Criminal proceedings on tax evasion upon results of tax audit and dispute when the tax liabilities remain NOT settled
With the resumption of tax audits, criminal proceedings for alleged tax evasion have become more frequent, even when the tax liabilities are still not settled or in dispute.
Under the law (Part 1 of Article 212 of the Criminal Code of Ukraine), liability arises only for malicious tax evasion, meaning there must be an actual failure for the funds to reach the budget and the presence of intent. If the tax liability is disputed, the fact of “non-payment of taxes” may legally be absent — making criminal prosecution in such cases questionable.
In theory, an act of tax audit itself is not a statement of a crime and, by law, should not be automatically referred to law enforcement before the liabilities are settled. However, in practice this often occurs: law enforcement initiates cases even while the dispute is still ongoing or before the tax notice is issued — that is, before the debt “officially” arises.
A possible reason is the use of criminal proceedings as leverage on businesses — to pressure them into paying the assessments or to “improve the statistics” of tax and law-enforcement agencies on filling in the budget. Law enforcement officers often suggest that taxpayers pay the amounts (even disputed or non-existent ones) “before charges are filed” to benefit from Part 4 of Article 212 of the Criminal Code and avoid criminal liability.
It is therefore important to carefully assess whether to pay disputed amounts, and if yes — how and when — to avoid criminal liability, or to pursue the matter through tax disputes — while fully considering the associated risks.
The full version of the article is available in Ukrainian by the link.
Kind regards,
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