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MFU Has Developed a Draft Resolution for the Operation of VAT Risk System

The Ministry of Finance of Ukraine has developed a draft Resolution on the further operation of the VAT risk system. This mechanism is a necessary measure aimed at the prevention of VAT embezzlement schemes and uninterrupted process of automatic VAT refund.

We remind that in December last year, the work of the VAT risk system was suspended in order to develop a coordinated effective solution which would not entail new risks.

So, the MFU together with the SFS have developed and agreed upon a decision that was made public on the official website of the Ministry on February 9, for public discussion.

Now the draft Resolution is under consideration of people’s deputies of the Tax and Customs Policy Committee. It includes the following changes:

  • In order to reduce the cases of suspension of the registration of tax invoices, a “cutoff criterion” of 3% and a threshold of the volume of supply for the month of 500 thousand UAH are established.
  • Earlier, the coordination of evaluation criteria continued for some time, that allowed some payers to use a fictitious loan. It is proposed the SFS to establish criteria for risk assessment for a prompt response. In order to ensure the transparency of this process, the SFS should first agree on these criteria with the Ministry of Finance and publish it on the official website.
  • Indicators of a positive tax history are introduced for small and medium-sized businesses. Tax invoices with a risky operation for the payers with a positive tax history will not be suspended.
  • An electronic register of suspended tax invoices is introduced where the payer will be able to find the information on the consideration and status of the suspended tax invoices in the online mode. This decision will make the process more transparent.
  • For the efficiency of consideration of explanations and documents, it is envisaged to create commissions at the regional and central level. The decisions made by the regional and central level commissions come into effect after they are registered in the electronic Register of the suspended tax invoices.
  • If the decisions of the commissions are not registered within seven working days, the tax invoice is suspended/ the adjustment calculation is registered automatically.
  • The form of the decision on refusal in registration has been finalized. In particular, the decision will have a clear reasoned ground for the refusal. In the event of non-submission and/or submission of the documents drawn up in violation of the law, the form will indicate the specific document which it concerns.
  • The project regulates the issue of registration of TI/AC for the payers, for which TI/AC was suspended until 01.12.2017 and no explanations and documents were provided.