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The tax compromise is a regime of exemption of taxpayers and/or their officials from legal liability, which applies within the statute of limitations (1,095 days) to legal relations that arose prior to April 1, 2014.

As a result of reaching the tax compromise, the taxpayer will pay 5% of the total amount of understated tax liabilities. The other 95% will be deemed settled, with no penalties applied and no interest accrued.

The tax compromise applies only to corporate profit tax and/or value added tax liabilities.

What steps should be taken to initiate the tax compromise procedure?

The taxpayer will have a right to submit adjusting calculations of tax liabilities by or on April 16, 2015. In these calculations, the taxpayer must specify the amount of overstated deductible expenses for CPT purposes and/or overstated VAT credit.

The tax compromise applies to non-agreed tax liabilities specified in tax notifications-decisions that are being challenged through the judicial and/or administrative appeal procedure. In this case, the taxpayer will submit a written application to the controlling authorities for achieving the tax compromise.

What actions may be taken by the controlling authorities after the tax compromise procedure has been initiated by the taxpayer?

  1. The tax authority may accept the understated tax liabilities to which the taxpayer has “confessed,” in which case the amount of the stated liabilities will be deemed agreed: the taxpayer will pay 5% of the tax liabilities to which it has “confessed”;
  2.  The tax authority may initiate an unscheduled documentary audit if the taxpayer submits an adjusting calculation for any non-audited periods. Based on the audit results, the tax authority will:
  3. issue a tax notification-decision if any tax law violations have been identified, other than those specified by the taxpayer in the adjusting calculation. In this case, if the taxpayer admits the new violations revealed by the tax authority, such taxpayer must pay 5% of the total amount of both those unpaid tax liabilities to which it has “confessed” and of those additionally calculated by the tax authority;
  4. draw up a certificate evidencing that there are no violations other than the ones indicated by the taxpayer in its adjusting calculation. The taxpayer then must only pay 5% of the amount of understated tax liabilities to which it has “confessed”.

Are there any “hidden pitfalls” in the tax compromise procedure?


  1. The controlling authorities may, without any solid grounds, initiate an unscheduled tax audit of the taxpayer who has submitted a adjusting calculation.
  2. If the taxpayer objects to the new tax liabilities additionally calculated during its audit by the tax authority or challenges them before a court or a superior tax authority, the tax compromise does not apply, and the taxpayer (should the decision on such challenged tax liabilities be issued not in its favor) will pay not 5%, but all 100% of the total amount of both those unpaid tax liabilities to which it has “confessed” and of those additionally calculated by the tax authority.
  3. The tax compromise exempts officers from liability under Article 212 of the Criminal Code of Ukraine, but does not guarantee their exemption from liability for crimes envisaged by other articles of the Criminal Code of Ukraine, such as, for instance, Articles 205 and 364 of the Criminal Code of Ukraine: sham business, abuse of authority or office, etc.
  4. The tax compromise does not affect the amount of tax liabilities of the taxpayer’s counterparties. However, there are no guarantees that the tax authorities will not use the information obtained from the taxpayers who have “confessed” against their counterparties.