Analytics

1.

E-commerce is one of the most common forms of trade in Ukraine. In particular, a typical model involves selling goods through an online store with delivery via a delivery service (e.g., Nova Post LLC) and cash on delivery through a non-bank financial institution (e.g., NovaPay LLC), which is carried out as follows:

(1) the buyer places an order through the online store;

(2) the seller hands over the goods to the delivery service;

(3) the buyer receives the goods at the delivery service branch and pays for them;

(4) the funds are received not by the seller, but by the non-bank financial institution;

(5) thereafter, the non-bank financial institution transfers the received funds to the seller’s bank account via wire transfer form.

According to Article 3 of the Law of Ukraine as of July 6, 1995, No. 265/95-ВР “On the Use of Cash Registers in the Sphere of Trade, Public Catering, and Services” (the Law on the RRO), the obligation to use a cash register (the RRO) and to issue a fiscal receipt arises only if the business entity conducts a settlement transaction:

“Article 3. Business entities that conduct settlement transactions in cash and/or non-cash form (using electronic payment instruments, payment checks, tokens, etc.) when selling goods (providing services) in the sphere of trade, public catering and services, as well as operations for accepting cash to perform payment operations, are required to:

1) conduct settlement transactions for the full amount of the purchase (service) via registered, sealed in the prescribed manner and set to fiscal mode cash registrars or via registered software cash registrars controlled by the fiscal server of the tax authority, with the creation in paper and/or electronic form of the appropriate settlement documents confirming the execution of settlement transactions, or in cases provided for by this Law, using registered in the prescribed manner settlement books”.

According to the definition of “settlement transaction” in paragraph 6 of Article 2 of the Law on the RRO, a transaction is considered a settlement transaction if both of the following conditions are met: acceptance of payment (1) directly from the buyer (2) at the place of sale of the goods.

Under the described sales model, the seller:

• does not conduct any settlements with the buyer at the place of transfer of the goods;
• receives only a non-cash transfer from the non-bank financial institution.

Therefore, the logical question arises: does the seller have an obligation to use the RRO under such circumstances?

2.

For many years, the sales model described above did not lead to any significant disputes with the tax authorities.

Until 2023, the position of the tax authorities regarding the use of the RRO in the context of distance sales of goods with cash on delivery through a non-bank financial institution remained consistent and, accordingly, predictable:

In a number of individual tax consultations (ITCs), the State Tax Service of Ukraine (the STS of Ukraine) expressly stated that where the customer does not make an advance payment, the goods are delivered through a delivery service, and payment is made at the carrier’s branch through NovaPay LLC, the seller does not conduct a settlement transaction within the meaning of the Law on the RRO.

In particular, ITC as of August 19, 2021, No. 3091/ІПК/99-00-07-05-01-06, issued by the STS of Ukraine, stated that the transfer of funds received by the seller from NovaPay LLC to the seller’s bank account does not possess the characteristics of a settlement transaction. Accordingly, the seller is not obliged to use a cash register when receiving such a transfer.

Similarly, in ITC as of October 18, 2021, No. 3862/ІПК/10-36-07-07-20, the Main Directorate of the STS in Kyiv Region stated that in the case of a distance sale of goods with cash on delivery, the cash register is used by the delivery service upon handing the goods over to the customer at its branch, while the seller is only required to include a delivery note and other documents required by law in the shipment.

A similar position was expressed in other ITCs issued by the tax authorities, demonstrating a consistent approach to this issue.

At the same time, in 2023, the STS of Ukraine significantly changed its approach to the issue of using a cash register in connection with distance sales of goods with cash on delivery. However, this change concerned not all postal operators, but only the private ones. The position regarding the purchase of goods on a cash-on-delivery basis with delivery through Ukrposhta JSC remained unchanged (apparently due to its status).

In particular, in ITC No. 1693/ІПК/99-00-07-04-01-06 as of July 4, 2023, the STS of Ukraine effectively abandoned its previously stated position and concluded that the seller is required to issue a fiscal receipt even where the funds are not received directly from the buyer.

The tax authority proceeded on the basis that several distinct business transactions occur between the parties to such legal relations:

– a sale and purchase agreement exists between the seller and the buyer;

– Nova Post LLC merely provides delivery services;

– NovaPay LLC merely performs the transfer of funds;

– NovaPay LLC (a non-bank financial institution) is not a party to the sale and purchase agreement.

For that reason, according to the STS of Ukraine, the obligation to issue a settlement document rests with the seller.

The tax authority further emphasized that a sale of goods with cash on delivery constitutes a form of sale of goods on credit under Article 694 of the Civil Code of Ukraine. On that basis, it concluded that the seller must issue a fiscal receipt at the moment the goods are handed over to the carrier, indicating the payment method as “CREDIT” or another designation that, under the law, more accurately reflects the legal relationship between the buyer and the seller.

This reasoning was subsequently used by the tax authorities during factual audits of taxpayers and became widespread in practice. The authorities proceeded from the assumption that the seller was required to issue a fiscal receipt at the stage of transferring the goods to the delivery service and therefore imposed financial penalties on taxpayers for failure to use a cash register.

At the same time, this change in approach led to numerous disputes, primarily because it was not prompted by any legislative amendments.

Neither the definition of a “settlement transaction”, nor the provisions of the Law on the RRO, nor the rules governing distance sales were amended.

In other words, the only thing that changed was the tax authority’s interpretation of the same legal relations.

Moreover, all relevant factual circumstances had been known to the tax authorities since at least 2021. However, while in 2021 these circumstances, according to the STS of Ukraine, demonstrated the absence of a settlement transaction, in 2023 the very same circumstances were used to support the opposite conclusion.

As a result, businesses that had organized their operations in good faith in reliance on the official explanations of a state authority effectively began to face liability due solely to an unjustified change in the position of the tax authority.

This issue quickly extended beyond individual tax disputes and became a matter of legal certainty for the entire e-commerce market.

3.

It should also be noted that the cost of legal uncertainty in this matter is extremely high for taxpayers. For violations of the requirements governing the use of the RRO, the tax authorities impose financial penalties amounting to 150% of the value of the goods sold, despite the fact that tax audits generally reveal no concealment of income, understatement of tax liabilities, or any other form of tax evasion.

Moreover, in many cases the tax audit materials themselves confirm the absence of any tax losses suffered by the state. The tax authority determines the value of the goods sold, which serves as the basis for calculating the penalty, exclusively on the basis of the taxpayer’s own primary documents, accounting records, and tax records. This indicates that the relevant business transactions were properly recorded and that all income and related tax liabilities were duly reflected for taxation purposes.

Accordingly, under such circumstances there are no unrecorded transactions or funds that passed “off the books”, and the violation does not produce any actual adverse consequences either for the state budget or for the public interest. At the same time, the taxpayer is subject to a penalty equal to 150% of the value of the goods sold, which by its very nature is manifestly disproportionate, predominantly punitive in character, and not aimed at compensating any budgetary losses or remedying the consequences of a tax offense.

Given that the fundamental purpose of the RRO is to ensure effective tax control and the completeness of tax payments, the imposition of a penalty equal to 150% of the value of the goods sold in the absence of any indications of tax evasion naturally raises the question of whether such a sanction complies with the principle of proportionality as an element of the rule of law.

It is indicative that the issue of proportionality of substantial financial penalties established by law in a fixed amount has become so significant that the Supreme Court applied to the European Court of Human Rights (the ECHR) for an advisory opinion pursuant to Protocol No. 16 to the Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention).

In its request to the ECHR, the Supreme Court asked whether a national court may refuse to apply a statutory sanction or impose less severe consequences where the sanction prescribed by law constitutes a disproportionate interference with the individual’s right to peaceful enjoyment of possessions guaranteed by Article 1 of Protocol No. 1 to the Convention, and what criteria should be used to assess such proportionality.

This approach demonstrates the gradual development within domestic judicial practice of a general standard according to which even a financial sanction formally established by law must be assessed from the perspective of proportionality, the fair balance between public and private interests, and compliance with Article 1 of Protocol No. 1 to the Convention.

4. 

Returning to the specific issue of the use of the RRO in distance sales with cash on delivery, the Supreme Court has now eliminated the legal uncertainty regarding the obligation to use the RRO under the circumstances under consideration.

Recently, in the Resolution as of June 3, 2026, in case No. 520/27700/25, the Supreme Court adopted a legal position according to which where goods are sold through an online store with delivery through a delivery service and cash on delivery through a non-bank financial institution, the seller is not obliged to use the RRO:

“Taking the foregoing together, where a consumer (customer) ordered goods via the Internet, including through the seller’s website (including an online store), on a post-payment basis (payment upon receipt of the goods), using the services of non-bank institutions that credit funds to the seller’s bank account, without making any advance payment, and the goods were delivered by a delivery service pursuant to an agreement under which the goods were transferred to such service for delivery to the buyer, the seller’s receipt of funds from the non-bank institution does not possess the characteristics of a ‘settlement transaction’ as defined in Article 2 of the Law on the RRO.

As established by the lower courts, when selling goods via the Internet (online marketplaces, etc.) on a cash-on-delivery basis using the services of a delivery service and a non-bank institution, the Plaintiff did not receive cash, payment cards, payment checks, or tokens directly from the buyer, but instead received funds transferred as payment for the goods by a non-bank institution, while the settlements between the Plaintiff and such institution were non-cash in nature.

In light of the foregoing, the Court agrees with the conclusions of the lower courts that the Plaintiff did not conduct transactions that are expressly defined in Article 2 of the Law on the RRO as settlement transactions.

…

Therefore, given the absence of a clear legislative provision classifying the crediting of funds to a business entity’s bank account for goods supplied without any advance payment and on a post-payment basis through non-bank institutions as a settlement transaction, the Court has no grounds to conclude that the Plaintiff was obliged to use the RRO when supplying goods on a cash-on-delivery basis and receiving payment through the non-bank institutions Post Finance LLC / NovaPay LLC to its bank account”.

Thus, the Supreme Court expressly stated that the legislation does not classify as settlement transactions the crediting of funds to the seller’s bank account by a non-bank financial institution following the sale of goods on a cash-on-delivery basis.

Another important conclusion reached by the Supreme Court was that, under such circumstances, there is effectively no place of settlement, which is one of the mandatory elements of a settlement transaction:

“The Court also agrees with the well-reasoned conclusions of the lower courts that the sale of goods through the Internet does not involve a clearly identifiable place of sale of the goods (services), while the Plaintiff does not receive funds at the place where payment for the goods is made. Such funds are received by the Plaintiff in non-cash form from financial institutions”.

The Supreme Court also assessed the arguments advanced by the tax authority, found them unfounded, and stated as follows:

“The Court further agrees with the conclusions of the lower courts that where an order is received through an online store without any advance payment by the customer, at the stage of transferring the goods to the delivery service, the seller cannot know with certainty whether the customer will ultimately purchase the goods and make payment. In other words, at the stage of dispatching the goods, the business transaction is not yet completed, and the seller cannot control either the event of its completion or the timing thereof.

…

In order for a sale and purchase agreement to be regarded as completed, for purposes of issuing a settlement document, a combination of elements is required, namely: the transfer of goods (or an obligation to transfer them), acceptance of the goods (or an obligation to accept them), and payment for the goods (which serves as the basis for issuing the settlement document).

At the same time, where the Plaintiff transfers goods to the delivery service, namely Nova Post LLC, and payment is to be made exclusively upon receipt at the delivery service branch (cash on delivery), without even partial prepayment, the sale and purchase agreement cannot be considered completed, because although the Plaintiff has dispatched the goods and thereby performed part of the obligations arising from such an agreement, the Plaintiff has not acquired the right to require the buyer to perform his or her corresponding obligations, namely to accept and pay for the goods.

Indeed, in the case of sales on a cash-on-delivery basis via the Internet, i.e., by means of distance trading, current legislation does not impose on the person who placed the order a legal obligation to receive the goods, nor does it grant the seller the right to compel that person to collect and pay for the goods.

Accordingly, although the Civil Code of Ukraine and the Law of Ukraine ‘On Electronic Commerce’ regulate the procedure for concluding sale and purchase agreements, including in the context of e-commerce and distance selling, such regulation does not take into account all aspects of contemporary e-commerce practices and contains certain legislative gaps. In the circumstances of this case, the relevant gap lies in the fact that the Plaintiff first ships the goods to the person who placed the order on a post-payment basis, and only once that person receives the goods and pays for them does he or she acquire the status of a buyer, at which point the legal relationship between the Plaintiff and the person who placed the order assumes the characteristics of a sale and purchase agreement.

The Court also notes that the Ministry of Finance of Ukraine, in its letter as of January 2, 2026, No. 11220-02-2/93, prepared according to the letter of the Committee of the Verkhovna Rada of Ukraine on Finance, Tax and Customs Policy as of December 22, 2025, No. 04-32/10-2025/296356, regarding the determination of the date on which income is received by single-tax payers when goods are sold on a cash-on-delivery basis through NovaPay LLC, stated as follows: ‘Accordingly, where goods are sold by single-tax payers using the services of NovaPay LLC, and payment is made upon receipt of such goods by means of a transfer of funds by a non-bank payment service provider, including through that provider’s payment systems or services, the date on which the single-tax payer receives income is the date on which the funds are credited to the taxpayer’s account’.

The Court considers unacceptable the Defendant’s argument that legal relations in which payment is made only after the goods have been delivered by the carrier fall within the scope of Part 1 of Article 694 of the Civil Code of Ukraine, pursuant to which a sale and purchase agreement may provide for the sale of goods on credit with deferred payment or payment by installments.

Part 5 of Article 694 of the Civil Code of Ukraine provides that where a buyer delays payment for goods, interest shall accrue on the overdue amount in accordance with Article 536 of this Code, from the date on which payment for the goods was due until the date of actual payment.

In the case of delivery of goods on a cash-on-delivery basis, without even partial prepayment, the seller does not acquire a claim against the buyer for interest or any other compensation in the event the buyer fails to collect the goods.

The Court also finds unfounded the Defendant’s argument that the seller’s obligation to deliver the goods to the buyer is deemed fulfilled at the moment the goods are handed over to a carrier or postal operator for delivery to the buyer, and that, therefore, the goods should be considered delivered to the buyer, while receipt of the goods without payment gives the Plaintiff grounds to recover the debt from the buyer. Indeed, the decisive factor for recovering a debt from the buyer is the buyer’s actual receipt of the goods. At the same time, where the buyer has not received the relevant goods, there are no grounds for recovering the value of such goods from that buyer”.

In addition, the Supreme Court emphasized that imposing liability on a taxpayer in the absence of actual adverse consequences is unlawful:

“In the resolutions as of November 27, 2023, in case No. 420/11790/22, as of September 11, 2025, in case No. 580/7450/24, and as of August 12, 2025, in case No. 500/5316/21, the Supreme Court stated that, when examining the objective element of the offense, namely the conduct that constitutes the essence of a taxpayer’s unlawful behavior, liability under paragraph 1 of Article 17 of the Law arises in respect of actions which, by their nature and manner, are aimed at concealing the proper recording of a settlement transaction for its full amount through the use of cash registers and similar means.

As reasonably noted by the courts of lower instances, under the applicable legislation, the very purpose of conducting settlement transactions through the RRO and issuing the corresponding settlement documents (fiscal receipts) in cash payments or payments made by bank card to business entities is to ensure that a business entity maintains transparent and accurate records of its business activities, reports all income, and does not conceal any unrecorded revenue, thereby ensuring that taxes are paid to the State Budget in full.

The courts of lower instances established that, within the framework of the legal relations at issue, the Plaintiff, while conducting its business activities in accordance with the requirements of the applicable legislation, received funds in non-cash form from POST FINANCE LLC / NovaPay LLC, without concealing any income, and that during the tax audit the fiscal authority identified no discrepancies between the actual volume of the business transactions carried out by the Plaintiff and the documentation maintained in respect of the Plaintiff’s activities“.

Accordingly, the Supreme Court has established a legal position confirming that a seller is not obliged to use the RRO when selling goods through an online store with delivery through a delivery service and cash on delivery through a non-bank financial institution.

5.

This Resolution of the Supreme Court is significant not only because of its conclusion regarding the absence of an obligation to use the RRO under the relevant distance-selling model, but also because of the broader approach adopted by the Supreme Court to resolving disputes arising from deficiencies in legislative regulation.

In addition to the foregoing, the Supreme Court noted that the dispute arose due to the absence of clear and foreseeable legislative regulation, which for many years had not been ensured by the state despite the widespread nature of the relevant legal relations:

“Regarding the Defendant’s argument that the Plaintiff’s transactions fall within the concept of ‘etc.’ contained in the definition of a ‘settlement transaction’, the Court notes that such a situation reveals a deficiency in legislation that permits ambiguous interpretation of that concept.

…

The Court further notes that the Committee of the Verkhovna Rada of Ukraine on Finance, Tax and Customs Policy, in its letter ‘Regarding the Use of RRO/PRRO as of January 1, 2022’ No. 04-32/10-2021/409504 as of December 30, 2021, which was prepared in response to numerous inquiries from individual entrepreneurs who are single-tax payers concerning problematic issues related to the use of cash registers (RRO/PRRO) as of January 1, 2022, and the absence of a consistent position among public authorities on these matters, and which was addressed to the Ministry of Finance of Ukraine, the National Bank of Ukraine, the State Tax Service of Ukraine, and individual entrepreneurs who are single-tax payers, stated the following in response to the question, ‘How should a settlement transaction be conducted when goods are sold with delivery through delivery services?’:

Accordingly, as early as the end of 2021, the legislature was aware that the issue of conducting settlement transactions in the context of sales through delivery services on a cash-on-delivery basis constituted a problematic issue for many business entities, lacked clear legislative regulation, and nevertheless remained unresolved at the legislative level even by the time this case was considered by the court of cassation”.

For this reason, the Supreme Court relied upon the principle of good governance, which forms part of the rule of law and has been consistently applied in the case-law of the ECHR:

“Article 8 of the Constitution of Ukraine establishes that the principle of the rule of law is recognized and operative in Ukraine.

Parts 1 and 2 of Article 6 of the Code of Administrative Procedure of Ukraine provide that, when deciding a case, a court shall be guided by the principle of the rule of law, according to which, inter alia, the individual, his or her rights and freedoms are recognized as the highest values and determine the content and direction of the State’s activities. The court applies the principle of the rule of law taking into account the case-law of the European Court of Human Rights.

According to paragraphs 70 and 71 of the ECHR’s judgment in Rysovskyy v. Ukraine, ‘the Court reiterates particular importance of the principle of good governance. It requires that where an issue in the general interest is at stake, in particular when the matter affects fundamental human rights such as property rights, the public authorities must act in good time and in an appropriate and above all consistent manner (Beyeler v. Italy, Öneryıldız v. Turkey, Megadat.com S.r.l. v. Moldova, and Moskal v. Poland).

In particular, it is incumbent on the public authorities to put in place internal procedures which enhance the transparency and clarity of their operations, minimise the risk of mistakes (Lelas v. Croatia and Toşcuţă and Others v. Romania) and foster legal certainty in civil transactions affecting property interests (Öneryıldız v. Turkey and Beyeler v. Italy).

The ‘good governance’ principle should not, as a general rule, prevent the authorities from correcting occasional mistakes, even those resulting from their own negligence (Moskal v. Poland). Holding otherwise would, inter alia, amount to sanctioning an inappropriate allocation of scarce public resources, which in itself would be contrary to the public interest (ibid.). On the other hand, the need to correct an old ‘wrong’ should not disproportionately interfere with a new right which has been acquired by an individual relying on the legitimacy of the public authority’s action in good faith (see, mutatis mutandis, Pincová and Pinc v. the Czech Republic). In other words, State authorities which fail to put in place or adhere to their own procedures should not be allowed to profit from their wrongdoing or to escape their obligations (Lelas v. Croatia). The risk of any mistake made by the State authority must be borne by the State itself and the errors must not be remedied at the expense of the individuals concerned (Pincová and Pinc v. the Czech Republic, Gashi v. Croatia, Trgo v. Croatia)’.

A preventive mechanism against legislative non-compliance with the rule of law is the principle of the presumption of legality of the taxpayer’s decisions (in dubio pro tributario).

It was precisely the violation of the above principle that repeatedly served as grounds for findings by the European Court of Human Rights that Ukrainian tax legislation contained inconsistencies and that such legislation had been interpreted in an erroneous manner favourable to the State (see, in particular, Serkov v. Ukraine, Shchokin v. Ukraine, and Dovbyshev v. Ukraine)”.

Thus, the Supreme Court proceeded on the basis that where a known legislative gap or legal uncertainty exists, and the state fails to eliminate it over a prolonged period, public authorities may not impose financial penalties on persons who acted under such conditions of uncertainty.

Importantly, this conclusion of the Supreme Court extends far beyond disputes involving the use of the RRO.

In essence, the Supreme Court adopted a universal approach to tax disputes where (1) legislative regulation is incomplete, contradictory, or ambiguous, (2) such uncertainty is systemic and persists over an extended period, (3) the issue is widespread in legal practice, (4) the state, despite being aware of the legislative gap or ambiguity, fails to ensure timely legislative regulation, and (5) the tax authority attempts to compensate for deficiencies in legislation by imposing financial penalties on taxpayers.

Under this approach, the Supreme Court confirmed that the principle of good governance constitutes an independent criterion for assessing the lawfulness of decisions made by tax authorities. Where the state has failed to provide sufficiently clear regulation, it is the state – not the taxpayer acting in good faith reliance on the existing regulatory framework – that must bear the risk of such uncertainty.

This approach is fundamentally important as it ensures that taxpayers are not held liable for deficiencies in legislative drafting or for the absence of an adequate regulatory framework.

Furthermore, relying on the case-law of the ECHR, the Supreme Court reaffirmed the active role of the judiciary in safeguarding the principle of legal certainty:

“According to the judgments of the ECHR in Vyerentsov v. Ukraine and Cantoni v. France, responsibility for overcoming legislative deficiencies, legal conflicts, gaps, and interpretative uncertainty rests, among others, with the courts that apply and interpret the law.

The role of judicial decisions is precisely to dispel such interpretative doubts that remain in light of developments in everyday practice”.

Accordingly, the significance of this Resolution extends well beyond the adjudication of a specific dispute regarding the use of the RRO. It establishes broader standard governing relations between the state and taxpayers: the state is not entitled to punish individuals for the consequences of its own failure to provide proper legislative regulation of important and widespread legal relations.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Kind regards,

© WTS Consulting LLC, 2026