Automated tax administration system or “manual control”: what to expect from proposed changes in the risk criteria for suspension of registration of tax invoices?
The Ministry of Finance of Ukraine has issued a new draft on amending Order No.567 of 13.06.2017 “On Approval of the Criteria for assessing the risk level sufficient for suspension of registration of a tax invoice/adjustment calculations in the Unified Register of Tax Invoices”.
The experts of Finance Business Service have considered what kind of changes may happen and whether they will simplify the “life” for business.
Having removed the issue of regulatory technology and consistency of terminology, to which lack in some normative acts of the Ministry of Finance we are already accustomed, let us try to understand the consequences that taxpayers will have to face if such changes are adopted.
Thus, the draft suggests introducing certain changes in the part of provision of the possibility not to take into account taxpayer data filed in the prescribed form, so-called “technological table”, by the State Fiscal Service of Ukraine.
In which cases does the Ministry of Finance propose not to take into account the “technological table”? The Ministry of Finance defines two such cases, namely, when the supervisory body has received:
Information that the “technological table” contains inaccurate information;
Other tax information, indicating the riskiness of transactions.
The questions arise: from whom, how, and what kind of information, indicating the data unreliability, can be received by the supervisory body? How will it be checked and what criteria should be taken into account in order to set the information received (from nowhere) as a counter to the information provided by the taxpayer? The Ministry of Finance does not give the answers to these questions.
In turn, it is absolutely clear that the inclusion in the normative acts of such a set of appraisal concepts, rules of interpretation which no one knows, in the absence of responsibility for their self-willed application results that the “automated system of tax administration” actually passes into “manual control”. And this is a return to what has been before. If only earlier it was at the level of inspections, but now this function is assumed by the State Fiscal Service of Ukraine.
The possibility not to take into account the “technological table” causes a considerable surprise, when obtaining tax information indicating the riskiness of transactions (it is likely to concern the economic transactions).
It is unknown what regulatory act provides for the right of the SFS to assess the operations from the perspective of their riskiness. There is no answer what exactly is a risk in carrying out an economic operation, as, according to Article 44 of the Code of Commercial Procedure of Ukrainian, business activity is carried out on the basis of its own commercial risk, which presumes the availability of a certain risk in any operation. Therefore, the recognition of business transactions as “risky” by the tax authority is, in fact, an interference of the state in the activities of economic entities.
Moreover, it is proposed to define with the changes that the information previously taken into account by the Monitoring System, after making the decision by the SFS Commission that the information is not taken into account, is not subject to automatic recording subsequently. In other words, if some negative information is received on the previously taken into account “technological table”, then it (“technological table”) will not be taken into account more.
What does it mean? Everything is simple: the efficiency of submitting the “technological table”, as well as its general existence, is reduced to zero. As, at any time, the commission of the SFS can make in manual mode so that the information provided in it will not be taken into account. Based on the experience of taxpayers in the part of the work of the SFS Commission, it is rather difficult to count on the objectivity and legitimacy of its decisions. In this case, the powers of the commission of the SFS on the basis of valuation concepts are being expanded to an incredible size, and, in fact, the registration of any tax invoice can be suspended on far-fetched and biased grounds.
It is also proposed to expand the list of grounds for the possibility of monitoring of tax invoices and, accordingly, suspension of their registration.
The first one is availability of the conviction of the court against an official (officials) of a business entity under Article 205, 212 of the Criminal Code of Ukraine. But in this case, the Ministry of Finance forgets (intentionally or without understanding this) to add the words “entered into force”. Because the use of a court judgement that has not entered into legal force as an instrument of interference in the economic activities of a taxpayer is inadmissible.
In addition, the question remains open: with respect to the official of which particular economic entity should the sentence be? Either the person submitting the tax invoice for the registration, or the one to whom the tax invoice was issued, or generally with respect to the supplier’s counterpart (goods /services). Proceeding from the unjustifiably broadened and arbitrary interpretation of legislation by SFS officials, it should be expected that they will use the verdict extensively, without excluding that the verdicts of the counterparties’ counterparty (the verdict in any part of the supply chain) will be taken into account. That is, we return to what has been before.
The second one is the change of the cost of goods/services more than twice and/or the change of the nomenclature of goods /services in tax invoices by providing an adjustment calculation.
In this case, everything is clear and it does not require additional comments. However, this novel will lead a certain category of business entities to a number of difficulties and inconveniences.
Thus, the Ministry of Finance proposes to establish four criteria instead of two for monitoring and suspension of the registration of tax invoices.
The grounds for monitoring and suspension of the registration of tax invoices are as follows:
In our opinion, the changes proposed by the Ministry of Finance of Ukraine in that form they exist unreasonably expand the rights of the SFS in monitoring and suspension of the registration of tax invoices, which, in turn, will not facilitate the simplification of business in Ukraine with regard to tax administration and may lead to a new round of groundless “blocking” of tax invoices.
These changes have not been adopted so far, so we hope that they will be completed, and the comments will be taken into account from both the side of business and legal experts.
The experts of Finance Business Service continue to monitor and analyze both already adopted changes to the current legislation and their projects in order to warn their clients in a timely manner about the impact of such changes on the business process and to level down the associated risks.
The Ministry of Finance of Ukraine has issued a new draft on amending Order No.567 of 13.06.2017 “On Approval of the Criteria for assessing the risk level sufficient for suspension of registration of a tax invoice/adjustment calculations in the Unified Register of Tax Invoices”.
The experts of Finance Business Service have considered what kind of changes may happen and whether they will simplify the “life” for business.
Having removed the issue of regulatory technology and consistency of terminology, to which lack in some normative acts of the Ministry of Finance we are already accustomed, let us try to understand the consequences that taxpayers will have to face if such changes are adopted.
Thus, the draft suggests introducing certain changes in the part of provision of the possibility not to take into account taxpayer data filed in the prescribed form, so-called “technological table”, by the State Fiscal Service of Ukraine.
In which cases does the Ministry of Finance propose not to take into account the “technological table”? The Ministry of Finance defines two such cases, namely, when the supervisory body has received:
The questions arise: from whom, how, and what kind of information, indicating the data unreliability, can be received by the supervisory body? How will it be checked and what criteria should be taken into account in order to set the information received (from nowhere) as a counter to the information provided by the taxpayer? The Ministry of Finance does not give the answers to these questions.
In turn, it is absolutely clear that the inclusion in the normative acts of such a set of appraisal concepts, rules of interpretation which no one knows, in the absence of responsibility for their self-willed application results that the “automated system of tax administration” actually passes into “manual control”. And this is a return to what has been before. If only earlier it was at the level of inspections, but now this function is assumed by the State Fiscal Service of Ukraine.
The possibility not to take into account the “technological table” causes a considerable surprise, when obtaining tax information indicating the riskiness of transactions (it is likely to concern the economic transactions).
It is unknown what regulatory act provides for the right of the SFS to assess the operations from the perspective of their riskiness. There is no answer what exactly is a risk in carrying out an economic operation, as, according to Article 44 of the Code of Commercial Procedure of Ukrainian, business activity is carried out on the basis of its own commercial risk, which presumes the availability of a certain risk in any operation. Therefore, the recognition of business transactions as “risky” by the tax authority is, in fact, an interference of the state in the activities of economic entities.
Moreover, it is proposed to define with the changes that the information previously taken into account by the Monitoring System, after making the decision by the SFS Commission that the information is not taken into account, is not subject to automatic recording subsequently. In other words, if some negative information is received on the previously taken into account “technological table”, then it (“technological table”) will not be taken into account more.
What does it mean? Everything is simple: the efficiency of submitting the “technological table”, as well as its general existence, is reduced to zero. As, at any time, the commission of the SFS can make in manual mode so that the information provided in it will not be taken into account. Based on the experience of taxpayers in the part of the work of the SFS Commission, it is rather difficult to count on the objectivity and legitimacy of its decisions. In this case, the powers of the commission of the SFS on the basis of valuation concepts are being expanded to an incredible size, and, in fact, the registration of any tax invoice can be suspended on far-fetched and biased grounds.
It is also proposed to expand the list of grounds for the possibility of monitoring of tax invoices and, accordingly, suspension of their registration.
The first one is availability of the conviction of the court against an official (officials) of a business entity under Article 205, 212 of the Criminal Code of Ukraine. But in this case, the Ministry of Finance forgets (intentionally or without understanding this) to add the words “entered into force”. Because the use of a court judgement that has not entered into legal force as an instrument of interference in the economic activities of a taxpayer is inadmissible.
In addition, the question remains open: with respect to the official of which particular economic entity should the sentence be? Either the person submitting the tax invoice for the registration, or the one to whom the tax invoice was issued, or generally with respect to the supplier’s counterpart (goods /services). Proceeding from the unjustifiably broadened and arbitrary interpretation of legislation by SFS officials, it should be expected that they will use the verdict extensively, without excluding that the verdicts of the counterparties’ counterparty (the verdict in any part of the supply chain) will be taken into account. That is, we return to what has been before.
The second one is the change of the cost of goods/services more than twice and/or the change of the nomenclature of goods /services in tax invoices by providing an adjustment calculation.
In this case, everything is clear and it does not require additional comments. However, this novel will lead a certain category of business entities to a number of difficulties and inconveniences.
Thus, the Ministry of Finance proposes to establish four criteria instead of two for monitoring and suspension of the registration of tax invoices.
The grounds for monitoring and suspension of the registration of tax invoices are as follows:
In our opinion, the changes proposed by the Ministry of Finance of Ukraine in that form they exist unreasonably expand the rights of the SFS in monitoring and suspension of the registration of tax invoices, which, in turn, will not facilitate the simplification of business in Ukraine with regard to tax administration and may lead to a new round of groundless “blocking” of tax invoices.
These changes have not been adopted so far, so we hope that they will be completed, and the comments will be taken into account from both the side of business and legal experts.
The experts of Finance Business Service continue to monitor and analyze both already adopted changes to the current legislation and their projects in order to warn their clients in a timely manner about the impact of such changes on the business process and to level down the associated risks.