Audit of personal accounts of IE: what information about your accounts can a bank provide to the State Fiscal Service?

The tax authorities have been receiving information from the banks about the accounts of individual entrepreneurs, which were opened for their personal, non-business purposes (card accounts), for more than a year. 

However, when providing business registration services for individual entrepreneurs, we have realized that many of the future entrepreneurs have no idea that the State Fiscal Service of Ukraine can get information on their accounts opened both for business and personal purposes.

Thus, from 2018 to 2019 alone, the regulatory authorities of the State Tax Inspection imposed additional penalties of at least tens of millions of hryvnias, using also the data on personal (card) accounts of entrepreneurs.

Therefore, we decided to elaborate on the following issues:

• Are there any legal grounds for the State Fiscal Service to receive information from banks about personal accounts of entrepreneurs?
• What information on personal accounts of entrepreneurs does the bank have the right to provide to the State Fiscal Service?
• Isn’t the information on personal accounts protected by banking secrecy?
• How can an individual entrepreneur mitigate the risk of penalties based on the information on personal accounts?

Our service: Appealing Against Tax Violation Notification Letters In Ukraine

The ability of the State Tax Inspection to lawfully obtain information from banks about individual entrepreneurs

The Tax Code of Ukraine stipulates that: 

• Banks are obliged to send a notice of opening of the taxpayer’s account to the supervisory authority, where the taxpayer is registered, on the day the account is opened. The bank shall be liable for failure to provide such information as provided by law. 

Pursuant to the Law of Ukraine, an individual entrepreneur  or a self-employed person shall also inform a bank representative about their business status.

So, the bank is obliged to disclose information to the State Tax Inspection, but only about specific data as provided by law.

What bank account information of private entrepreneurs can be provided to the State Tax Inspection (STI)?

Only information about the fact of opening an account shall be provided to the tax authorities.

This information is not covered by banking secrecy.

If the tax authorities want to know the flow of funds on your personal (card) accounts, they should apply to the court to obtain the Decision on the disclosure of bank secrecy, as far as this type of information is covered by banking secrecy.

Of course, if the court issues the decision, the bank will be obliged to provide all the necessary information to the STI.

How can an individual entrepreneur mitigate the risk of being fined based on information about personal accounts opened?

The only information that an individual entrepreneur has a personal (card) account is not a basis for imposing tax penalties.

However, it may be a reason for the tax authorities to ask you in writing about the purpose of opening and using personal (card) accounts. And if you do not provide an answer to this request in due time, it can result in a tax audit and a tax violation notification letter, in case of detecting any violations of tax laws. 

Therefore, in order to mitigate the risk of penalties, we recommend the following:

• Do not open personal (card) accounts in state-owned banks;
• Open personal (card) accounts first, and then register as an individual entrepreneur;
• Do not open business accounts and personal (card) accounts in the same bank;
• Remove information about personal (card) account numbers from websites and the Internet, if any.

If you have already received a Tax Violation Notification Letter on the accrual of penalties, you need to go through the procedure of both administrative and judicial appeal against the decision of the tax authorities. Our lawyers can provide you with legal support and assistance at any authority.

Note! When appealing the Tax Violation Notification Letter, “take care” of all the assets that you own as an individual entrepreneur, because you, as an individual entrepreneur, cover your obligations with all of your assets.

If you want to get more information on inspections of individual entrepreneurs carried out by state authorities or to use our services to protect your interests, please call us!