Blocking of Tax Invoices: How to Respond Properly

The blocking of tax invoices (TIs) and adjustment calculations (ACs) has remained one of the most acute problems for Ukrainian businesses in recent years. In practice, this mechanism of tax control—applied by the State Tax Service (STS) under the pretext of combating risky transactions—often turns into an instrument of pressure that leads to real financial losses for taxpayers.

The situation becomes especially critical when a company is included in the list of “risky taxpayers.” This decision becomes the key basis for blocking any TI, depriving buyers of their right to a tax credit and, in many cases, effectively paralyzing business operations. Reputational risks, penalties for late registration, and conflicts with contractors become inevitable consequences.

Uncertainty of the “riskiness” concept and the dynamic nature of Procedure No. 1165

Despite the significance of the “risky taxpayer” status, Ukrainian legislation still does not contain a unified definition of this term. In practice, it is shaped by tax authorities based on their internal monitoring approaches.

The legal basis is Cabinet of Ministers Resolution No. 1165, which establishes the mechanism for suspending the registration of TIs/ACs and outlines official risk criteria. Since its adoption, the document has been amended ten times. The latest changes were intended to support businesses operating in combat-affected areas, exporters, and SMEs. However, they did not solve the problem of mass invoice blocking.

Among the eight risk criteria in the annex to the Procedure, the absolute “favorite” of tax authorities is criterion 8 — the presence of tax information that allegedly indicates the riskiness of a transaction. It is this point that is most commonly cited in decisions, often without any explanation or evidence. “Copy-paste” reasoning has become standard practice.

Blocking TIs and the risk status: two parts of the same problem

While a taxpayer remains on the risky list, no documents regarding specific invoices will be reviewed. This means that the first step must always be to challenge the very status of riskiness, not the individual blocking of specific TIs. Many companies mistakenly focus on preparing explanations for each blocked invoice, but unless the risk status is removed, such documents remain irrelevant.

How to challenge the risk status: a practical algorithm

1. Administrative appeal

The first stage involves submitting a complaint to the regional commission of the STS, accompanied by a complete set of supporting documents:

• contracts, acts, invoices;
• statements, reports, logistics documents;
• evidence proving the reality and commodity nature of operations;
• information confirming the company's financial transparency and good faith.

The goal is to demonstrate the legitimacy of the company’s activity and refute the grounds for being classified as risky.

The regional commission must issue a decision within 7 working days. If this deadline is missed, the taxpayer must be automatically removed from the risky list. In practice, however, this norm is often ignored, forcing businesses to move to the next appeal level. If the regional commission upholds the negative decision, the complaint must be submitted to the central STS.

2. Judicial appeal

If all administrative bodies refuse to grant the complaint, the taxpayer has the right to challenge the decision in court. A court ruling that has entered into legal force is an unconditional basis for removing a company from the risky list under paragraph 6 of Procedure No. 1165.

Judicial practice shows that courts often side with businesses, especially when the tax authority provides no substantiated reasoning and bases its decisions on generic template wording.

Conclusion

Blocking tax invoices is not merely a technical issue—it is a significant threat to business stability. As long as Procedure No. 1165 remains vague and tax authorities exercise broad discretion, protecting a company depends largely on a well-designed legal strategy.

Challenging the risk status is the key step, without which the unblocking of individual invoices is impossible. A properly prepared document package, an active stance during administrative appeals, and readiness to defend one’s rights in court are essential for restoring normal business operations and protecting corporate interests.