Sole proprietor audits! Who’s first?

In 2025, sole proprietors (FOPs) are once again under strict scrutiny from the tax authorities. After the moratorium on inspections was lifted, the government has resumed active control over small businesses, citing budget deficits and an increase in “shadow” transactions. Lawyers warn: some entrepreneurs will receive inquiries or summonses in coming months, as inspection plans have already been approved and published by the State Tax Service.
Who will be inspected first
According to lawyers and financial consultants, there are four main groups of FOPs under the tax authority’s spotlight:

1. FOPs with large turnover but without supporting documents. The tax service tracks discrepancies between transaction volumes and declared income. FOPs actively operating through bank accounts but submitting minimal tax declarations are considered risky.
2. Entrepreneurs working in “high-risk” sectors. These include trade in food products, alcohol, tobacco, household appliances, as well as e-commerce, gambling, and currency exchange businesses. According to lawyers, these fields appear most frequently in current inspection schedules.
3. FOPs with hired employees who under-report official wages. New requirements since October 2025 force entrepreneurs licensed for excisable goods to pay two minimum wages (16,000 UAH) or double the social security contributions if no employees are hired.
4. FOPs with a history of amended declarations and sharp fluctuations in indicators. Frequent reporting changes, “negative profits,” delays in paying social security or the unified tax automatically increase the likelihood of inspection.
   What will be inspected
   Lawyers note the State Tax Service focuses during inspections on:

• proper financial record-keeping;
• consistency between cash flow and declared income;
• availability of supporting documents (contracts, acts, invoices, receipts);
• HR policy — official employment and wage level;
• use of cash registers or software-based registers for cash transactions;
• tax history and previous violations.
  Lawyers add that inspectors now have access to bank transactions and can analyze money movements on personal accounts. If regular transfers come from legal entities or various individuals that are not reported in tax filings, the inspection risk increases multifold.
  Main risks for entrepreneurs
• Additional tax charges and fines, which may reach hundreds of thousands of hryvnias, even for the past three years;
• Blocking tax invoices, a major issue for VAT-paying FOPs, as it hinders business with contractors;
• Interference with business operations, as inspectors often request internal documents requiring accountants and legal expertise;
• Risk of being classified as a “risky taxpayer,” which blocks VAT refunds and triggers further audits even outside scheduled plans.
  What should be done now
  Experts advise FOPs to conduct internal audits and check the following:
• tax and social security reports — timely and complete submission;
• correct business activity codes to avoid exceeding group limits;
• usage of cash registers or software-based registers — keep all fiscal receipts and customer databases;
• compliance with turnover limits, especially for the second and third tax groups;
• proper maintenance of income books, even if simplified;
• employment contracts for all hired staff.
  Lawyers recommend avoiding business with companies considered “gray” or temporarily blocked by the tax service, even if partnership seems safe.
  Actions during inspection
  Lawyers recommend FOPs follow these rules:
• demand presentation of official inspection orders and inspector IDs;
• make copies of acts and comments immediately on the spot;
• never hand over original documents without a written record;
• include a lawyer or accountant at all stages of communication with inspectors;
• document all inspector actions (e.g., on video).
  Most inspections last 10–15 days but may be extended if violations or suspicious transactions are found.
  Possible consequences of inspection
  If violations are detected, the tax service may:
• assess additional taxes, fines, and penalties—up to 50% of the violations’ total sum;
• initiate inspections of contractors;
• record the FOP in the “risky taxpayer” system;
• forward materials to financial monitoring or law enforcement (if evasion or money laundering is suspected).
  However, lawyers stress: even after an inspection report is filed, a FOP can appeal administratively or go to court. Practice in 2024–2025 shows that courts often rule in taxpayers’ favor if the State Tax Service exceeds its authority or breaches procedures.

Conclusion
In coming months, the tax authorities will focus on inspecting risk-prone FOPs: entrepreneurs with high turnover, undeclared employees, excisable goods, or inconsistencies in accounting data. The focus is on transparent cash flow, fiscal discipline, and income confirmation. To minimize risks, lawyers recommend preparing documents, stabilizing accounting, and not postponing tax consultations. For business in 2025, “inspection readiness” is effectively a new survival standard.

Yulia Popadyn – tax and customs law attorney at the Law Firm “WINNER”.

If you have any questions or issues related to tax inspections, document preparation for the State Tax Service, business protection during audits, tax reporting optimization or appealing decisions of regulatory authorities — contact our legal team for professional advice.