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Annulment of Single Taxpayer Status: When the Decision Can Be Overturned

Andrii Spektor

Date: 12 Jan , 8:12

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The annulment of single taxpayer status is one of the most sensitive tax issues for small and medium-sized businesses. In practice, such a decision may be initiated either by the entrepreneur themselves or imposed forcibly by the tax authority. It is the latter scenario that most often becomes the subject of disputes, as businesses frequently learn about the loss of the simplified tax regime only after the fact.

When the Tax Authority Annuls Single Taxpayer Status

Practice shows that the grounds for forced annulment are fairly typical. Most often, tax authorities refer to the performance of business activities that are expressly prohibited for single taxpayers, or to the use of prohibited forms of settlements, such as barter or set-off arrangements. Another common category is exceeding the statutory income limit where the entrepreneur failed to timely move to a higher group or to the general taxation system.

Another frequent ground is the existence of tax debt. The law sets a relatively low threshold: if the debt exceeds UAH 3,060 (180 non-taxable minimum incomes) and persists for two consecutive quarters, the tax authority formally acquires the right to annul single taxpayer status.

Effective Date of Termination of the Simplified Regime

Registration as a single taxpayer is terminated as of the first day of the month following the period in which the violation occurred. At the same time, the tax authority makes the relevant entry in the Single Taxpayers Register on the date the decision is adopted.

Returning to the simplified tax regime after forced annulment is generally possible only after four consecutive quarters have elapsed. The exception is where the taxpayer successfully challenges the tax authority’s decision through administrative or judicial proceedings.

Business Mistakes the Tax Authority Treats as Violations

In practice, not every annulment is the result of deliberate misconduct. Quite often, the problem stems from the lack of proper tax or legal support. A typical example is exceeding the income cap at the end of the year, when the entrepreneur fails to react in time to changing financial indicators. Another common issue is insufficient attention to minor tax debts, particularly penalties, which may accumulate even when the main taxes have been paid.

A separate risk arises from working with counterparties that are not permitted for a particular single tax group. For example, a second-group single taxpayer who begins cooperating with municipal institutions or non-governmental organizations effectively goes beyond the permitted taxation model, creating grounds for intervention by the tax authority.

Procedural Violations as the Key Ground for Reversal

Court practice in recent years shows that the decisive argument in disputes with the tax authority is often not the alleged violation itself, but the procedure by which the annulment decision was made. The position of the Supreme Court of Ukraine, reflected in its 2025 rulings, is that annulment of single taxpayer status is lawful only where it is based on properly documented results of a documentary tax audit. Automatic removal from the register without such an audit is considered unlawful by the courts.

Thus, violations of the decision-making procedure frequently become sufficient grounds for overturning the annulment, even where the tax authority points to formal reasons for doing so.

Administrative and Judicial Appeals

The administrative appeal procedure involves filing a complaint with a higher-level tax authority. The law allows only 10 working days from the date the decision is received to do so, meaning any delay can effectively deprive the business of a chance to protect its rights.

Judicial appeals are heard by administrative courts. If an administrative appeal was previously used, the deadline for filing a court claim is three months; if not, it is six months. Where the taxpayer prevails, the court obliges the tax authority to restore single taxpayer status retroactively, i.e., from the date of annulment.

Key Takeaway for Businesses

Annulment of single taxpayer status is not always the end of the road. In a significant number of cases, it results from formal or procedural errors made by tax authorities. Timely analysis of the grounds for the decision and the correct choice of defense strategy can help businesses not only retain the simplified tax regime, but also avoid a substantial increase in their tax burden.

Blog

Annulment of Single Taxpayer Status: When the Decision Can Be Overturned

When the Tax Authority Annuls Single Taxpayer Status

Effective Date of Termination of the Simplified Regime

Business Mistakes the Tax Authority Treats as Violations

Procedural Violations as the Key Ground for Reversal

Administrative and Judicial Appeals

Key Takeaway for Businesses

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