Tax debt: what it is, when and how it arises

We decided to launch a new series of articles. This time, we're going to look at issues related to tax debt. We will find out what it is, how it arises, what the consequences may be, how to pay it off, and many other issues. Let's start with the basics: what is a tax debt, when and how does it arise?

Tax debt - is the amount of the agreed monetary obligation that the taxpayer failed to pay within the established timeframe, as well as the unpaid penalty accrued in accordance with the Tax Code of Ukraine.

What is the amount of a monetary liability?

This concept includes:

1. Tax liabilities: taxes and duties; the amount specified in the tax bill; funds generated as a result of a tax benefit but used for other purposes.
2. Other obligations controlled by the tax authorities, such as state dividends (unified social tax arrears are not included here and are not considered a tax debt).
3. Fines for violations of tax laws, the Law on Cash Registers and the Law on Alcohol, Tobacco and Fuel.
4. Fines and penalties for violations in the field of foreign economic activity.
5. Penalty.

What is an agreed upon commitment?

The key point in determining the tax debt is the agreed monetary obligation. The grounds for reconciliation may be as follows:

1. A tax return or adjustment calculation has been filed - the liability will be considered settled at the time of filing the tax return, and the tax debt will arise from the date following the tax payment deadline.
2. The procedure for administrative appeal of the tax authority's decision to impose additional taxes has ended - this deadline is 10 business days after the disputed decision is received. This means that on the 11th day after receiving the decision on the audit, the obligation will become agreed upon, and if you appeal it, it will become agreed upon after receiving the decision on your appeal.
3. A court decision on a disputed tax notice has entered into force - if, after receiving a tax notice, you have time to file a lawsuit to appeal the decision within 10 business days, then the obligation will be considered settled upon receipt of the court decision, if you do not have time to file a lawsuit within the allotted time, then on the 11th day after receiving the tax notice, the obligations under it will be considered settled.

When does tax debt come into existence?

Tax debt arises the day after the deadline for payment of tax liabilities.

The terms of payment of tax liabilities are as follows:

• for self-declared tax liabilities - within 10 calendar days after filing the declaration;
• for the payment of personal income tax and social security by tax agents - at the time of payment of income;
• for liabilities accrued by tax inspectors - within 10 business days following the day of receipt of the tax notice.

If the deadline for the payment of tax liabilities falls on a weekend or a holiday, such deadline is postponed to the next business banking day following such weekend or holiday.

What are the consequences of having a tax debt?

If you have a tax debt, you may be in danger:

• penalty for non-payment of tax liabilities and interest;
• the tax authorities may apply a tax lien;
• the tax authorities can seize your property and accounts;
• the tax authorities can forcibly sell your property and recover money from your accounts;
• may cancel the status of a single tax payer or refuse to register as a single tax payer;
• individual entrepreneurs and officials of legal entities may be prohibited from traveling abroad.

If the amount of the tax debt is more than UAH 1020, the taxpayer will receive a tax claim, and if the amount is less, no notifications will be sent.

Tax debt appeal

Different situations may require different procedures for appealing a tax debt. Let's look at the two most common reasons for appeal:

1. Appealing a tax notice-decision: can be appealed administratively or in court. If the tax liability was determined by the taxpayer independently, it cannot be appealed.
2. Appealing a tax claim: can be appealed within 10 days administratively or within 1095 days in court.

When challenging a tax claim, the amount of the liability cannot be disputed, as it is considered agreed upon. However, it is possible to completely cancel penalties for various reasons, for example, if the amounts of fines and penalties were incorrectly determined. Administrative appeals should be filed immediately with the State Tax Service of Ukraine.

In the next article, we will discuss the amount of fines for late payment of taxes.

A tax debt is the amount of an agreed monetary obligation that a taxpayer has not paid within the prescribed period, as well as unpaid penalties accrued in accordance with the Tax Code of Ukraine.