Date of publication: 5 November 2026
Source: Yurydychna Praktyka
In 2026, tax audits remain a major source of financial and legal risk for domestic and international businesses in Ukraine. The specifics of tax control during martial law, the risk-oriented approach of the State Tax Service of Ukraine (STS), and heightened scrutiny of specific business transactions require companies to undertake thorough audit preparations.
Tax reassessments can cause substantial financial losses; however, the tax authorities’ findings are not always legally grounded. The practice of Ilyashev & Partners Law Firm confirms that defending business interests effectively depends on timely tax risk assessments, a robust evidence base, and a well-chosen strategy for challenging audit results.
Tax Audits During Martial Law: What Has Changed in 2026?
In 2026, Ukraine resumed virtually all types of tax audits. At the same time, certain restrictions remain in effect, particularly those related to audit safety and the regulatory specifics of martial law.
- Statutes of Limitation.
The general statutory period for tax liability assessments is 1,095 days, extending to 2,555 days for specific transactions, such as transfer pricing matters (Article 102 of the Tax Code of Ukraine). However, due to the suspension and subsequent resumption of limitation periods during the COVID-19 quarantine and martial law, tax authorities may audit significantly older tax periods.
Statutory periods must be calculated individually, taking into account the type of audit, the relevant tax period, and statutory exceptions.
- Risk-Based Selection of Taxpayers for Scheduled Audits and the Increased Use of STS Analytical Tools to Evaluate Business Models.
Tax inspectors analyze financial metrics, profitability, transactional structures, counterparty relationships, and economic rationale. This increases the risk of tax claims regarding transactions whose commercial rationale is insufficiently documented.
Businesses should verify not only the legality of an audit’s assignment and the accuracy of its defined timeframes, but also their readiness to substantiate their business model and the economic substance of key transactions. At the same time, analytical findings by the STS do not in themselves constitute proof of tax violations.
Key Tax Risks for Ukrainian and International Businesses
Tax control focuses not only on the accuracy of tax calculations, but also on the economic substance of business transactions. Key areas of tax claims include:
- Tax Relief and Special Martial Law Rules.
Compliance with eligibility requirements for tax exemptions, relief, and special rules enacted under martial law warrants careful attention. Potential disputes may cover compliance with application conditions, documentary proof of entitlement, and justifications for the inability to perform tax duties on time.
- Cross-Border Transactions and Transfer Pricing.
Audits of payments to non-residents frequently raise disputes regarding double tax treaty relief, ultimate beneficial ownership status, and the actual substance of services rendered. In transfer pricing, key considerations remain proving arm’s-length pricing and matching actual conduct to contractual terms.
Furthermore, businesses often underestimate risks in transactions that are non-controlled for transfer pricing purposes. The absence of reporting obligations for such transactions does not prevent the application of specific tax adjustments that increase taxable profit.
- Criminal Law Risk Assessments.
Cross-border transactions and treaty-based tax relief can trigger criminal risk assessments for potential tax evasion by the Economic Security Bureau of Ukraine (ESBU). Consequently, even without active STS audit measures, a company is not immune to law enforcement scrutiny. Nevertheless, tax risks or disputes over tax relief do not per se evidence a criminal offense.
- Corporate Income Tax, VAT, and Customs Matters.
Tax claims may address the reality of business transactions, expense documentation, input VAT credits, and business purpose considerations where prescribed by law. Issues also arise around maintaining input VAT credits for property destroyed by Russian military aggression, alongside customs valuation accuracy on imports and its impact on tax liabilities.
The primary risk for businesses is an insufficiency of evidence supporting entitlement to special tax regimes or the actual substance of transactions. Companies must establish an evidence base in advance to defend their position during audits and potential disputes with the STS.
How to Challenge Tax Audit Results and Additional Tax Assessments
Effective business defense begins during the tax audit itself. In practice, companies often seek legal assistance only after an audit is complete, when the tax authority’s stance is essentially fixed, and opportunities to influence findings are limited. Rather than remaining passive, businesses should maintain professional dialogue with inspectors, promptly clarify potential claims, and submit supporting evidence to the audit file. Understanding the logic behind tax claims enables the timely development of a reasoned defense strategy.
Objections to the Tax Audit Report.
This is a critical defense stage and, in certain cases, the last practical opportunity to add vital evidence to the audit file before a tax assessment notice (TAN) is issued. Taxpayers may submit written objections and supporting documentation within 10 business days. However, submitting objections requires a calibrated strategy: additional explanations or documents might not only rebut claims, but could also expose new risks or reinforce the authority’s evidence. Before submission, companies should carefully assess each document’s content, relevance, legal implications, and actual benefit to the taxpayer.
Administrative Appeals against Tax Assessment Notices (TANs).
As a rule, administrative appeals to the STS of Ukraine must be lodged within 10 business days of receiving a TAN. Timely appeals suspend the execution of the monetary obligations specified in the notice for the duration of administrative review, preventing the accrual of tax debt (which, even if formal, can critically impact certain operations).
Administrative appeals should be deployed strategically by evaluating the potential for canceling assessments, evidence sufficiency, risks of subsequent litigation, and the time required to prepare for court.
Court Appeals Against STS Decisions: What Do Courts Consider?
Litigating tax assessment notices requires not only rebutting STS findings, but also properly building a legal defense. Administrative appeals are not a mandatory prerequisite for court filings, though choosing to appeal administratively affects statutory court deadlines.
Procedural Violations.
Unlawful audit assignments, exceeding the scope of an audit, or violating statutory limits can serve as grounds to invalidate tax assessment notices. However, the Supreme Court evaluates the nature of procedural defects and their actual impact on the legality of the adopted decision. Consequently, formal procedural flaws do not automatically lead to TAN invalidation.
Burden of Proof.
In disputes over the legality of STS decisions, the burden of proof rests on the tax authority. However, this does not relieve businesses of the obligation to substantiate the facts underlying their claims. Courts evaluate not only primary accounting records, but also actual transactional performance, economic substance, and the entirety of presented evidence.
In its practice, Ilyashev & Partners Law Firm operates on the principle that court disputes effectively begin long before a lawsuit is filed. Documents, explanations, and legal arguments formulated during audits and administrative appeals can determine the ultimate prospects of judicial defense. Evidence strategies must therefore be built with potential litigation in mind from the earliest stages of tax control.
Tax Disputes in Ukraine: Legal Recommendations
In 2026, effective protection against tax assessments demands a proactive approach. Businesses should evaluate the tax risks of key transactions in advance, verify documentary support, and prepare arguments substantiating economic substance.
During a tax audit, it is essential to:
- understand the underlying logic of potential STS claims;
- maintain structured communication with inspectors;
- carefully curate the evidence base.
Details are decisive: inspector actions, specific transactional features, document drafting, performance circumstances, and even written explanations can significantly influence dispute outcomes. These nuances must be factored into tailored defense strategies, as generic arguments rarely succeed.
Ilyashev & Partners Law Firm advises clients not to delay preparation until a tax assessment notice is issued. Timely risk assessment, attention to detail, and professional legal representation help prevent unsubstantiated tax assessments or substantially strengthen a company’s position in court.
