Tax audits slow down business: collisions and risks

In the current business environment in Ukraine, tax audits have become one of the key risk factors for companies. According to the State Tax Service, in 2025 the number of such audits increased by 15%, which led to the blocking of accounts of more than 5,000 business entities. This not only diverts resources from core activities but also creates barriers due to legislative inconsistencies and unfounded requests from tax authorities. The key issues are the ambiguity of the provisions of the Tax Code of Ukraine, the excessive discretion of the State Tax Service, and weak mechanisms for protecting taxpayers.

Legislative inconsistencies create the basis for chaos in tax audits: even after numerous amendments, the Tax Code still contains contradictory provisions, and Article 73 on documentary audits is not aligned with the 2023 Law “On Administrative Procedures”, which requires that actions of public authorities be duly justified. This allows tax officials to request information for a period exceeding 1,095 days, referring to “risky” transactions, which has already led, in particular, to the court annulling the audit of AgroPlus LLC. Such inconsistencies generate costly litigation for small businesses.

Another issue is unfounded requests from the State Tax Service, when instead of targeted demands they send thousands of pages of primary documents without specific justification, which contradicts Article 78.1 of the Tax Code of Ukraine. In 2025, the Antimonopoly Committee received more than 2,000 complaints about excessive requests, including demands for irrelevant data and employees’ personal information, which violates the principle of proportionality under Article 19 of the Constitution. A telling case is MetalInvest PJSC: due to an excessive request concerning VAT in the amount of 50 million UAH, the company faced account blocking for 2 months and losses of 1.5 million UAH, while such practices discourage foreign investors because of the system’s unpredictability.

The tax audit process is further complicated by bureaucracy and weak digitalisation: despite the introduction of the Taxpayer’s e-Cabinet, only 40% of audits are conducted as desk audits online, and planned inspections can last up to 30–60 days with extensions, blocking operational activities. Additional pressure is created by ignoring the moratorium on inspections of small businesses under the pretext of “exceptional risks”, which forces companies to spend on auditors and lawyers and, according to KSE estimates, reduces productivity by about 2.5% of GDP.

The consequences include slower economic growth (Ukraine’s position in the Doing Business ranking for the tax component fell from 65th to 78th place in 2025), an increase in the shadow economy (25% of companies use “grey” schemes), and growing inequality, where large corporations withstand the pressure while SMEs are more likely to go bankrupt (a 12% increase in bankruptcies in 2025).

Solving this issue requires reform: harmonising the Tax Code with administrative legislation and clearly defining “risky transactions”, limiting the scope of requests under the “one request – one document block” principle with a response period of up to 10 days, fully digitalising audits through the Taxpayer’s e-Cabinet and strengthening liability of tax officials for unfounded requests. Despite draft law No. 12000 having been prepared, its implementation is delayed, and tax audits with legal collisions and excessive requests continue to turn business into a battlefield and undermine Ukraine’s investment potential; if you have any questions related to tax audits, you can contact our experts for an individual consultation.

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