When Interest Is Not Accrued for Erroneous Tax Payment – STS Comments

Since 16 March 2024, important amendments have been introduced into the Tax Code of Ukraine that significantly allow taxpayers to avoid the accrual of interest (peni) in certain situations of erroneous tax payment.

Essence of the problem and new legal rules
Previously, when a taxpayer mistakenly paid tax to a wrong budget account, such payment was treated as non‑payment of tax. This led to the formation of tax debt and automatic accrual of interest for each day of delay, even if the taxpayer had initiated the payment on time. As a result, the taxpayer found themselves in a difficult situation: although they had fulfilled their obligation according to the schedule, they were punished with fines and interest solely due to a technical error in the payment details.
Now the legislation provides for exemption from such unfair liability. In essence, this can be viewed as a mechanism to protect bona fide taxpayers from sanctions in cases of mistaken transfers.

Key conditions for exemption from interest in case of erroneous payment
Three conditions must be met to qualify for interest exemption (Art. 129, para. 129.9.8, Tax Code):

1. Payment was initiated within the statutory deadline. The relevant moment is when the payment order is submitted, not when funds are credited to the account.
2. The error relates solely to transfer to another budget account (error in recipient account details). If tax was credited to a non-budget account, the exemption does not apply.
3. The taxpayer filed an application with the STS for refund of erroneously paid amounts under Art. 43 of the Tax Code.

If these conditions are met, interest is not charged; if already accrued, it is cancelled.

Procedure for refunding erroneous payments and directions of transfer
When submitting an application for refund of erroneously paid funds, the taxpayer must choose the correct direction of transfer. This is critical for the exemption from interest. According to the clarifications of the STS, when the exemption relates to an erroneous payment to another account, the taxpayer must choose the direction “To a budget account to repay the monetary obligation and/or tax debt for other payments administered by the STS”.
In other words, the funds are moved from the wrongly used budget account to the correct budget account. This is not a refund to the taxpayer’s bank account or in cash, but a transfer within the budget system.
The taxpayer is not obliged to request a refund to their current account if a tax debt has already arisen. On the contrary, if such a debt exists due to the error, the funds should be applied to repay that debt.

Deadlines for application and required documents
The taxpayer must submit the application within 1,095 days from the date of the erroneous payment. This three‑year period is sufficient to detect the error and file the application.
The form of the application is not strictly regulated: it may be submitted in free form or electronically via the Taxpayer’s e‑Cabinet (forms J1302002 for legal entities and F1302002 for individuals).
The application must specify: the type of tax erroneously paid, the amount, the date of payment, details from the payment document, the budget revenue classification code, the erroneous budget account, and the EDRPOU code of the Treasury office that maintains this account. The STS recommends attaching a copy of the payment document and a written explanation of the circumstances of the error, which helps the tax authority process the application more quickly.

Exemption from fines in case of erroneous payment
Interest (peni) and fines are different legal instruments. Fines for late payment are governed by Article 124 of the Tax Code. Delays up to 30 calendar days trigger a 5% fine, and delays over 30 days a 10% fine. Since 16 March 2024, however, exemption from fines applies in parallel with exemption from interest, provided the three conditions mentioned above are met. This follows from subparagraph 112.8.8¹ of Article 112 of the Tax Code and applies specifically to erroneous payments to another budget account without missing the statutory payment deadline.

Example of how the rule works
Suppose an entrepreneur must pay 10,000 hryvnia by 20 October 2024. Due to a mistake, the payment order contains an incorrect EDRPOU code and the funds go to a different budget account, although the payment was initiated on time. The tax authority detects non‑payment and accrues interest. If the taxpayer then files an application for refund with the direction to repay the tax debt, the accrued interest is not applied or is cancelled.

Special aspects for single social contribution (SSC) and other payments
For the single social contribution (SSC) and certain non‑tax payments, the mechanism has some particularities. In case of erroneous payment of SSC to a wrong 3556 account, sanctions may be avoided by filing an application to transfer SSC to the correct account with supporting documents. However, the rule on non‑accrual of interest for erroneous transfers does not govern SSC refunds to the taxpayer; such amounts are usually offset against future SSC liabilities or refunded in cash.

Conclusions and recommendations
Taxpayers should carefully check budget account details before making payments, act promptly if an error occurs, select the correct direction of fund transfer in their applications, attach supporting documents, and make active use of the Taxpayer’s e‑Cabinet for remote interaction with the STS.

Author – Yulia Popadin, lawyer, tax and customs law practitioner at the Attorney Association “Legal Company WINNER“.

If you have questions about erroneous tax payments, accrual of interest, exemption from fines, appealing decisions of tax authorities, or other taxation matters – contact our team of professionals in the field of tax and customs law.