Tax Inspection Errors: Article 199 of the Tax Code of Ukraine
During tax audits, authorities often make typical mistakes, especially when applying Article 199 of the Tax Code of Ukraine (TCU). This article concerns the proportional allocation of VAT input credit when goods, services, or assets are used for both taxable and non-taxable activities.
Common Tax Office Mistake
One of the most frequent errors is charging VAT under Article 198.5 without applying the allocation coefficient.
In other words, the tax authority assumes that all expenses were used solely for non-taxable activities and adds VAT to the entire amount, ignoring the actual proportion.
Case Example
Such violations have been documented not only in Kyiv but also in Kyiv and Dnipropetrovsk regions. Tax officials add VAT in full, without analyzing the real use of assets or calculating the proportional coefficient.
What Should a Taxpayer Do?
- Review whether the input VAT was properly allocated;
- Collect documentation that confirms the percentage used in taxable activities;
- Consult legal experts to prepare objections or challenge the audit results.
Why Is This Important?
Incorrect VAT assessments can lead to significant financial losses for a business.
However, the law supports the taxpayer if they act in accordance with the TCU and have the necessary documentation.
How GLS Law Can Help
GLS Law supports businesses during tax audits, prepares legal positions for tax authorities and courts, and helps avoid unjustified VAT assessments.
If your business is being audited — contact us for a consultation.
