The Supreme Court Tightens the Rules for Businesses During Tax Inspections

On-site tax inspections have always remained one of the most problematic instruments of tax control because they are conducted without prior notice to the taxpayer and effectively require businesses to be permanently prepared to immediately confirm the legality of their operations. However, recent Supreme Court practice demonstrates that after amendments to Law No. 265/95-VR and the Tax Code of Ukraine, the standard of taxpayer conduct during such inspections has become significantly stricter.

A particularly illustrative example is case No. 140/6980/24, in which the Supreme Court, on March 3, 2026, effectively confirmed that the mere existence of inventory accounting documents no longer guarantees protection from penalties if those documents were not provided to the tax authority at the proper moment and in the proper manner. The dispute concerned an individual entrepreneur engaged in the retail sale of jewelry. During an on-site inspection, the tax authority identified two violations: the sale of goods without the use of a cash register and the failure to provide documents at the point of sale confirming the accounting and origin of inventory. While the entrepreneur did not substantially dispute the first violation, the second became the subject of extensive litigation.

The key issue was that the inventory accounting documents did in fact exist but were stored electronically, while the taxpayer argued that informing inspectors about the possibility of reviewing them should have been considered sufficient fulfillment of the legal obligation. The courts of first and appellate instance accepted this argument and cancelled the fine in the relevant part. The Supreme Court, however, adopted a fundamentally different position.

The Court expressly stated that, under Article 20 of Law No. 265/95-VR, the mere failure to provide documents during the inspection is itself sufficient grounds for imposing a financial sanction, even if inventory accounting is actually maintained. This is an extremely important conclusion for businesses because the Supreme Court effectively finalized the distinction between two independent grounds for liability: the sale of unaccounted goods and the failure to provide documents confirming their accounting.

Notably, the Supreme Court directly referred to its earlier rulings in cases No. 420/12275/22, No. 300/2879/22, and No. 520/22949/24, demonstrating that this approach has already become established and systematic judicial practice. 

The Court also paid particular attention to the specific nature of on-site inspections, which are conducted without prior notice under Articles 75 and 80 of the Tax Code of Ukraine. According to the Court, this feature fundamentally changes the expected conduct of the taxpayer. Unlike documentary inspections, which involve a more formalized procedure with advance requests and preparation of documents, an on-site inspection requires the taxpayer to be ready to provide documents immediately upon presentation of the inspection order and authorization.

In effect, the Supreme Court confirmed a very strict legal framework: the obligation to provide documents confirming the accounting and origin of goods arises automatically at the very beginning of the inspection and does not depend on whether the tax authority has issued a separate written request under paragraph 85.4 of the Tax Code. This conclusion is particularly important because the lower courts had relied precisely on the absence of such a request when cancelling the penalty. The Supreme Court, however, emphasized that the mechanism for requesting certified copies of documents has a different legal purpose and applies primarily to documentary inspections, where the scope of inspection is determined in advance. Such logic does not apply to on-site inspections.

Another highly significant aspect of the ruling is that the Supreme Court effectively defined the procedural boundary after which documents lose their legal significance in disputes with tax authorities. The Court pointed out that the Tax Code still provides taxpayers with several procedural mechanisms to remedy the situation: submitting documents before completion of the inspection under paragraph 44.7 of the Tax Code, filing objections to the inspection report together with documents and explanations under paragraph 86.7, or providing documents before the tax authority issues a tax notice-decision.

However, in case No. 140/6980/24, the taxpayer used none of these mechanisms. The documents were submitted only together with the administrative complaint after the tax notice-decision had already been issued. According to the Supreme Court, this became the decisive factor: once the tax notice-decision has been adopted, the subsequent submission of documents no longer eliminates the violation recorded during the inspection.