Tax Controversy in Ukraine 2021


Alina Ratushna


Domestic Litigation,
Tax Litigation

Andriy Stelmashchuk

Managing Partner, Attorney-at-Law

Domestic Litigation,
Public Advocacy

Published: Chambers Global Practice Guides, June 2021

Authors: Andriy Stelmashchuk, managing partner, Tetyana Berezhna, Counsel, Attorney-at-Law, Alina Ratushna, Junior Associate

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1.1. Tax Controversies in this Jurisdiction

In Ukraine, most tax controversies arise following a tax audit of a taxpayer company. Corporate income tax (CIT) controversies, in particular, may arise because of allegedly illegal deductions for CIT purposes. Such allegations relate to violations discovered by the tax authorities during tax audits of the taxpayer’s business partners.

Taxpayers often initiate tax disputes concerning value added tax (VAT) liabilities. VAT controversies arise from either a tax audit of the taxpayer’s VAT return or from the tax authorities’ denial or inaction concerning a claimed VAT refund.

Property tax disputes usually have their origin in the tax base assessment conducted by a tax authority.

1.2. Causes of Tax Controversies

All taxes may give rise to tax controversies, but CIT and VAT disputes generate most of the administrative courts’ caseload. While carrying out audits, tax authorities usually focus on whether a taxpayer has made a proper assessment of tax amounts for accounting and reporting purposes. Taxpayers often dispute additional assessments by challenging both the amount of the tax and the administrative decisions forming the grounds for the tax audit. Taxpayers also often challenge the tax authority’s denial of a VAT refund or denial of registration of the tax invoices required to receive a VAT refund.

Tax controversies are also initiated by taxpayers because of the continuing inaction of a tax authority regarding a taxpayer’s requests or applications. Individuals often challenge property tax assessments by a tax authority or their social contributions liabilities.

Disputes over tax debt recovery initiated by tax authorities constitute a significant amount of the tax disputes in Ukraine.

1.3. Avoidance of Tax Controversies

A taxpayer may mitigate the possibility of tax controversy prior to a tax audit through the following means:

  • proper maintenance of the documentation which is required for an audit;
  • regular verification of business processes and accounting records;
  • assessment of the credibility of business partners to avoid potential tax risks;
  • obtaining binding rulings from a tax authority – a binding ruling on the application of the legislation in certain circumstances may be either applied by the taxpayer or challenged in court;
  • comprehensive and timely submission of responses to the tax authority’s requests; and
  • preparation for a tax audit, once it is anticipated – big companies engage external advisors to help prepare employees for planned audits concerning complicated tax issues.

Once a tax authority has initiated a scheduled or unscheduled tax audit, the possibility of a tax controversy is mitigated by working co-operatively with the auditors. A taxpayer should provide the inspectors with the records requested.

Nevertheless, a taxpayer should check whether the grounds for the audit as well as the auditors’ authorisation are valid.

1.4. Efforts to Combat Tax Avoidance

Currently, Ukraine is in the process of implementing mechanisms to combat tax avoidance. In December 2019, BEPS Action 15, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and ProfitShifting (MLI), entered into force in Ukraine. From January 2020, its provisions concerning tax liabilities of non-residents are applicable for bilateral tax treaties concluded by Ukraine. Other provisions have applied from June 2020.

In January 2020, the Ukrainian Parliament adopted large-scale amendments to the Tax Code of Ukraine aimed at implementing the BEPS Action Plan in Ukraine (Actions 3, 4, 6, 7, 8-10 and 13). 

The number of tax controversies with regard to these rules is likely to increase in the near future.

1.5. Additional Tax Assessments

After additional tax assessments, the tax must be paid within ten days unless a taxpayer initiates an administrative complaint procedure or challenges the tax notice of assessment in court. An administrative complaint postpones the payment date until a taxpayer receives the State Tax Service’s decision on its complaint. Commencement of litigation in the court of first instance or in the appellate court postpones the payment deadline until the court’s judgment enters into force. However, there is no possibility of such postponement if a taxpayer files a cassation appeal unless the Supreme Court suspends the
enforcement of the appeal court’s ruling.

If the taxpayer fails to pay the amount of tax due on time, the tax authority may place a tax lien or administrative arrest on the taxpayer’s assets, file a judicial claim on tax debt recovery, and enforce collection of the additional tax by seizing bank accounts and the taxpayer’s property.


2.1. Main Rules Determining Tax Audits

The State Tax Office selects a company for scheduled audits owing to the presence of certain tax risks. A company is considered a “high risk” taxpayer based on the following conditions:

  • the increase in the rate of a company’s CIT or VAT liabilities is 50% lower than the company’s annual outcome or average tax amounts in the business sector;
  • a company has made payments to, or engaged in, commercial relationships with risky business partners (eg, insolvent entities) or offshore companies; and/or
  • a tax authority has received notification about alleged tax avoidance from a criminal investigation office.

High-risk taxpayers may be included in an audit schedule annually. “Middle-risk” and “low-risk” companies are businesses that participate in risky commercial relationships or declare income decreases in tax returns; they may be audited once every two and three years respectively.

A tax authority may conduct an unscheduled tax audit if:

  • there is information on potential tax avoidance on the part of the taxpayer and the latter did not provide explanations and documents upon official request;
  • a tax return has not been filed due;
  • a taxpayer has filed a correcting return to the audited documentation; or
  • a taxpayer has filed a tax return for a VAT refund.

Tax authorities regularly audit large corporations or certain business sectors. Lately, tax authorities have audited fuel sector businesses on excise duty payments.

2.2. Initiation and Duration of a Tax Audit

A tax authority may conduct a tax audit and assess additional tax within the statute of limitations. In most circumstances, the statute of limitations expires after three years following the date of filing of a tax return (seven years in the case of transfer pricing audits). The statute of limitations shall not apply if: (i) a taxpayer has not filed a tax return for a tax period subject to an audit; or (ii) a company’s official has been found guilty of a criminal offence relating to tax

The duration of a tax audit ranges from a few days to 18 months and depends on the type of

  • a desktop audit of tax returns shall be conducted in 30 days once the filing date has expired or a tax/correcting return has been filed;
  • the duration of a factual audit (at the location of the taxpayer’s business) should not exceed ten days but can be extended for a maximum of five more days;
  • the duration of a scheduled documentary audit (both with or without a visit to the taxpayer’s location) ranges from ten business days for small enterprises (which can be extended for a maximum of five more days) to 30 business days for large companies (which can be extended for a maximum of 15 more days);
  • the duration of an unscheduled documentary audit (with or without visiting the taxpayer’s location) ranges from three business days for certain individual entrepreneurs to 15 business days for large companies (which can be extended for a maximum of ten more days); and
  • transfer pricing audits must be conducted within 18 months.

2.3. Location and Procedure of Tax Audits

The location of a tax audit depends on the type of audit. Factual or scheduled or unscheduled visiting documentary audits occur on the tax payer’s premises. Scheduled or unscheduled documentary office audits as well as desktop audits are conducted in the tax authority’s head quarters.

Both desktop and electronic audits are based on data available on the electronic databases of the tax authority. When conducting documentary and factual audits, a tax authority may request documentation confirming a real taxpayer’s commercial relationships with its business partners. A taxpayer is entitled to submit either printed or electronic documents. In practice, taxpayers usually submit printed documents even though they are maintained electronically in accordance with the law.

2.4. Areas of Special Attention in Tax Audits

Key areas likely to draw the tax auditor’s special attention include:

  • the existence of commercial relations between a taxpayer and sham businesses;
  • the participation of a taxpayer in business relations with companies subject to criminal investigation for alleged tax fraud/avoidance;
  • substantial formal mistakes and anomalies in tax returns, as well as a lack of accounting documents; and
  • documentation on transfer pricing, relation ships with non-residents or offshore companies.

2.5. Impact of Rules Concerning Cross Border Exchanges of Information and Mutual Assistance Between Tax Authorities on Tax Audits

Ukraine has not yet implemented mechanisms for the automatic exchange of tax information. Therefore, the tax authority receives tax information from foreign tax agencies only on request.

In 2019, the Parliament ratified the Agreement between the Government of the United States of America and the Government of Ukraine to Improve International Tax Compliance and to Implement FATCA and adopted the amendments to the Tax Code of Ukraine connected to the ratification of this Agreement. The Parliament has also adopted the laws in connection with the implementation of the Common Reporting Standard (CRS) in Ukraine.

Once Ukraine adopts measures on cross-border automatic exchange of tax information, the number of international tax controversies is likely to increase.

2.6. Strategic Points for Consideration During Tax Audits

During a tax audit, a taxpayer should focus on the following key points:

  • whether the reasons to conduct a tax audit are lawful and well-grounded and whether a taxpayer has been notified of the tax audit in advance;
  • whether tax auditors have filed requests for explanations and documents concerning the subject of a tax audit;
  • whether tax authorities’ information requests meet the formal requirements; and
  • whether a tax audit is carried out in full compliance with the procedural requirements.


3.1. Administrative Claim Phase

An additional tax assessment, as well as any other decision of the tax authorities, can be challenged before the supreme tax authority (State Tax Service) or in court. The administrative complaint phase is an optional pre-trial procedure. 

The deadline for lodging an administrative complaint is:

  • ten business days after the receipt of the decision if the tax assessment is carried out because of any violations on the part of the taxpayer; or
  • 30 calendar days after the receipt of the decision if the tax authority is obliged by law to carry out the tax assessment.

These deadlines can be extended if the individual at the taxpayer who was responsible for lodging a complaint was somehow restricted from making that complaint because of a range of circumstances, or if that person was outside the territory of Ukraine at the time. This applies only if there is no other person in charge of calculating and paying taxes who could lodge the
complaint on time.

Administrative complaints must be filed in writing and can be supported by any documents, calculations or evidence which the taxpayer considers it necessary to provide.

Normally there is a meeting between the tax payer’s representative and the tax authority in charge of reviewing the claim, during which the case is discussed, and relevant documents are presented.

The burden of proof in the administrative tax procedure lies upon the tax authority which adopted the contested decision.

As a result of the administrative complaint review, the contested decision can be annulled as a whole or in part, or can be left unchanged.

3.2. Deadline for Administrative Claims

The deadline to decide on the administrative complaint is ten working days. This deadline can be extended by the authority in charge of reviewing the claim, but the procedure cannot last more than 60 calendar days in total. The extension must be communicated to the tax payer in writing within the initial review deadline.

If the taxpayer does not receive the decision on the administrative complaint or the deadline extension notice within the time period prescribed, it is assumed that the complaint is accepted as a whole.

The decision of the State Tax Service on the administrative complaint is final in the pre-trial stage, its assessment can only be challenged in court.


4.1. Initiation of Judicial Tax Litigation

Taxpayers can contest the decision of the tax authorities either in court directly or after the administrative complaint stage. The case should be brought in front of the circuit administrative court by the taxpayer or its representative within the six-month time limit (for a direct claim) or within one month (after the receipt of the decision on the administrative complaint).

4.2. Procedure of Judicial Tax Litigation Proceedings before the Court of First Instance

The ordinary procedure has a preparatory stage, where all the evidence is gathered, and substantial-review stage, where the evidence is examined and evaluated. The simplified procedure has only one stage and is either wholly conducted in writing or with only one court hearing. First instance proceedings usually take more than a year, even in the case of the simplified procedure, which requires the judgment to be given within 60 days. The judgment enters into force if no appeal is lodged.

Proceedings before the Appellate Court

This stage takes two to three months. The judgment of the appellate court enters into force on the day of its adoption, regardless of a subsequent cassation appeal to the Supreme Court.

Proceedings before the Supreme Court

This stage usually takes up to three months. The judgment of the Supreme Court is final and can be reviewed only exceptionally or, under strict conditions, due to newly discovered circumstances.

4.3. Relevance of Evidence in Judicial Tax Litigation

All the evidence must be presented during the proceedings in the court of first instance. New evidence can be brought before the appellate court only if there are valid reasons for it not being presented earlier. The Supreme Court can not examine any new evidence at all.

The court can, on its own initiative or on the motion of a party to the proceedings, order a person or entity to provide any evidence they possess.

Evidence is usually provided in documentary form; witnesses statements are rarely supplied.

4.4. Burden of Proof in Judicial Tax Litigation

The burden of proof lies on the tax authorities. No new reasoning, which did not form the basis for the adoption of the contested decision, can be presented at the stage of tax litigation.

However, in some cases the burden of proof is effectively shifted to the taxpayer; for instance, in determination of the beneficial ownership of the recipient of income.

In criminal proceedings, the presumption of innocence applies, and the investigating authorities must prove the existence of the offence related to tax.

4.5. Strategic Options in Judicial Tax Litigation

Usually the evidence must be provided to the court of first instance at the time the claim is lodged. New evidence and arguments can, in principle, be presented, if necessary, during the preparatory stage of the court of first instance proceedings before the case is reviewed on substance.

The possibility of settlement is prescribed by law, but it is not common in tax disputes.

Litigation suspends the obligation to pay the contested amount. It is therefore is better not to pay until the end of the proceedings to avoid further reimbursement delays.

4.6. Relevance of Jurisprudence and Guidelines to Judicial Tax Litigation

The courts are obliged by law to apply ECHR jurisprudence as a source of law and to follow the conclusions of the Supreme Court in similar cases.

Doctrine is not taken into consideration at all. As for guidelines, their application is more common, but is not obligatory.


5.1. System for Appealing Judicial Tax Litigation

The first instance is a circuit administrative court (situated in each district and in Kyiv), which examines all the relevant evidence and provides its judgment.

The appeal can be lodged by the parties to the proceedings or by the persons or entities whose rights are affected by the court judgment. Administrative appellate courts review the appeals against first instance courts’ judgments in tax litigation. There are eight administrative appellate courts in Ukraine. Until the end of the appeal proceedings, the judgment of the court of first instance does not enter into force.

Cassation appeals are brought to the Cassation Administrative Court, which is a part of the Supreme Court. The Supreme Court does not examine the factual circumstances of the case and evidence, it only determines whether the subordinate courts correctly applied procedural and material norms to the case. The Supreme Court can decide on the case directly, or, if the circumstances were not properly examined by the subordinate court, it can refer the case to the court of first instance for reconsideration. In this latter circumstance, a new judge is appointed to the court of first instance.

The possibility of appeal does not depend on the value of the case or on the nature of the controversy. The right to a cassation appeal is limited in simple cases, or in cases where the simplified procedure was applied by the lower courts.

5.2. Stages in the Tax Appeal Procedure

See 4.2 Procedure of Judicial Tax Litigation and 5.1 System for Appealing Judicial Tax Litigation.

5.3. Judges and Decisions in Tax Appeals

In the first instance, the case is decided by one judge. In the appellate and cassation proceedings the case is decided by a panel of three judges, one of which is a reporting judge.

The judges are appointed randomly by the automatic case distribution system. At the same time, the panels in courts of second and third instance are stable; thus, when the reporting judge is appointed by the automatic system, their panel takes part in proceedings by default.


6.1. Mechanisms for Tax-Related ADR in this Jurisdiction

Currently there are no ADR mechanisms in Ukraine available for tax disputes. The use of mediation in tax disputes is not prescribed in legislation since the general law on mediation has not yet been adopted. For this reason the tax authorities are reluctant to participate in mediation, although it is not prohibited.

6.2. Settlement of Tax Disputes by Means of ADR

See 6.1. Mechanisms for Tax-Related ADR in this Jurisdiction.

6.3. Agreements to Reduce Tax Assessments, Interest or Penalties

No agreement can be reached outside the scope of the administrative complaint procedure or litigation.

6.4. Avoiding Disputes by Means of Binding Advance Information and Ruling Requests

The taxpayer is entitled to obtain advance individual tax advice concerning the application of a relevant piece of legislation to a specific situation. Individual tax advice can be relied on only by the taxpayer to whom it is addressed, but such advice is also published on the official web site of the State Tax Service.

General tax advice is applicable to all taxpayers. Taxpayers cannot be held liable through financial penalties for actions based on general or individual tax advice. However, the obligation to pay the amount of tax prescribed by law still applies.

Tax advice can be contested in court. If the court declares tax advice void, new tax advice that pays due attention to the court’s judgment must be provided to the taxpayer.

6.5. Further Particulars Concerning Tax ADR Mechanisms

See 6.1. Mechanisms for Tax-Related ADR in this Jurisdiction.


7.1. Interaction of Tax Assessments with Tax Infringements

A criminal investigation is usually initiated following the alleged tax offence identified by a tax authority in the tax audit report. If an additional tax assessed by a tax authority exceeds USD100,000, the authority shall notify the Tax Offences Investigation Office of a potential criminal offence. In practice, the outcome of the criminal proceedings depends on the existence
of a final judgment in a tax dispute.

The Tax Offences Investigation Office may also carry out criminal proceedings independently from a court dispute (eg, perform a preliminary inquiry).

Following a tax audit, a tax authority can also initiate an administrative offence procedure against a taxpayer’s official, where that official was responsible for calculating and paying taxes.

7.2. Relationship Between Administrative and Criminal Processes

The relationship between tax litigation and criminal proceedings concerning the alleged tax avoidance of a taxpayer varies from case to case. A court may suspend administrative litigation concerning a review of a tax authority’s additional assessment if the trial is objectively impossible until the final judgment in another dispute is given. In practice, courts rarely suspend the administrative process.

Criminal and administrative offence proceedings may be conducted by the court either separately from or following a tax litigation. In practice, both pre-trial investigation and the trial itself are significantly time-consuming. Therefore, criminal litigation usually depends on the results of a tax dispute.

7.3. Initiation of Administrative Processes and Criminal Cases

If the actions of a taxpayer’s official constitute an administrative offence under the law, a tax authority shall initiate an administrative infringement procedure. In practice, tax authorities start administrative infringements following a tax audit.

Additionally assessed liability following a tax audit in the amount of approximately USD100,000 or more can potentially mean the existence of a crime of tax avoidance. As a result, an investigation office, when notified of such facts, shall initiate criminal proceedings.

Administrative infringements and criminal offences are considered separately. At the same time, facts found by the court in one of these proceedings may constitute prejudicial information in another.

7.4. Stages of Administrative Processes and Criminal Cases

The administrative infringement process consists of the following stages:

  • initiation of a tax infringement file;
  • administrative investigation performed by a tax authority;
  • judicial review and the court’s ruling;
  • appeal against the ruling of the court of first instance to the appellate court (optional); and
  • enforcement of a ruling.

Criminal proceedings in tax offences are much more complicated and include:

  • pre-trial investigation;
  • preliminary procedure;
  • court trial;
  • appeal proceedings;
  • enforcement of the judicial ruling; and
  • cassation appeal in the Supreme Court (optional).

General local and appellate courts hear criminal cases and administrative infringements related to tax while administrative courts decide on the legality of a tax authority’s additional assessment. The parties file cassation appeals to the Supreme Court, where its respective subdivisions perform cassation review of the lower court’s judgments.

7.5. Possibility of Fine Reductions

A taxpayer must pay the additional tax assessed, plus fines and penalties. Ukraine does not have a mechanism for the reduction of potential fines and penalties if payment is made up front.

7.6. Possibility of Agreements to Prevent Trial

A taxpayer may enter into an agreement with the prosecution in order to terminate a criminal trial. The agreement prescribes the taxpayer’s explicit admission of guilt for a crime, governs conditions for partial relief of civil liability for damages caused to the state, and contains obligations for the suspect/accused regarding co-operation in disclosing other criminal offences. The court is obliged to approve the agreement.

An agreement with the public prosecutor does not impact payment of the tax assessed by a tax authority. Under the law, the tax authorities can not enter into agreements with taxpayers.

7.7. Appeals against Criminal Tax Decisions

There is only one strategy concerning appeal against criminal tax decisions. If a taxpayer or a taxpayer’s official is found guilty, they may file an appeal to the appellate court of the region.

The appeal court’s ruling enters into force once it is announced. Nevertheless, the convicted person may file a cassation appeal to the Supreme Court.

7.8. Rules Challenging Transactions and Operations in this Jurisdiction

Ukraine does not have a general anti-avoidance rule or specific anti-avoidance rules. A taxpayer may challenge transactions and operations in the administrative courts. The proportion of these cases is small. There is no public information on criminal tax cases concerning transfer pricing rules in Ukraine.


8.1. Mechanisms to Deal with Double Taxation

In cases of double taxation, a taxpayer shall file a lawsuit against a tax authority. The mutual agreement procedure is not efficient in Ukraine even though it is prescribed under double taxation treaties. In January 2020, the Ukrainian Parliament adopted amendments to the Tax Code of Ukraine which establish mutual agreement procedures available for both taxpayers and tax authorities. Arbitration procedures concerning double taxation situations are not available.

The mutual agreement procedure was approved in Ukraine at the end of 2020. There are no cases which show its impact yet.

However, in 2021 other measures adopted under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) began to apply. For example, tax authorities are currently registering non-residents who have permanent establishment in Ukraine taking into account the features of such permanent establishments adopted by the MLI (Article 12 of the MLI).

8.2. Application of GAAR/SAAR to Cross-Border Situations

Ukraine does not have a general anti-avoidance rule or specific anti-avoidance rules. 

In December 2019, the MLI Convention covering the principal purpose test (PPT) entered into force in Ukraine. The PPT is an anti-abuse rule similar to a GAAR for transactions and arrangements. Most of the double taxation treaties between Ukraine and foreign countries also include PPT provisions. There are no judicial decisions or pending court disputes concerning the PPT so far. Additionally, in January 2020 the Parliament adopted amendments to the Tax Code of Ukraine introducing the PPT into
Ukrainian tax legislation.

It is hard to predict how taxpayers and courts will react to the PPT introduced by the MLI and the amendment of the double taxation treaties (DTTs) because this rule will only come into force in 2022. 

8.3. Challenges to International Transfer Pricing Adjustments

In Ukraine, a taxpayer may only challenge international transfer pricing adjustments in court.

8.4. Unilateral/Bilateral Advance Pricing Agreements

Unilateral, bilateral and multilateral advance transfer pricing agreements are available in Ukraine. The parties to the agreement are large businesses and the State Tax Service. A foreign tax authority may be engaged under a double taxation treaty. The agreement may cover current or previous tax periods.

Stages of the procedure include:

  • submitting a proposition for preliminary consideration of an advance transfer pricing agreement procedure, and preliminary consideration (optional stage);
  • submitting proposals for a transfer pricing agreement procedure;
  • consideration of the procedure with discussion between a taxpayer and a tax authority;
  • making a decision;
  • signing of an agreement; and
  • termination of an agreement.

A taxpayer and the State Tax Service are entitled to terminate a procedure at any stage.

8.5. Litigation Relating to Cross-Border Situations

Transfer pricing situations give rise to most of the cross-border court disputes in Ukraine. However, permanent establishment issues constitute a significant part of the cross-border caseload. 

Withholding tax (WHT) also causes tax disputes in Ukraine and the main reasons for such disputes are the existence of a duty to pay WHT and application of tax benefits related to WHT.


9.1. Application of Part VI of the MLI to Covered Tax Agreements (CTAs)

Ukraine has signed 76 DTTs. Although, as of 2021, an arbitration clause exists only in three of them. These are the DTTs signed by Ukraine and:

  • Switzerland;
  • Great Britain; and
  • the Netherlands.

The reason for this is that not all countries have agreed to extend the MLI to DTTs they have signed with Ukraine.

9.2. Types of Matters That Can Be Submitted to Arbitration

DTT Signed by Ukraine and Switzerland

Any unresolved issues in a case submitted for mutual agreement may be resolved by arbitration if the competent authorities are not able to resolve the case within three years and the taxpayer so requests. However, arbitration is not available if the unresolved issues have been decided through an arbitration within another case.

DTT Signed by Ukraine and Great Britain 

Any unresolved issues in a case submitted for mutual agreement may be resolved by arbitration if the competent authorities are not able to resolve the case within two years and the taxpayer so requests. However, arbitration is not available if the unresolved issues have been decided by a domestic court or administrative tribunal.

DTT Signed by Ukraine and the Netherlands

Any unresolved issues in a case submitted for mutual agreement may be resolved by arbitration if the competent authorities are not able to resolve the case and both countries agree to resolve it by arbitration procedure.

9.3. Application of the Baseball Arbitration or the Independent Opinion Procedure

The DTT, signed by Ukraine and Switzerland, provides for the baseball arbitration procedure, in which the arbitrators are not allowed to reach an independent decision – they only choose between two solutions proposed by contracting states.

The DTTs signed by Ukraine with Great Britain and the Netherlands provide for the independent opinion procedure, which is typical for the OECD Model. According to this procedure the arbitrators are not restricted in any way and can decide independently based on facts and law.

9.4. Implementation of the EU Directive on Arbitration

International practice shows that in most cases a mutual agreement procedure (MAP) can work well, but there is still a high number of cases in which the MAP does not work. Therefore, tax arbitration, provided by the OECD and the UN, is an enhancement of the MAP, rather than a replacement. In tax disputes arbitration is an optional agreement instrument.

9.5. Existing Use of Recent International and EU Legal Instruments

There are no cases in Ukraine where such types of procedures have been used to settle tax disputes.

9.6. Publication of Decisions

According to Article 21 of the MLI, all information related to the arbitration procedure is confidential. Moreover, the members of an arbitration commission undertake not to disclose the information they discover during a dispute settlement.

9.7. Most Common Legal Instruments to Settle Tax Disputes

Besides the fact that the EU Dispute Resolution Directive and MLI provides new legal instruments to settle tax disputes, the most commonly used instruments so far are administrative appeal and litigation.

9.8. Involvements of Lawyers, Barristers and Practitioners in International Tax Arbitration to Settle Tax Disputes 

In Ukraine, taxpayers hire lawyers, attorneys-at law, and practitioners to initiate the procedure of international arbitration and to accompany the case.

Independent professionals can be hired by the state using the procedure of public procurement to represent the interests of government or of state-owned enterprises.


10.1. Costs/Fees Relating to Administrative Litigation

The administrative complaint procedure is completely free of charge.

10.2. Judicial Court Fees

Court fees are paid in each instance by a person lodging a claim, appeal or cassation appeal. Payment of the court fee is a prerequisite for considering the respective submission.

The common approach of the courts is that annulment of the tax assessment is a pecuniary claim. The court fee in the first instance in such cases is in the amount of 1.5% of the claim’s value for companies and 1% for individuals. There are minimum and maximum court fee amounts, these being approximately USD70 and USD700 for companies and approximately USD30 and USD350 for individuals. For each non-pecuniary claim, a court fee in the amount of approximately USD70 is paid by companies and approximately
USD30 by individuals.

In the appellate court, the court fee is 150% of the amount paid in the first instance. The maximum court fee for lodging an appeal is approximately USD1,050.

In the Supreme Court, the court fee is 200% of the amount of the court fee in the first instance, the maximum being approximately USD1,400.

If the claim brought by a taxpayer is satisfied by a final judgment, the court fee is reimbursed by the tax authorities from the state budget. If the claim is denied, the court fee paid by a taxpayer is not refunded. No interest is applicable.

The court fees paid by the tax authorities must not be reimbursed by a taxpayer.

10.3. Indemnities

Indemnity mechanisms are available within the proceedings for contesting a tax assessment, but they are rarely used by taxpayers since the damage is in most cases not easy to calculate. Indemnity can also be claimed separately in commercial or civil proceedings.

10.4. Costs of Alternative Dispute Resolution

See 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.


11.1. Pending Tax Court Cases

There are no precise statistics as to currently pending cases. 

As for 2019, approximately 40,000 tax related cases were filed before the courts of first instance. The total number of cases attributed to a judge of first instance is approximately 400 per year, among which approximately 20% are tax related cases.

The appellate courts reviewed approximately 10,000 tax related judgments of the courts of first instance in 2019.

The Supreme Court ruled on approximately 15,000 tax related cassation appeals in 2019.

The approximate value of the cases where final judgment was issued reached USD850 million in 2019.

11.2. Cases Relating to Different Taxes

In 2019, value added tax was the most commonly litigated form of tax, with approximately 30% of cases (with a value of approximately USD13.5 million), followed by corporate income tax and personal income tax, which were the subject of approximately 8% of cases each (with a value of approximately USD7 million and approximately USD130,000 respectively).

11.3. Parties Succeeding in Litigation

In 2019, approximately 30% of final judgments in all tax related cases were given in favour of the taxpayers and approximately 70% in favour of the tax authorities. These statistics include all the cases to which tax authorities were party.

There are no separate statistics relating solely to tax assessments.


12.1. Strategic Guidelines in Tax Controversies

The number of disputes between taxpayers and tax authorities is likely to decrease in the near future. At the same time, those tax controversies that do still arise will be more and more complicated, especially when tax authorities start auditing compliance with the newly adopted Tax Code amendments. Therefore, the role of a lawyer or a tax consultant will become crucial.

Preparation for a potential tax controversy starts well in advance. Proper maintenance of the accounting documents, regular verification and updates of business processes and accounting records are the key elements of such preparation. In addition, tax advice should be obtained in case of any uncertainty on tax legislation compliance.

If a tax issue arises, a taxpayer should first communicate with a tax authority (by requesting a binding ruling, filing an application/letter). At the same time, a taxpayer should be prepared for a potential administrative complaint procedure or court dispute. If a tax audit is initiated, a taxpayer should become familiar with the legal grounds for that tax audit, its subject, terms, etc. If a tax authority finds any violations on the part of the taxpayer, which are not well reasoned, a taxpayer should submit objections to the audit report.

If a taxpayer disagrees with a tax notice or any other administrative decision issued by a tax authority, the taxpayer should file an administrative complaint to the State Tax Service. If that complaint does not succeed, a lawsuit should be initiated. Preparation for a court dispute includes analysis of the relevant court practice to identify the possible risks and chances of success.

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