One
of the hardly noticeable changes
brought by the tax reform 2015 was a right vested in the fiscal authorities to
recover tax debts in some cases
without a court order.
The relevant
rules are provided for by para 32 of Chapter XX "Transitional
Provisions" of the Tax Code of Ukraine.
This is a temporary measure being in force until 1 July 2015.
A very
important point here is that out-of-court recovery is possible in respect of
tax debts based on self-assessed tax liabilities only (for example, a taxpayer
files its corporate income return, but fails to remit the tax specified in the return
to the state revenues).
Another no less important
point is that even the recovery of
tax debts arising from self-assessed tax liabilities is
limited to certain cases. The Tax Code of Ukraine lays
down two conditions that must be simultaneously met to make out-of-court
recovery possible:
- The amount of the tax
debt is more than UAH 5
million;
- There is no debt
owed by the fiscal authority to the taxpayer (excessively paid taxes),
which can be set off against the tax
debt to be collected.
Out-of-court collection of tax debts is carried out on the
basis of a decision taken by the head of the local unit
of the fiscal authorities. Taxmen can have the debt recovered by means
of both cash money and funds held in bank accounts.
In the case of
funds held in bank accounts a decision to collect the tax debt is sent to a bank. The bank just withdraws money from the account
of the taxpayer. The National Bank of
Ukraine has already managed to confirm this
possibility (the letter dated 27 January
2015 No 25-110 / 4833).
If cash
money is at issue, the decision on debt collection goes directly to the
taxpayer. “Severe” taxmen come to the taxpayer’s premises and seize the
available cash. The procedure for the seizure of cash money is set out by the
legislation (the Cabinet of Ministers’ resolution of 29 December 2010 No 1244).
Hopefully, “lawlessness" should not occur.
The recourse to out-of-court collection does not mean that the fiscal authorities are exempt
from general procedural constraints
related to recovery of tax debts. For instance, before a decision on
out-of-court collection is made, the fiscal authorities must fully comply with
general procedure requirements, namely they are supposed to forward to
the taxpayer a formal request on the repayment of the tax debt and wait 60 calendar days after the
sending of such a request.
Below are some comments on the actual purpose of the amendments and
their possible impact on taxpayers.
There are some articles in the press intimidating taxpayers with massive
seizure of their "sweat
earned" money "without
any trial". My best advice is to be sceptical of such threatening
articles, as they significantly exaggerate the actual state of affairs.
Not all is that bad,
indeed. The change will be felt
only by the small number of taxpayers.
It will primarily affect taxpayers having serious liquidity problems (so-called
pre-bankruptcy entities). The change may also touch upon those
whom we "affectionately"
call "shams".
An "average" taxpayer should not be affected by the change. For
a viable business it is a paranormal situation to be where it records
its tax liabilities and then does not have enough funds to discharge them.
What was the rationale behind the change is a good question. Unfortunately, an answer to this question
cannot be extracted from an explanatory note to the relevant Bill on amending
the Tax Code of Ukraine.
It seems
that the change was made to facilitate the recovery of tax debts from
distressed companies. The procedure for obtaining a court judgment authorizing
the recovery, especially given a possible appellate review, may take up to a
year. Over this time, money can just “evaporate” from the bank accounts of the distressed
enterprises. The money will go to other creditors or can be taken out by means
of “fake nature” transactions. The fiscal authorities will go into bankruptcy
proceedings and eventually collect nothing, just because the money has been already
gone.
The amendments do improve the chances of the fiscal authorities to
emerge victorious from the
battle for the assets of a "drowning"
taxpayer. This is due to the shortening of debt recovery time
and ensuring "surprise effect" in the tax debt collection.
*- Photo from http://www.sodahead.com
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