How can a manufacturer prevent the blocking of tax invoices?

The suspension of tax invoices and the non-acceptance of the table can also occur due to reasons such as low tax burden, non-compliance with expense standards for risky goods (fuel, fertilizers, etc.), insufficient equipment or human resources, cooperation with risky counterparties, and so on.

In our opinion, the most common factors for refusal to register tax invoices for producers are:

• Lack of documentary evidence of the equipment used for planting and harvesting;
• Missing reports: 4-SG (annual) “Report on the Sown Areas of Agricultural Crops,” 37-SG (as of the last reporting date of submission) “Report on Sowing and Harvesting Agricultural Crops, and Other Field Work,” 24-SG (monthly, annual) “Report on the Production of Animal Products and the Number of Livestock,” 29-SG (annual) “Report on the Areas and Gross Yields of Agricultural Crops, Fruits, Berries, and Grapes”;
• Failure to submit a tax declaration for land tax;
• Failure to submit a tax declaration for a single tax payer (Group 4);
• Failure to provide information on land plots;
• Inconsistency between the amount of grain sold and the ability to produce it;
• Lack of fixed assets;
• Insufficient number of employees;
• Failure to submit the 20-OPP report (on the presence of owned and/or leased vehicles);
• Failure to submit the taxpayer data table;
• The counterparty has not declared its relationship with the agricultural producer;
• The counterparty is listed as a risky taxpayer;
• Failure to submit a notification regarding explanations and copies of documents related to the tax invoices whose registration has been suspended;
• The explanation does not describe the full cycle of operations of the agricultural producer and/or does not provide sufficient documentation to support it.

The question arises: how should we proceed?

There is a well-established action algorithm in case of tax invoice registration suspension, which consists of the following stages:

1. Preparation and submission of explanations and copies of documents to the controlling authority.

It is important to understand that although the Order on Decision-Making for the Registration/Refusal of Registration of Tax Invoices/Correction Calculations in the Unified Register of Tax Invoices, approved by the Ministry of Finance of Ukraine Order No. 520 of December 12, 2019, defines the taxpayer’s right, not the obligation, to submit documents necessary for the decision on the registration of a tax invoice/correction calculation in the ERPN, based on our practice, providing well-grounded explanations and quality documents significantly increases the chances of registering the tax invoice/correction calculation in the ERPN.

In the explanations, it is crucial to state that your company does not meet the risk criteria for either the VAT payer or the transaction operations, based on the actual business activities, which can be confirmed, in particular, by contracts, specifications, invoices, acts of completed work (services provided), payment orders, presence of fixed assets (sale and purchase agreements, lease agreements), and human resources (1-DF, civil law contracts), etc.

Result: We either receive a decision to register the tax invoice, or we receive a decision to refuse registration of the tax invoice.

2. Preparation and submission of a complaint to the controlling authority regarding the decision to refuse the registration of a tax invoice.

As a rule, the decision to refuse the registration of tax invoices/correction calculations in the Unified Register of Tax Invoices does not include a list of documents that, according to the controlling authority, were not provided by the taxpayer. In particular, the following reasons for refusal are often stated for agricultural producers:

• “Failure to provide the taxpayer with copies of documents: settlement documents and/or bank statements from personal accounts.”
• “Failure to provide the taxpayer with copies of documents: primary documents regarding the supply/purchase of goods/services, storage and transportation, loading, unloading of products, warehouse documents (inventory descriptions), including invoices/invoices, acceptance-transfer acts for goods (works, services) taking into account the presence of certain typical forms and industry-specific features, delivery notes.”

It should be noted that according to the rules of the Procedure for the Suspension of the Registration of Tax Invoices/Correction Calculations in the Unified Register of Tax Invoices, approved by the Resolution of the Cabinet of Ministers of Ukraine dated December 11, 2019, No. 1165, the condition for unblocking the registration of tax invoices is the provision by the taxpayer of the necessary documents to the controlling authority for making a decision on the registration of tax invoices.

That is, it is the responsibility of the controlling authority to provide the taxpayer with a comprehensive list of documents that must be submitted. This has been repeatedly confirmed in judicial practice, for example, in the Supreme Court rulings of February 18, 2020, in case No. 360/1776/19, October 23, 2018, in case No. 822/1817/18, May 21, 2019, in case No. 0940/1240/18, and July 22, 2019, in case No. 815/2985/18.

However, as a rule, the decision to refuse the registration of tax invoices/correction calculations in the ERPN does not contain either a list of documents not provided or, even more, their specification. Therefore, it is essential to take into account the specifics of the agricultural business and provide the relevant documents, including 20-OPP reports, 4-SG reports, 37-SG, 24-SG, and 29-SG reports, tax declarations for land tax, information about land plots, and so on.

Thus, thorough preparation at this stage and submission of a well-prepared complaint is a very effective way to protect your interests. We also have examples of such complaints being satisfied, one of which you can review via this link.

Result: We either receive a decision to satisfy the complaint or a decision to refuse to satisfy the complaint.