How to confirm the origin of goods and prepare records for inspection

How to Confirm the Origin of Goods: Source Documents, Inventory Records and Inspection Readiness

An entrepreneur must be able to trace each batch of goods: from a specific supplier and the document confirming receipt — through recording the goods in inventory, transfers between warehouses or stores and subsequent sale. This requires properly prepared source documents, entries in accounting or inventory records and, when required by law, the Sole Proprietorship Inventory Record Form. An entry in inventory management software helps organise information but does not replace the supplier’s document.

Sole Proprietorships that are single tax payers and are not registered as VAT payers are exempt from the special inventory record requirement under the ECR Law, except for sellers of technically complex household goods, medicines, medical devices, jewellery and household products made of precious metals and stones. For other entrepreneurs, the sale of unrecorded goods or the absence of documents at the place of sale may result in a financial penalty equal to the retail value of such goods, but not less than ten non-taxable minimum incomes of citizens.

What Confirmation of the Origin of Goods Means

In the context of inventory and tax records, the «origin of goods» means documentary confirmation of:

• who supplied the goods;

• the legal basis on which they were received;

• when the transaction took place;

• which goods were received;

• the quantity received;

• the value of the goods;

• which warehouse, store or other business location received the goods;

• how the goods were transferred and removed from the records.

For Sole Proprietorships required to maintain inventory records, the documents confirming the records and origin of goods include both the Inventory Record Form and source documents. Procedure No. 496 includes delivery notes, transport documents, customs declarations, purchase certificates, fiscal and sales receipts and other documents that make it possible to identify the supplier, recipient, transaction date, product name, quantity and value.

This should not be confused with a certificate of country of origin. Certificates of origin are used in cases provided for by customs, foreign trade or special legislation. In ordinary retail trade, the entrepreneur’s primary task is to confirm the lawful acquisition and proper recording of the goods.

Which Documents Confirm the Purchase of Goods

The required set of documents depends on how the goods were obtained.

A transport document confirms transportation but does not always independently confirm the transfer of ownership of the goods to the buyer. A payment order or bank statement confirms payment but not the actual receipt of the goods. An invoice for payment usually contains a request to pay, but without a document confirming the transfer of the goods, it does not always prove that the delivery was completed.

A VAT invoice serves as a document for VAT purposes. It does not replace a delivery note, certificate or another source document confirming the actual transfer of goods.

Mandatory Details of a Source Document

A source document is the basis for recording a business transaction in accounting records. It may be prepared in paper or electronic form and must contain:

• the name of the document;

• the date of preparation;

• the name of the company on whose behalf the document was prepared;

• the nature and scope of the business transaction;

• the unit of measurement;

• the positions and surnames of the persons responsible for the transaction and the accuracy of its documentation;

• a personal signature or other information that makes it possible to identify the person who participated in the transaction.

The document number, seal, reference to a contract, place of preparation, payment term, product code, barcode, serial number or batch number may be included as additional details. The law does not define the document number as a universally mandatory detail of every source document, but including it significantly simplifies accounting, document searches and transaction reconciliation.

The requirements for Sole Proprietorship inventory records are more specific: documents must make it possible to identify the supplier and recipient and must contain the transaction date, product name, quantity and value. Therefore, a delivery note without counterparty details, quantity or value creates a significant risk during an inspection.

A minor error should not automatically deprive a document of legal validity if it does not prevent the identification of the parties, date, nature and scope of the transaction. However, the absence of essential information about the supplier, goods or business transaction is not considered a minor defect.

Who Is Required to Maintain Inventory Records

The exemption of certain Sole Proprietorships from special inventory records under the ECR Law does not mean that goods of unknown origin may be sold. Documents may be required to confirm expenses, product compliance and safety, warranty obligations, protection against claims from rights holders, customs or law enforcement inspections and the resolution of disputes with suppliers or customers.

How to Maintain the Sole Proprietorship Inventory Record Form

A Sole Proprietorship subject to Procedure No. 496 must continuously enter information about the receipt and disposal of goods in the Inventory Record Form. Source documents are an integral part of these records.

Main rules:

• the receipt of goods must be recorded before their sale begins;

• entries must be made in chronological order;

• the Form may be maintained on paper or electronically;

• separate records must be maintained for each individual place of sale;

• transfers between stores, warehouses or other business locations must be documented using an internal transfer document;

• if inventory already exists on the date when the record-keeping obligation arises, the first entry must be based on a self-prepared inventory description;

• corrections must be made by cancelling the incorrect entry and creating a new one rather than silently deleting information;

• the electronic Form must be suitable for viewing and copying during an inspection.

The sale of goods is prohibited if the place of sale does not have a source document, an entry concerning it in the Inventory Record Form or both the document and the entry are absent. The Form and source documents must be retained at the place of sale until the last unit of goods specified in the relevant document has been disposed of. Documents must be grouped monthly in chronological order.

If the original document is temporarily unavailable in the store, a copy may be provided during the inspection and the original must be presented before the inspection is completed if the authorised official requests it. The employee conducting sales must have access to paper documents or be able to open, display and copy the electronic Form and documents.

Goods in Several Stores or Different Warehouses

Keeping a single delivery note at the head office is not always sufficient. For a Sole Proprietorship operating at several places of sale, Procedure No. 496 requires records to be maintained separately for each location.

A reliable documentary chain should be organised as follows:

1. the goods are received from the supplier at the central warehouse;

2. the receipt is entered into the records based on the delivery note;

3. the transfer of part of the goods to a store is documented using an internal delivery note;

4. the receipt of the goods is recorded at the store;

5. during an inspection, the actual stock can be reconciled with the supplier’s documents and internal transfer documents.

Transporting goods between the entrepreneur’s own locations without a document creates a break in the documentary chain: the supplier’s delivery note shows receipt at one location, while the goods are physically held at another.

Online Stores, Delivery and Dropshipping

Selling through a website, social media, marketplace or delivery service does not remove the requirements concerning the origin and recording of goods.

An online store should retain:

• documents received from the supplier;

• the customer’s order;

• payment documents;

• a delivery or settlement document;

• the carrier’s consignment note;

• documents concerning a return or refusal of a parcel;

• marketplace or payment service reports if they participate in the settlements.

In dropshipping, when the supplier sends the goods directly to the customer, the documents must connect the supplier, seller, customer, specific goods, quantity, value and delivery. A carrier’s express consignment note alone, without a document establishing the legal basis for obtaining or selling the goods, does not create a complete chain of evidence.

ECR/pECR and Source Documents — Different Parts of the Records

The supplier’s source document confirms the receipt of goods. An ECR or pECR fiscal receipt confirms the settlement with the customer. One document does not replace the other.

During a settlement transaction, the seller must:

• process the full transaction amount through a registered ECR or pECR if its use is required by law;

• generate a paper or electronic settlement document;

• provide it to the customer;

• ensure that the product name, quantity and price correspond to the goods actually sold.

A fiscal receipt must contain the mandatory details established by Regulation No. 13. The absence of even one mandatory detail may be grounds for refusing to recognise the document as a settlement document. At the same time, an inaccuracy in the product name that does not distort the information about the transaction should not automatically deprive the receipt of its status as a settlement document.

For excisable goods, the ECR or pECR must be programmed with the product subcategory code under the Ukrainian Classification of Goods for Foreign Economic Activity, the product name, price and quantity. In the retail sale of alcoholic beverages, where required by law, the receipt must include the numerical value of the excise tax stamp barcode.

A delivery note does not replace a licence, state registration, special labelling, declaration of conformity or another authorisation document if such a document is required by law for a specific product. At the same time, the absence of a general «licence confirming the origin of goods» cannot be used as grounds for requiring a seller to provide a permit that is not prescribed by the relevant legislation.

Electronic Documents and Scanned Copies

Source documents may be created electronically. A document automatically generated by software may be used for accounting purposes if it contains the mandatory details and bears an electronic signature or seal in accordance with the law.

A scan or photograph of a paper delivery note is an electronic copy but does not automatically become an electronic original. Therefore, a reliable approach involves retaining:

• the signed paper original;

• or an electronic original bearing a proper electronic signature;

• a backup copy of electronic documents;

• the ability to quickly locate, open, display and provide the document to the regulatory authority.

A company that stores source documents electronically must produce paper copies at the request of authorised authorities. It must also protect records against concealed or unauthorised amendments.

Tax Significance of Documents

For tax accounting purposes, income, expenses and other indicators are determined based on source documents, accounting registers, financial statements and other information provided for by law.

For a Sole Proprietorship under the general taxation system, the documented purchase value of acquired goods may be included in expenses under Article 177 of the Tax Code. The absence of documents creates a risk that the purchase value will not be recognised as an expense.

For a VAT payer, a goods delivery note and a VAT invoice perform different functions:

• the source document confirms the nature of the business transaction;

• a registered VAT invoice is one of the documents required to claim a VAT credit;

• the registration of a VAT invoice alone does not remove the need to confirm the actual receipt of the goods.

How Long Documents Must Be Retained

The minimum retention period depends on the entrepreneur’s status and the purpose of the document.

The period is generally calculated from the date on which the tax return for which the documents were used was submitted or from the deadline for its submission. The running of the period may be extended or suspended in cases provided for by the Tax Code.

For a Sole Proprietorship maintaining inventory records under Procedure No. 496, an additional requirement applies: the Form and source documents must remain at the place of sale until the last unit of goods covered by the relevant delivery note has been disposed of. If the goods are sold over a period longer than the general tax document retention period, the document cannot be removed from the current inventory records until the sale of that batch has been completed.

Documents related to an unfinished inspection, administrative or judicial appeal, unperformed contract, warranty claim or dispute with a counterparty should not be destroyed.

What to Do If There Is No Document for the Goods

The sale of goods without a document should not continue if the entrepreneur is required to maintain inventory records.

Recommended sequence of actions:

1. Separate the goods from the stock available for sale.

2. Identify the actual supplier and the date of receipt.

3. Request a duplicate paper document or a proper electronic original.

4. Reconcile the document with the bank payment, correspondence, order and delivery information.

5. Record the receipt of the goods before resuming their sale.

6. If the purchase cannot be confirmed — document the return to the owner, write-off or another lawful disposal depending on the actual circumstances.

An entrepreneur must not independently prepare a delivery note on behalf of the supplier, change the transaction date or create a fictitious backdated document. An internal statement or inventory certificate may record the existence of goods but does not always confirm their purchase from a specific supplier.

Preparing for an Inspection

Before the start of an actual inspection, a business entity subject to paragraph 12 of Article 3 of the ECR Law must provide documents confirming the recording and origin of goods at the place of sale. These may include documents concerning the receipt of goods, inventory counts and internal transfers.

It is advisable to check regularly:

• whether there is a source document for each actual batch of goods;

• whether product names, item numbers, quantities and units of measurement match;

• whether the document has been entered into the accounting and inventory records;

• whether transfers between business locations have been documented;

• whether a document can be quickly found by product, supplier, number and date;

• whether the seller has access to the documents;

• whether the actual stock corresponds to the software records;

• whether an inventory count has been conducted in cases required by law and the accounting policy;

• whether the documents are protected against loss or unauthorised editing.

Liability for Violations

Unrecorded Goods or Failure to Provide Documents

A financial penalty applies for the sale of goods that have not been recorded in accordance with the established procedure or for failure to provide documents confirming the recording of goods at the place of sale during an inspection:

the value of the relevant goods at retail prices, but not less than ten non-taxable minimum incomes of citizens.

This penalty does not apply to Sole Proprietorships that are single tax payers and are not VAT payers, except for sellers of technically complex household goods, medicines, medical devices and products made of precious metals and stones as defined by law.

Failure to Provide Documents During Tax Control

Failure to provide regulatory authorities with original documents or copies in cases provided for by the Tax Code results in a fine of:

• 1,020 UAH — for the first violation;

• 2,040 UAH — for a repeated similar violation within one year.

Violation of ECR/pECR Rules

For failing to process a settlement through an ECR/pECR, processing it for an incomplete amount or failing to issue a proper settlement document, the Law provides for financial penalties of:

• 100% of the transaction amount — for the first violation;

• 150% of the transaction amount — for each subsequent violation.

For licensed or specially regulated goods, additional penalties under sector-specific legislation may apply, including penalties for the absence of a licence or violations of labelling, storage or sale requirements. The grounds for suspending or revoking a licence are determined separately for each type of activity; the existence of a source delivery note alone does not remove these requirements.

How to Organise a Reliable Internal Process

A consistent procedure should be used for every delivery:

1. Check the supplier’s details and status.

2. Agree on the goods, price, quantity and delivery method.

3. Accept goods only together with a source document or a proper electronic original.

4. Reconcile the actual goods with the document.

5. Record discrepancies using a certificate or claim submitted to the supplier.

6. Record the goods in inventory before beginning their sale.

7. Link the goods to a specific delivery note or delivery batch.

8. Document every internal transfer, return and write-off.

9. Process sales through an ECR/pECR when required.

10. Retain the source document, accounting records, payment documents and delivery documents as a single set.

11. Restrict employees’ rights to change the purchase price, supplier or contents of a delivery note.

12. Regularly create backup copies of the electronic database and documents.

How Confirmation of the Origin of Goods Is Implemented in Torgsoft

In Torgsoft, goods are recorded through the «Goods Receipt» document. It allows you to specify the supplier, company, currency, date, supplier’s document number, warehouse or store that received the goods, as well as the contents of the delivery note and purchase prices. The supplier’s delivery note number is retained for subsequent searches and document reconciliation.

In the «Incoming Delivery Note Register», documents can be filtered by period, supplier, recipient, currency, company, status and payment method. For the selected delivery note, the software displays the goods included in it. A separate deliveries directory makes it possible to create batches and link new or previously created incoming delivery notes to them. This helps trace which delivery the goods came from and analyse the corresponding documents.

These records make it possible to quickly find the supplier, receipt number and date, purchase value, delivery contents, batch and subsequent movement of the goods. At the same time, an entry in Torgsoft is a tool for organising information and maintaining internal control. A properly prepared paper or electronic source document remains the legally significant confirmation of purchase. An automatically generated electronic document acquires the status of a source document if it contains the mandatory details and an electronic signature or seal when required by law.

Example from Case Law

The Commercial Cassation Court within the Supreme Court noted that the fact of delivery may be confirmed not only by source documents but also by a combination of other evidence that a business transaction actually took place. For a business, this means that payment documents, correspondence, orders, transport documents, warehouse records and evidence of the subsequent movement of goods should be retained together with the delivery note. At the same time, this approach does not remove the obligation to prepare source documents when it is expressly required by law.

Official Sources

1. Law of Ukraine «On Accounting and Financial Reporting in Ukraine» dated 16 July 1999 No. 996-XIV
   Key provisions: Article 8 — organisation and retention of accounting records; Article 9 — source documents, their mandatory details, electronic form and corrections.
   https://zakon.rada.gov.ua/laws/show/996-14

2. Tax Code of Ukraine dated 2 December 2010 No. 2755-VI
   Key provisions: Article 44 — records and document retention periods; Article 85 — documents during inspections; Article 121 — liability for failure to provide documents; Article 177 — expenses of Sole Proprietorships under the general taxation system.
   https://zakon.rada.gov.ua/laws/show/2755-17

3. Law of Ukraine «On the Use of Electronic Cash Registers in Trade, Public Catering and Services» dated 6 July 1995 No. 265/95-VR
   Key provisions: Article 3, paragraphs 1, 2, 11, 12 and 15 — ECR/pECR, settlement documents and inventory records; Article 17 — penalties for violations concerning settlement transactions; Article 20 — liability for unrecorded goods and the absence of documents.
   https://zakon.rada.gov.ua/laws/show/265/95-%D0%B2%D1%80

4. Order of the Ministry of Finance of Ukraine dated 3 September 2021 No. 496 «On Approval of the Procedure for Maintaining Inventory Records by Individual Entrepreneurs, Including Single Tax Payers»
   Key provisions: Section I — documents confirming inventory records and the origin of goods; Section II — the procedure for making entries, separate records for each place of sale, internal transfers, document retention and provision.
   https://zakon.rada.gov.ua/laws/show/z1411-21

5. Order of the Ministry of Finance of Ukraine dated 21 January 2016 No. 13 «On Approval of the Regulation on the Form and Content of Settlement Documents/Electronic Settlement Documents»
   Key provisions: Section I, paragraph 3 — mandatory details of settlement documents; Section II — the form and content of a fiscal cash register receipt.
   https://zakon.rada.gov.ua/laws/show/z0220-16

6. Law of Ukraine «On Electronic Documents and Electronic Document Management» dated 22 May 2003 No. 851-IV
   Key provisions: Articles 5–8 — electronic documents, electronic originals, legal validity and admissibility of electronic documents as evidence.
   https://zakon.rada.gov.ua/laws/show/851-15

7. Official publication of the Supreme Court «The Delivery of Goods May Be Confirmed Not Only by Source Documents but Also by a Combination of Other Evidence That the Business Transaction Took Place»
   https://supreme.court.gov.ua/supreme/pres-centr/news/1965869/