How can an individual entrepreneur prepare for an actual inspection?

How to Prepare a Retail Sole Proprietorship for an On-Site Inspection: Inventory Accounting, ECR/PECR, and Product Movement History

For a retail Sole Proprietorship, simply having supplier invoices or showing stock balances in inventory software is not enough. A reliable accounting model requires an uninterrupted documentary trail for every product item: where the product came from, where it was stored, when and to whom it was sold, returned, transferred, or written off, and what the actual stock balance should be on a specific date. Inventory records must correspond with primary documents, ECR/PECR settlement documents, bank receipts, cash records, and tax accounting.

Internal inventory accounting should be distinguished from the statutory Inventory Record Form. A detailed movement history for each product unit is strong evidence of proper accounting, but it does not replace primary invoices, customs declarations, consignment documents, fiscal receipts, or the Inventory Record Form if the Sole Proprietorship is required to maintain it. Selling products whose origin or receipt cannot be confirmed creates a risk of financial penalties and, for excisable goods, a risk of licence termination. (Ukrainian legislation)

What Inventory Accounting Must Confirm

For each product, it is advisable to maintain four interconnected levels of confirmation:

1. Product origin — the supplier, purchase date, product name, quantity, value, and the document on the basis of which the product was received.

2. Movement between storage locations — warehouse, store, retail outlet, pickup point, order assembly location, or dispatch location.

3. Product disposal — sale, return to the supplier, write-off, shortage, destruction, free transfer, or use for the Sole Proprietorship’s own needs.

4. Actual stock balance — the quantity physically available at a specific location that corresponds with the accounting records.

The basic stock balance control formula is:

Opening balance + receipts + customer returns + incoming transfers + recorded surpluses – sales – returns to suppliers – outgoing transfers – write-offs – shortages = balance as of the date.

Every component of this formula must be supported by a separate document or a set of related documents.

Which Sole Proprietorships Must Maintain Inventory Records

Clause 12 of Article 3 of the ECR Law requires businesses to maintain inventory records and sell only products reflected in those records. At the same time, the law expressly excludes Sole Proprietorships that are single-tax payers and are not registered as VAT payers, except for those selling certain specified categories of goods. (Ukrainian legislation)

Exemption from the Inventory Record Form does not mean that goods may be offered for sale without any documents. Primary documents may be required to confirm expenses and the origin of products, as well as compliance with customs, licensing, sanitary, market surveillance, warranty, or consumer protection requirements.

Primary Documents for Receiving Goods

The procedure approved by Order No. 496 of the Ministry of Finance includes the following documents for goods:

• supplier delivery notes and goods invoices;

• consignment notes;

• customs declarations;

• purchase certificates;

• fiscal and sales receipts;

• other documents that make it possible to identify the supplier and recipient, transaction date, product name, quantity, and value. (Ukrainian legislation)

The document must make it possible to clearly match the received goods with the goods actually stored or sold. A general invoice containing wording such as «assorted goods» without item names and quantities does not provide proper identification of inventory.

When receiving goods, check:

• the details of the Sole Proprietorship and the supplier;

• the date and document number;

• the product name, characteristics, item number, or product code;

• the unit of measurement and quantity;

• the price and total value;

• the inclusion of VAT if both parties are VAT payers;

• serial numbers, excise stamps, marking codes, or batch numbers where required;

• whether the actual quantity corresponds with the invoice.

Goods subject to mandatory accounting under Order No. 496 must be entered in the Inventory Record Form on the basis of a primary document before they are offered for sale. (Ukrainian legislation)

Opening Balances

If a Sole Proprietorship begins mandatory inventory accounting and has stock for which there are no current entries in the Form, an opening balance inventory must be prepared. It must contain the product names, quantities, units of measurement, and values.

The inventory does not establish the lawful origin of goods if the relevant category requires manufacturer or importer documents, customs clearance, excise marking, certificates, or other special confirmations. It only records the quantitative and monetary balance as of the date on which accounting begins. (Ukrainian legislation)

Documenting Every Warehouse Transaction

Sale

An internal sale recorded in inventory software and fiscalisation through an ECR/PECR must represent the same business transaction. The item names, quantities, prices, payment method, and amount in the warehouse document must not contradict the fiscal receipt.

Sales processed through an ECR/PECR are not entered as separate rows in the disposal column of the Inventory Record Form for every receipt. However, they must reduce stock balances in the internal system and be supported by fiscal data. Other types of disposal — including returns to suppliers, transfers, write-offs, destruction, or use for the Sole Proprietorship’s own needs — must be documented with the relevant primary documents. (Ukrainian legislation)

Refunding a Customer

When funds are returned to a customer for goods paid for as part of a settlement transaction, a fiscal refund receipt in Form ФКЧ-2 must be generated. At the same time, the product must be returned to the warehouse using a separate warehouse document or recorded as defective if it cannot be resold. (Ukrainian legislation)

For goods with serial numbers, warranties, excise stamps, or other unique identifiers, verify that the returned product is the same product that was sold under the relevant document.

Internal Transfer

Moving goods between a store, warehouse, pickup point, or another storage location is not a sale, but it must be documented. An internal transfer document must contain:

• the date and number;

• the sending location;

• the receiving location;

• the list and quantity of goods;

• the persons who transferred and received the goods.

For a Sole Proprietorship that maintains the Inventory Record Form, accounting is performed separately for each place of sale or business facility. Internal transfer documents must be reflected in the respective forms for both locations. (Ukrainian legislation)

Write-Off

A shortage, expired shelf life, damaged packaging, or loss of marketable appearance does not justify simply deleting a product from the inventory system. A certificate is required that records:

• the reason for the write-off;

• the date;

• the product name and quantity;

• the purchase or other accounting value;

• the persons who established the circumstances;

• what will subsequently happen to the product.

Order No. 496 requires the destruction, loss, and use of goods for the Sole Proprietorship’s own needs to be documented at their purchase value. (Ukrainian legislation)

Inventory Record Form

The Form may be maintained in paper or electronic format. It must contain the Sole Proprietorship details required by Order No. 496, the address of the place of sale or business facility, the details of primary documents, and the amounts of receipts or disposals. Entries are made chronologically on the basis of primary documents. (Ukrainian legislation)

The electronic Form must be available for viewing in a format that reproduces all mandatory details. During an inspection, showing only the total stock balance or an arbitrary report from an inventory system is insufficient if it cannot reproduce the Form prescribed by Order No. 496. (Ukrainian legislation)

The Form and the documents used to make entries in it must be stored at the place of sale until the last unit of the relevant batch is disposed of. Copies may be provided during an inspection, but the originals must be presented within the prescribed period. The sale of goods at a location where the Form or primary documents are unavailable is prohibited. (Ukrainian legislation)

Form No. 496 is a chronological register of primary documents and amounts. It does not replace detailed quantitative inventory accounting for each item number. Therefore, the business owner should also maintain product cards, batches, serial numbers, and stock balance history.

ECR and PECR

A Sole Proprietorship that conducts settlement transactions must process them through a registered ECR or PECR for the full purchase amount and provide the customer with a paper or electronic settlement document. This rule also applies to online orders if the payment method constitutes a settlement transaction. (Ukrainian legislation)

A fiscal receipt must contain the mandatory details, including:

• the name of the business entity and business unit;

• the address where the settlement transaction takes place;

• a product name that makes it possible to identify the product;

• the quantity, price, and value;

• the payment method;

• tax groups and rates where applicable;

• fiscal numbers and a QR code;

• excise stamp details or other special identifiers for goods where required. (Ukrainian legislation)

A daily fiscal report receipt, or Z-report, must be generated for every day on which settlement transactions were conducted. (Ukrainian legislation)

When an ECR/PECR May Not Be Required

First-group single-tax Sole Proprietorships are exempt from using an ECR/PECR. Second- to fourth-group Sole Proprietorships and Sole Proprietorships under the general taxation system must use an ECR/PECR when conducting settlement transactions unless the specific transaction falls under an exception provided by Articles 9 or 10 of the ECR Law or Resolution No. 1336 of the Cabinet of Ministers. (rv.tax.gov.ua)

An ECR is not required for a transaction in which funds are received exclusively as a bank transfer from the buyer’s account to the seller’s account without the use of a payment card, payment service, or another payment instrument that constitutes a settlement transaction. The decisive factor is not how the goods are delivered but how the payment is accepted.

A separate ECR may not be used at a warehouse or storage location where customers neither make payments nor collect paid goods. If payments are accepted, orders are issued with payment made on site, or refunds are processed at that location, it effectively becomes a place of settlement. (Ukrainian legislation)

Reconciling Warehouse Documents with Fiscal Data

For each day or shift, reconcile:

• the total warehouse sales with fiscal receipts;

• cash sales with cash register totals;

• card payments with banking terminal data and bank statements;

• returns in the warehouse system with fiscal refund receipts;

• the quantity of goods sold with the actual reduction in warehouse stock;

• receipts, cancellations, cash deposits, and cash withdrawals with ECR/PECR data;

• non-cash shipments with invoices, bank statements, and delivery notes.

A dangerous situation arises when a receipt has been generated but the product has not been deducted from warehouse stock, or when a warehouse sale exists but there is no fiscal receipt. Such discrepancies make it impossible to reconstruct a reliable stock balance.

Stocktaking

The tax authority has the right to require stocktaking of fixed assets, inventory, funds, and the physical counting of goods. (Ukrainian legislation)

To document stocktaking properly, a retail Sole Proprietorship needs:

1. A decision or order issued by the Sole Proprietorship to conduct stocktaking.

2. A list of locations, product groups, and responsible persons.

3. An inventory sheet containing the physically counted quantities.

4. A reconciliation statement showing the difference between actual and recorded data.

5. Documents recording surpluses.

6. Certificates for writing off shortages, damage, or misgrading.

7. Explanations from responsible employees if significant discrepancies are identified.

Counting should be performed separately for each warehouse, store, and storage location. Goods in transit, held in safekeeping, under repair, reserved, on consignment, or transferred to a courier must be identified separately and supported by documents.

An unjustified refusal to conduct stocktaking in response to a lawful request from the supervisory authority may constitute grounds for the administrative seizure of property under the Tax Code. (Ukrainian legislation)

Accounting for Places of Trade and Storage

A store, warehouse, rented premises, pickup point, office, production location, and other facilities associated with taxation must be reported to the tax authority using Form No. 20-OPP.

A notification of a new facility must be submitted within 10 business days after its registration, creation, opening, or commencement of use. Changes to the address, purpose, status, or other facility details must be reported within the same period. (Ukrainian legislation)

The name and address of the business unit stated on the fiscal receipt must correspond with the documents confirming ownership or the right to use the premises and with the data submitted in Form No. 20-OPP. (Ukrainian legislation)

Warehouse stock balances must be separated by their actual locations. A single virtual warehouse used for several stores makes it difficult to confirm why a specific product is located at the place being inspected.

Employees and Access to the Accounting System

An employee may not begin work until the employment relationship has been formalised and the employment notification has been submitted before the employee starts working. (Ukrainian legislation)

The retail outlet must designate persons who:

• receive and record goods;

• process sales through an ECR/PECR;

• process returns;

• transfer and write off goods;

• conduct stocktaking;

• are responsible for cash and documents.

Each user of the inventory software should have a separate account. A shared password for all employees makes it impossible to establish who changed a document, deleted a sale, recorded a return retrospectively, or adjusted a stock balance.

On-site inspections may cover not only ECR operation and stock balances but also the formalisation of employment relationships. (Ukrainian legislation)

Delivery and Distance Selling

When shipping goods to a customer, the following must be linked:

• the order;

• the reservation or order assembly document;

• the warehouse sale;

• the fiscal receipt if the payment constitutes a settlement transaction;

• the express waybill, consignment note, or another carrier document;

• bank or cash confirmation of payment;

• the return document if the parcel was not collected or the product was returned.

Transferring goods to a courier or carrier should not automatically be treated as the final sale if the customer may refuse delivery under the agreement. The product status — dispatched, in transit, received, or returned — must be traceable.

For cash-on-delivery transactions, it is necessary to determine who accepts the payment from the customer and who is required to fiscalise the settlement. The agreement with the carrier and the actual movement of funds must correspond with the selected model.

Product Marking, Storage, and Information

An inventory record does not replace mandatory product marking. Before goods are sold, the requirements applicable to the relevant category must be checked, including requirements concerning:

• the product name and manufacturer;

• the importer or responsible person in Ukraine;

• composition, characteristics, and method of use;

• the production date, expiry date, or service life;

• warranty terms;

• warnings and safe-use instructions;

• the provision of information in Ukrainian;

• the technical regulation conformity mark;

• serial numbers, batch numbers, or traceability tools;

• excise stamps and electronic identifiers.

Storage conditions must comply with the manufacturer’s information and the special requirements applicable to the relevant product. Damaged, expired, dangerous, or recalled products must be separated from goods intended for sale, and their status must be recorded in inventory accounting.

Licences and Special Product Categories

There is no universal «trade licence» for ordinary retail trade in non-food goods. A licence or another permit is required only for activities and goods expressly specified by law, including alcohol, tobacco products, liquids for electronic cigarettes, fuel, medicines, and other regulated categories.

Alcohol, Tobacco, and Liquids for Electronic Cigarettes

Retail trade in alcoholic beverages, except for statutory exemptions concerning table wines, requires a licence. Separate licences are required for the retail sale of tobacco products and liquids for electronic cigarettes. (sumy.tax.gov.ua)

A separate licence is issued for each retail location. Such a location also includes the address from which goods are dispatched for delivery to the end consumer. The application and licence register specify the ECRs/PECRs used at the relevant location. (zp.tax.gov.ua)

Therefore, the licence of one store may not be used to sell or dispatch excisable goods from another warehouse if that location is not covered by the appropriate licence.

Licensees engaged in the retail sale of excisable goods are subject to requirements concerning the average monthly salary of employees and, for a Sole Proprietorship without employees, monthly taxable income:

• at least two minimum monthly salaries;

• at least one and a half minimum monthly salaries if all retail locations are situated more than 50 kilometres outside regional administrative centres and the city of Kyiv and have retail areas not exceeding 500 square metres.

Failure to comply with the relevant requirement for three full consecutive calendar months constitutes grounds for terminating the licence. (tax.gov.ua)

The discovery at a retail location of unrecorded alcoholic beverages, tobacco products, or liquids for electronic cigarettes in an amount exceeding 0.5 percent of the previous day’s sales volume according to all ECRs/PECRs at that location is one of the statutory grounds for terminating the licence. (dp.tax.gov.ua)

Tax Accounting

Inventory accounting does not replace tax accounting.

A Sole Proprietorship under the general taxation system must reconcile the purchase and sale of goods with income and expense records and primary documents in accordance with Article 177 of the Tax Code.

Single-tax payers maintain income records in accordance with Article 296 of the Tax Code. VAT payers must additionally reconcile product transactions with VAT invoices, data from the Unified Register of VAT Invoices, and VAT returns.

It is also necessary to ensure that:

• sales income is included in tax records in the correct amount and on the correct date;

• a customer refund does not reduce income without proper supporting evidence;

• purchase documents correspond with the goods actually received;

• the Sole Proprietorship’s personal funds and trading revenue are not mixed without explanatory documents;

• bank receipts can be matched with invoices, orders, and sales.

Documents That Must Be Available at the Place of Sale

Depending on the taxation system and product range, the retail outlet should provide access to:

• the Inventory Record Form;

• primary documents for goods or properly prepared copies;

• internal transfer documents;

• invoices for returns to suppliers;

• write-off certificates;

• the latest stocktaking documents;

• ECR/PECR registration documents;

• licences or extracts from licence registers;

• documents for the premises;

• Form No. 20-OPP data;

• employee labour documents;

• documents concerning quality, safety, warranty, or origin if required for the relevant products.

The electronic archive must remain accessible even when the employee who normally maintains the records is absent. Documents should be organised by supplier, date, number, and product batch.

Financial Penalties and Other Consequences

The penalty for unrecorded goods provided by Article 20 of the ECR Law does not apply to Sole Proprietorships that are single-tax payers without VAT, except for sellers of technically complex household goods, medicines, medical devices, and jewellery for which the law establishes mandatory inventory accounting. (Ukrainian legislation)

How Inventory Accounting Is Implemented in Torgsoft

In Torgsoft, receipts, sales, returns, internal transfers, write-offs, and stocktaking are recorded using separate warehouse documents. The «Warehouse» section provides access to warehouse status, product movement, lists of receipts and disposals, and the warehouse document register and journal. The journal makes it possible to view different types of transactions at the same time, including customer returns, write-offs, returns to suppliers, and defective goods, as well as print or export the data.

For a specific product, you can open «Product Movement» or the inventory record card and see which transaction changed the stock balance: receipt, sale, return, or internal transfer. Where required, movement can be viewed across all accounting centres in the retail network from the beginning of record keeping. This makes it possible to match the physical product with the document confirming its receipt and all subsequent transactions.

The software includes a separate «Inventory Record Form» feature where the accounting start date is specified, opening balances are calculated, and entries are generated from warehouse documents. Stocktaking can be performed using a computer, a paper inventory sheet, a data collection terminal, or serial numbers. Reports on shortages, surpluses, and discrepancies are generated from the results.

Recording a transaction in Torgsoft does not replace a properly prepared supplier document, customs declaration, transport document, or fiscal receipt. The actual details of the primary document must be linked to the warehouse document, and the paper or electronic original must be retained for the prescribed period.

Retail Sole Proprietorship Readiness Checklist

Before the retail outlet begins operating, verify that:

• each physical product has been created only once in the inventory system;

• the product name on the inventory card corresponds with the documents and fiscal receipt;

• all receipts have been recorded before sales begin;

• every receipt is supported by a primary document;

• goods are allocated to the actual warehouses and stores;

• all transfers are documented with internal transfer documents;

• sales reduce warehouse stock and correspond with ECR/PECR receipts;

• refunds are documented with fiscal refund receipts;

• write-offs are not performed without certificates;

• there are no negative stock balances without documentary explanation;

• stocktaking has been conducted and its results have been documented;

• Form No. 496 is maintained where mandatory;

• the electronic Form can be displayed and printed;

• documents for goods are available at the place of sale;

• all facilities have been reported using Form No. 20-OPP;

• the address on the receipt corresponds with the actual place of settlement;

• employees have been formally employed before starting work;

• licences correspond with the specific retail locations and ECRs/PECRs;

• excisable goods have the proper stamps and identifiers;

• deliveries are linked with orders, payments, sales, and carrier documents;

• the warehouse, ECR/PECR, bank, cash records, and tax accounting contain no unexplained discrepancies.

Example from Inspection Practice

In May 2026, the tax authority reported an on-site inspection of an online Apple electronics store during which it examined the use of an ECR and documents confirming the origin and accounting of goods. The example demonstrates that listing a product on a website or in inventory software does not replace documents confirming its purchase, receipt, and fiscal sale. (tr.tax.gov.ua)

Official Sources

1. Tax Code of Ukraine dated 02 December 2010, No. 2755-VI — Subclause 20.1.9, Articles 75, 80–82, 85, 94, 177, and 296.

2. Law of Ukraine «On the Use of Settlement Transaction Registrars in Trade, Catering, and Services» dated 06 July 1995, No. 265/95-VR — Articles 3, 5, 9, 10, 15, 17, and 20.

3. Order of the Ministry of Finance of Ukraine dated 03 September 2021, No. 496, «On Approval of the Procedure for Maintaining Inventory Records by Sole Proprietorships» — Section I, Clauses 1–2; Section II, Clauses 1–11.

4. Order of the Ministry of Finance of Ukraine dated 21 January 2016, No. 13 — Regulations on the form and content of settlement documents, Sections I–III.

5. Order of the Ministry of Finance of Ukraine dated 14 June 2016, No. 547 — procedures for the registration and use of ECRs, KORO, and settlement books.

6. Order of the Ministry of Finance of Ukraine dated 09 December 2011, No. 1588 — Section VIII, Clauses 8.4–8.5 concerning Form No. 20-OPP.

7. Resolution of the Cabinet of Ministers of Ukraine dated 17 June 2015, No. 413 — notification of an employee’s commencement of work.

8. Law of Ukraine dated 18 June 2024, No. 3817-IX, «On State Regulation of the Production and Circulation of Ethyl Alcohol, Alcohol Distillates, Bioethanol, Alcoholic Beverages, Tobacco Products, Raw Tobacco Materials, Liquids Used in Electronic Cigarettes, and Fuel» — Articles 16, 23, 41–43, 46, and 52.

9. Law of Ukraine «On Licensing Types of Economic Activity» dated 02 March 2015, No. 222-VIII — Article 7.

10. Resolution of the Cabinet of Ministers of Ukraine dated 15 June 2006, No. 833 — Procedure for conducting trading activities and rules of retail service.

11. Law of Ukraine «On Consumer Protection» dated 12 May 1991, No. 1023-XII — consumer rights, product information, exchanges, and product returns.

12. Resolution of the Cabinet of Ministers of Ukraine dated 23 August 2000, No. 1336 — a list of certain forms and conditions of activity under which settlements may be conducted without an ECR using settlement books and KORO.