal advice on tax risks and assess how your business model may appear to the State Tax Service?

📞 Call: 096 574 81 02
📧 Email: info@uk-winner.com

Author: Ihor Yasko, Managing Partner at WINNER Law Firm, PhD in Law.