Enforced sale of property against tax debt

We continue to tell you about tax debt. In this article, we will answer your questions:"Can the tax authorities forcibly seize property and sell it to pay off your tax debt?".

Let's not keep the intrigue alive for too long and answer the question - yes, if you have a tax debt and do not pay it off, the tax authorities can forcibly sell your property or withdraw money from your bank account to pay off the debt.

The good news is that no one will start taking away your property as soon as a tax debt appears. Such a procedure can be initiated 30 calendar days after the tax claim is served on the debtor.

Repayment of tax debt with funds from a bank account

Money can be debited from a bank account only by court order. After a positive court decision, the head of the tax authority makes a decision on such a write-off.

The court, not the tax authorities, decides how much money will be written off the account. They can write off all or part of the debt.

After receiving the court decision, the tax authorities draw up a payment order for the forced write-off of funds and indicate the details of the court decision.

Once the bank receives such a payment, they must debit the accounts within the business day. If there is not enough money on the account, the bank will write off the debt during the day using the funds credited to the current account. If the money in the account is only enough to partially pay off the debt, the bank will transfer only part of the money to pay off the tax debt. If there is no money on the account and no receipts during the day, the bank will return the payment to the tax authorities without execution.

If the payment is received by the bank after the end of the business day, the funds will be withdrawn the next day. If the money is not enough to fully repay the debt, the bank will write off the amount that is on the accounts, and if there is no money at all, the payment will be returned to the tax office without execution.

The bank is not obliged to notify the client of the forced debiting of the tax debt from the account unless such a condition is stipulated in the agreement. However, the debtor will most likely learn about such a write-off as he or she will receive a court decision.

Repayment of tax debt in cash

Repayment of tax debt in cash is also possible. To do this, the tax authorities must obtain a court decision and then the head of the tax service will issue a corresponding decision to withdraw.

The tax authorities can seize money from the company's cash register, from cash registers and other places where cash is kept. If the amount of cash on hand is greater than the tax debt, the amount of the tax debt will be seized.

If foreign currency is kept on hand, it is also subject to withdrawal. It is deposited together with the national currency through the bank's cash desks to the appropriate budget account. Before being deposited, it is sold at the current exchange rate.

After the cash is seized, the tax authorities draw up a special form of report.

If a business entity has a tax debt of more than UAH 5 million, then a court decision is not required to seize the debtor's cash or non-cash funds to repay the tax debt. In this case, the decision of the head of the tax office will be sufficient.

Realization of property against tax debt

Before seizing property, the tax authorities should try to seize funds to pay off the tax debt.

Just like with cash, to seize property, the tax authorities must first obtain a court decision. If the court issues a positive decision, then the debtor's property can be seized and sold.

Not all property is subject to seizure (more on tax lien property in the next article). Depending on the type of property, it will be sold in different ways:

• property that can be grouped and standardized is sold at stock exchanges;
• securities are sold on stock exchanges;
• movable and immovable property is sold at targeted auctions;
• if the property is perishable or not enough for public auction, it is sold through retail organizations. Such organizations are selected by the tax authorities on a competitive basis;
• property with restricted circulation, such as narcotics, is sold at closed bidding.

In order to determine the price at which to sell the property, the debtor may independently enter into an agreement with an appraiser to conduct an expert assessment. If such an agreement is not concluded within a month, then the tax authorities will do it.

After the sale of the property, the debtor must sign a sale and purchase agreement with the buyer. If the debtor refuses to sign it, then the head of the tax service will sign the agreement. If the sale was made through a commission, then the commissioner signs the sale and purchase agreement with the buyer.

After signing the contract, the buyer transfers the money to the broker, auctioneer, commission agent or other person from whom he or she purchased the property, and this organization, in turn, transfers the money to the budget account the next day after receiving the funds.

After the money from the sold property is credited to the treasury account, the debtor will receive a notification.

If the amount recovered is more than the tax debt, the difference will be transferred to the debtor's account. All costs associated with the sale of the property are borne by the debtor.

If the debtor pays off the tax debt before the sale and purchase agreement is concluded with the buyer, then his property will not be sold.

In the next article, we will talk about tax liens and the seizure of property and funds due to tax debt.