How to Document the Tax Authority’s Position Before an Audit: Individual Tax Consultation

Not every tax question has a clear-cut answer. The same business transaction may involve the application of several provisions of the Tax Code of Ukraine, and a company’s interpretation of those provisions does not always match the approach taken by the tax authority.

For example, your company may have applied a particular tax treatment to a specific transaction for several years. You consider it correct—perhaps your accountant advised you to use it, or perhaps the entire market follows the same approach. Then a tax audit begins, and the State Tax Service of Ukraine suddenly interprets the same transaction differently.

By that point, the company may have spent several years applying a particular tax treatment, claiming input VAT, recognizing expenses, making payments to nonresidents, or carrying out other transactions. If the State Tax Service evaluates them differently during an audit, the result may be additional tax assessments and a dispute with the tax authority.

The worst part of this situation is not the dispute itself, but the fact that the State Tax Service’s position could have been obtained much earlier, before years of such practice accumulated. The law expressly provides a mechanism for this: an individual tax consultation.

This is not a cure-all. An individual tax consultation does not guarantee that the State Tax Service will agree with your approach, and it does not eliminate the tax itself if the authority takes a different position. However, it provides something that advice from an accountant or lawyer alone cannot provide: the tax authority’s official, registered position. If you act in accordance with that consultation and the actual circumstances match those described in the request, it can protect you from penalties and late-payment interest even if the tax authority later reaches a different conclusion.

What Is an Individual Tax Consultation and What Does It Give a Business?

Under subparagraph 14.1.172¹ of paragraph 14.1 of Article 14 of the Tax Code of Ukraine, an individual tax consultation is an explanation issued by a controlling authority to a specific taxpayer regarding the practical application of particular provisions of tax and other legislation compliance with which is monitored by that authority, and registered in the Unified Register of Individual Tax Consultations.

At the taxpayer’s request, the State Tax Service provides an individual tax consultation free of charge. The general deadline is 25 calendar days following the date the request is received. An authorized State Tax Service official may extend this period, but by no more than 15 calendar days, and the taxpayer must be notified before the original deadline expires.

The Tax Code provides for oral, paper, and electronic consultations. However, if a business wants not merely to obtain an explanation but to formally document the tax authority’s position and later rely on it as legal protection, the relevant instrument is an individual tax consultation in paper or electronic form that is registered in the Unified Register of Individual Tax Consultations. Subparagraph 112.8.2 of the Tax Code links such a consultation to exemption from financial liability for actions taken by the taxpayer in accordance with it.

A written or electronic individual tax consultation must contain more than quotations from legislation.

• the title “individual tax consultation”;

• a registration number in the Unified Register of Individual Tax Consultations;

• a description of the questions raised by the taxpayer, taking into account the factual circumstances provided;

• the reasoning for applying the relevant legal provisions;

• a conclusion on the practical application of the relevant provisions.

In other words, the value of an individual tax consultation lies in receiving an answer on how a particular provision should apply to the taxpayer’s specific situation. In addition, the business has an officially documented position of the tax authority.

Related: Which Foreign Exchange Transactions Are Allowed for Payments from Ukraine?

When Should a Business Consider Requesting an Individual Tax Consultation?

An individual tax consultation is most useful when the cost of an incorrect tax decision could be substantial and the legislation allows more than one reasonable interpretation of a provision.

In practice, this may include questions concerning VAT, corporate income tax, the single tax, taxation of payments to individuals, transactions with nonresidents, application of international treaties, determination of the taxable base, documentary requirements for a particular transaction, or other obligations monitored by the State Tax Service.

A company should give particular consideration to requesting an individual tax consultation if it:

• plans a new or atypical business transaction;

• changes its contractual or operating model;

• encounters conflicting approaches in explanations issued by tax authorities;

• cannot clearly determine the tax consequences of a transaction;

• faces a substantial amount of potential tax liabilities;

• wants to document the State Tax Service’s position before a possible documentary audit.

At the same time, not every question should be turned into a request for an individual tax consultation. If a provision is unambiguous and the tax consequences are directly prescribed by law, a consultation may offer little additional value. This tool is most useful where there is genuine legal uncertainty or elevated tax risk.

Court practice also provides a useful example. Suppose a company sells medical devices and is unsure whether a 7% VAT rate may be applied to a particular item. It obtains an individual tax consultation in advance in which the State Tax Service confirms that the rate may be applied under the described circumstances, and the company then acts accordingly. If, during an audit, the tax authority reaches a different conclusion and assesses VAT at 20%, no penalty should be imposed on the company and no late-payment interest should accrue (subparagraphs 112.8.2 and 129.9.2 of the Tax Code). The tax itself will still have to be paid if the State Tax Service’s later conclusion is correct. At the same time, the individual tax consultation will be a significant argument if the company decides to challenge the additional assessment on the merits. This illustrates the practical value of an individual tax consultation when the tax treatment of a transaction later becomes disputed.

How to Draft a Request for an Individual Tax Consultation to Obtain a Specific Answer

The main mistake when preparing a request is asking the State Tax Service a question that is too general or theoretical. As a result, you may receive a vague answer or an answer that does not address the issue you actually wanted clarified.

For example, a request stating, “Please explain the tax treatment of transactions involving the provision of services,” is unlikely to produce a useful result. The tax authority may simply quote general provisions of the Tax Code.

The purpose of the request is to describe a specific model of taxpayer conduct and obtain an answer about its tax consequences.

Therefore, the first step is to determine:

• the specific transaction the company carries out or plans to carry out;

• the parties involved in the transaction;

• the status of those parties;

• the movement of funds, goods, services, or other assets involved;

• the specific legal uncertainty that has arisen;

• the provision or combination of provisions that must be applied.

A specific question can then be formulated.

For example, instead of asking generally, “Is the transaction subject to VAT?” it is better to formulate the question so that it is clear what specific transaction the taxpayer carries out, under what conditions, and which particular tax consequence the taxpayer wants clarified.

The request should not become an attempt to obtain advance confirmation from the State Tax Service of a legal position already prepared by the taxpayer. Its purpose is to obtain the controlling authority’s practical conclusion on how the relevant provisions apply to clearly defined factual circumstances.

Of course, formulating such a question correctly requires knowledge of the law and experience communicating with the tax authorities. This is why our law firm can act as an intermediary in such situations. What matters is not simply receiving an answer from the tax authority, but receiving a useful and properly framed answer that can later be relied on in the interests of your business.

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What Information and Circumstances Should Be Included in the Request?

The mandatory details of the request are set out in paragraph 52.1 of the Tax Code. These elements must be included so that the tax authority has no basis to refuse to provide the consultation.

For a legal entity, the request must include, among other things:

• the entity’s name;

• its tax address;

• its EDRPOU code;

• a contact number and email address, if available;

• an explanation of the practical need for the consultation, including the relevant factual circumstances;

• a signature—handwritten for a paper request or the appropriate electronic signature for an electronic document;

• the date of the request.

If the request does not meet the requirements of paragraph 52.1 of the Tax Code, an individual tax consultation is not provided. In that case, the taxpayer receives a response under the legislation governing citizens’ appeals.

However, merely meeting the formal requirements is not enough. For the consultation to be useful later, the description of the factual circumstances is critical.

The request should, for example, specify:

1. the nature of the transaction;

2. the subject matter and material terms of the agreement;

3. the status of the counterparties;

4. the tax residency of the parties;

5. the payment procedure;

6. the time at which title passes;

7. the place where services are provided;

8. whether the parties are related and any other facts that may affect the tax outcome.

The request should describe the model that the business actually uses or plans to use. If a material circumstance is omitted from the request and the actual situation during an audit differs from the situation for which the consultation was issued, relying on that consultation may lose much of its practical value.

An electronic request may be submitted through the private section of the Electronic Taxpayer Cabinet. In 2026, a separate “Individual Tax Consultations” menu is available for this purpose. The State Tax Service also allows the relevant request to be submitted through the “Correspondence with the State Tax Service” function.

If we prepare the request, we handle the full drafting process and assist with submission: during a Zoom call, we show you step by step where to go, what to select, and how to properly submit the request through the Electronic Taxpayer Cabinet.

What Effect Does an Individual Tax Consultation Have During a Tax Audit?

An individual tax consultation helps a business formally document the tax authority’s official position on a specific transaction in advance.

If a taxpayer acted in accordance with an individual tax consultation issued specifically to that taxpayer in paper or electronic form and registered in the Unified Register of Individual Tax Consultations, this may provide grounds for exemption from financial liability and, in cases prescribed by the Tax Code, for non-accrual or cancellation of late-payment interest.

For example, a company obtained an individual tax consultation on the taxation of a particular transaction and acted in accordance with it. During an audit, the State Tax Service may reach a different conclusion regarding the amount of tax due, but when penalties are considered, the fact that the taxpayer acted in accordance with an official consultation will be taken into account.

Thus, an individual tax consultation does not guarantee that no additional tax will be assessed, but it gives the business additional protection in the event of an audit or dispute.

It is important that the actual circumstances of the transaction match those described in the request for the individual tax consultation.

Related: Donation of Real Estate by an LLC to a Nonprofit Organization: Taxes and Risks

What Are the Limitations of an Individual Tax Consultation?

The first and most important limitation is its individual nature.

Under paragraph 52.2 of the Tax Code, an individual tax consultation may be used only by the taxpayer to whom it was issued. A consultation obtained by another company, even for an almost identical transaction, may be useful for understanding the State Tax Service’s approach, but it does not give another taxpayer the same individualized legal protection.

The second limitation concerns the factual circumstances. The consultation is issued based on the facts described by the taxpayer in the request. Therefore, a material change in the structure of the transaction, the status of the parties, the contractual terms, or other circumstances may mean that the earlier consultation does not cover the new situation.

The third limitation concerns duration and the applicable legal framework. According to the official position of the State Tax Service, an individual tax consultation applies to the specific taxpayer from the date it is issued until it is amended or canceled. If the consultation conflicts with a general tax consultation, the provisions of the general tax consultation take precedence. In addition, if the legislation concerning which the consultation was issued changes, the continued applicability of the consultation must be reassessed.

Finally, an individual tax consultation does not replace proper documentary support for a transaction. A consultation will not cure a situation where the transaction actually carried out differs from the one described by the taxpayer, or where the documents needed to substantiate the relevant tax consequences are missing. In such cases, the tax consequences of the particular transaction should be assessed separately; if needed, we can conduct the relevant audit and provide tax advice.

What Should You Do If the State Tax Service’s Answer Is Unclear or Does Not Resolve the Issue?

In practice, an individual tax consultation may devote substantial space to quoting the Tax Code without providing a clear answer on how the taxpayer should act.

In that situation, the first step is to check whether the consultation meets the requirements of paragraph 52.3 of the Tax Code. The law requires a written or electronic individual tax consultation to include not only a description of the question and the relevant legal provisions, but also the reasoning for applying them and a conclusion on the practical use of those provisions.

Several options are then possible.

If the problem arose because the initial request was not specific enough, a new request may be prepared with more precise factual circumstances and a question framed around a specific practical situation. At the same time, paragraph 52.5 of the Tax Code allows the authority to refuse to enter information about a consultation in the Register if the same taxpayer has already received an analogous individual tax consultation on the same issues. Therefore, simply repeating the previous request will not always solve the problem.

If the individual tax consultation contradicts the applicable rules or the substance of the relevant tax or levy, the taxpayer may challenge it in court as an individual legal act.

If a court cancels the individual tax consultation, the controlling authority must issue a new consultation taking the court’s conclusions into account. The deadline is 30 calendar days from the date the relevant court decision becomes legally effective.

Accordingly, an unfavorable, formalistic, or unclear response from the State Tax Service is not necessarily the end of the matter. It is important to identify the reason for the response: deficiencies in the request itself, an incomplete description of the circumstances, or incorrect application of the law by the controlling authority.

How We Help Obtain an Individual Tax Consultation

Obtaining an individual tax consultation is not simply a matter of drafting a letter to the tax authority. Most of the work takes place before submission: the tax risk must be identified correctly, the legislation and current State Tax Service approaches must be reviewed, the actual transaction model must be described, and the question must be framed so that the answer has practical value for the business.

As part of our individual tax consultation service, we can:

• analyze the planned or ongoing business transaction and identify tax risks;
• review the legislation, current individual tax consultations, and positions of the controlling authorities on the relevant issue;
• determine whether obtaining an individual tax consultation is appropriate in the specific situation;
• prepare the factual and legal sections of the request;
• draft the question so that it concerns the practical application of specific legal provisions;
• assist with submission of the request and receipt of the individual tax consultation;
• analyze the State Tax Service’s response and determine whether it provides the necessary legal certainty;
• if necessary, prepare a further legal position, including in relation to challenging the individual tax consultation.

We can do more than simply obtain a document from the State Tax Service. We can identify and formally document the tax authority’s official position on your business’s specific situation in advance. You can then take that position into account before a dispute arises or a tax audit begins.

Do you need help obtaining an individual tax consultation? Contact us. We will make sure the consultation is genuinely useful for your business.

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