On November 27, 2025, a critical meeting took place between representatives of leading public business associations in Ukraine and the acting Head of the State Tax Service (STS), Ms. Lesia Karnaukh. While the dialogue covered a wide range of issues, the search for a balance between fiscal discipline and business support was key for all sectors.

The business community positively noted the active communication under Ms. Karnaukh and the STS’s readiness to perform a “service function” by facilitating the prompt resolution of conflicts between taxpayers and local fiscal bodies.

However, the acting Head of the STS reported that the challenging situation with tax payments in September-October necessitates an inevitable tightening of control and inspection work, focused on verifying the reality of business operations and preventing business fragmentation.

 Focus on the Fuel and Energy Sector: Resolving Crisis Fiscal Issues

FEBA and other industry associations raised critical questions concerning the fiscal stability of legally operating MSBs. A key point raised was the formation of judicial practice regarding the payment of the advance corporate income tax payment by fuel retailers and the annulment of their retail fuel licenses based on non-payment of this advance contribution.

Judicial Practice Analysis

FEBA analyzed existing court practice and reached the following conclusions regarding disputes over advance payments:

1. Annulment of Licenses due to Non-Payment

• Prevailing Practice (in favor of the taxpayer): In most cases reviewed, courts recognize as unlawful and cancelthe decisions/directives of the STS Main Directorates to annul retail fuel licenses due to the non-payment of the advance income tax payment.
• Key Argument for the Taxpayer: Courts often agree that the criterion for the obligation to pay the monthly advance payment is the actual conduct of business activities (retail fuel trade) at the location, not merely the possession of the license. If the entity proves it has not yet started operations, non-payment of the advance contribution is not a valid ground for license annulment.
• Specific Cases (in favor of the STS): Court practice is not absolutely universal. Some courts have rejected claims by companies challenging the STS decision, underscoring that the proof of actual operation is critical in each individual case.

2. Appealing Tax Notification Decisions (PPRs)

In cases concerning purely Tax Notification Decisions (PPRs) issued for non-payment of the advance contribution (fines, penalties), the courts have also shown a tendency to satisfy the taxpayer’s claim and cancel the challenged PPRs.

Key Legislative Problems Identified by Judicial Practice

The analyzed court cases reveal several core problems:

1. Uncertainty regarding the moment business activity begins for the purpose of initiating the advance payment obligation and, consequently, license annulment.
2. Controlling bodies often fail to perform a mandatory desk audit to formally establish the fact of non-payment of the advance contribution before imposing sanctions.
3. Lack of clarity in Law No. 3817-IX regarding the order of application of the license annulment norm (is it a single violation or systematic/ongoing non-payment that triggers the decision?).
4. Current legislation (Tax Code and Law No. 3817) provides for two types of liability—fines/penalties and license annulment—without clarifying the order and conditions for applying each type of sanction.

FEBA consistently advocates for changing the approach to collecting the advance corporate income tax payment from fuel retailers, and the current judicial practice serves as an additional signal for the need to adjust fiscal policy on this issue.

FEBA’s Proposals for Legislative Clarity

To eliminate the root cause of the problem and minimize judicial disputes that exhaust both business and the state, FEBA proposes the following legislative changes:

1. Legislatively codify (amend the Tax Code of Ukraine) that the obligation to pay the monthly advance contribution arises from the first day of the month following the month in which the business entity actually began retail fuel trade at the licensed location.
   • The payment obligation must be tied to the fact of actual retail fuel activity, not merely the fact of license ownership.
2. Obligate the business entity to submit a notice to the STS regarding the actual start of activity (or the physical opening of the facility) within 5–10 calendar days from the start date of trading.
   • This would provide the STS with an objective starting point for controlling advance payment compliance and prevent taxpayer abuse.
3. Establish Proportionality of Sanctions: Determine that the primary sanction for non-payment of the advance contribution (where business activity is proven) should be the application of fines and penalties (PPR), and license annulment should only be a last resort in case of systematic and prolonged non-payment or ignoring PPRs.
   • License annulment is an excessive sanction that leads to business stoppage and frequent court appeals. Therefore, it must be reserved as an extreme measure, applied only under conditions of systematic non-payment after exhausting fine and penalty mechanisms.

The meeting confirmed the STS’s readiness for dialogue, but expectations for budget revenue remain high. Under conditions of enhanced control, the consolidated voice of business and the existence of judicial precedents become the most important tool for protecting legal taxpayers. FEBA stresses that the STS’s service function should be manifested in accepting and implementing the judicial position, and the Government must provide businesses with legislative clarity.