Tax inspections of car dealerships: where the STS sees risks and how businesses can protect themselves

The automotive business in Ukraine has long been under the close scrutiny of the State Tax Service, as it combines high‑value goods, substantial cash flows, complex sales models and regular transactions with individuals. For the tax authority, a car dealership is not just a retail outlet but a business where issues of cash registers (RRO/PRRO), VAT, inventory accounting, trade‑in deals, purchases of cars from individuals and control of actual stock levels all intersect.

For this reason, tax inspections of car dealerships have become not isolated events but a systemic element of control. The tax service focuses not only on individual reporting errors but also on the taxpayer’s overall risk profile: reality of the registered address, transparency of accounting, quality of documentation, links with counterparties, alignment of the business structure with actual operations and completeness of transaction reporting.

Why car dealerships are in the STS spotlight
For the STS, the automotive sector is one of the most sensitive segments because it combines several risk factors. These include high‑priced goods, the large value of each transaction, accompanying payments and advances, extra equipment and service packages, as well as complex multi‑party sales schemes.

The tax service pays special attention to models where everything looks formally correct on paper but the real substance of activity suggests otherwise. If a business actively sells cars but does not show a commensurate tax burden, has discrepancies between accounting records and actual stock or uses a structure that looks like artificial business splitting, the risk of an inspection rises significantly.

What violations the STS looks for first
A telling signal for the market is official STS information that inspections of car and spare‑parts sellers, as well as repair and maintenance businesses, have revealed violations totalling 122.2 million UAH. Among the detected breaches, the tax authorities highlight settlements without RRO/PRRO, incorrect programming of cash registers, failure to report all taxable objects and failure to provide documents in full.

For a dealership, this means that the risk zone is not limited to the sale of the car itself. The tax service scrutinises advances, partial payments, extra charges for configuration, accessories, insurance or service products, and the correct reflection of these operations in cash discipline and tax reporting.

Another risky area is the sale of used cars, including via trade‑in, commission schemes or purchases from individuals. In such transactions, mistakes arise not only in bookkeeping but already at the contractual level: how the car is accepted, how its value is determined, how the subsequent resale is structured, how set‑off is recorded and whether the tax base is formed correctly.

Stock‑taking as a critical episode
For dealerships, stock‑taking of vehicles during an inspection is one of the key risks: if cars exist on paper but are physically missing, the tax service treats this as possible “grey” sales with understated income and VAT. The actual transfer of a car to a client without timely primary documentation turns discrepancies between book and physical stock from a “technical error” into grounds for additional assessments, fines and doubts about the entire accounting system. Court practice recognises stock‑taking as a proper tool for establishing the actual presence or shortage of goods, so businesses must not only refrain from fearing this procedure but also handle its conduct and results correctly from a legal standpoint.

What businesses should focus on now
Preparation for a tax inspection starts long before inspectors arrive and begins with an internal audit of the dealership’s business model. In its guidance, the STS directly stresses correct registration data, a real legal address, reliable counterparties, quality reporting, proper documentation, automated accounting and the justification of expenses and VAT credits.

For a dealership this means simultaneously checking several core areas:

• whether RRO/PRRO work correctly for all payment methods;
• whether documentation matches the actual sales model for new and used cars;
• whether there is a risk of unlawful use of the simplified tax regime or sole proprietors for operations that are essentially one business’s activity;
• whether the company can at any time confirm the actual location of each vehicle and its status in the accounting system;
• whether staff are prepared for inspections, document requests, physical stock‑takes and proper recording of tax officers’ actions.

This last point is often underestimated. Even reasonably good accounting does not protect the business if employees do not know how to act during an inspection, who is responsible for documents, who coordinates stock‑taking, how explanations are recorded and what exactly is handed over to the tax authority.

Why legal support is a practical solution
A tax inspection of a car dealership is almost always a complex matter in which bookkeeping, contractual arrangements, cash discipline, HR decisions and the physical movement of vehicles are assessed together. Therefore, success depends not only on accounting but also on timely legal support.

Legal support during inspections allows a dealership to identify weak spots in advance, prepare documents, verify the correctness of sales models, assess stock‑taking risks, manage communications with the STS and, if necessary, challenge inspection results. This is especially important for dealerships working with used cars, using trade‑in schemes, buying vehicles from individuals or operating through several related entities.

Practice shows that the best results are achieved not by businesses that start defending themselves after an inspection report appears, but by those that have built an evidence base, stock‑control system, sound contractual models and clear inspection protocols in advance. That is the value of professional legal assistance: not only responding to tax claims but preventing them at the stage of designing internal processes.

Our experts are always ready to advise you on any issues, drawing on extensive practical experience in supporting such inspections.
Contact us at +38 096 574 81 02 or submit a request on our website.
Author: Ihor Yasko, Managing Partner at WINNER Law Firm, PhD in Law.