Lately tax authorities have been checking the legal address of companies.

Ukrainian law distinguishes between the address of a legal entity (actual place of business) and its tax/legal address (address used for registration and recorded in the State Register).

If before companies could register with a specific legal address and run their business without renting any offices for some time, now companies are required to rent offices as soon as possible and to register their office address.

The confirmation of legal address was introduced a few years ago. The law changed the application forms for registration of companies and required companies to confirm their status of legal entity every year in the district state administrations of Kiev.

Companies are required to confirm their legal data once a year by submitting their details on Form No. 6 to their district administration. The absence of such a confirmation will enable the tax authorities to assign the status of Stan 10 to a company, initiating a search for that company. Based on the results of a search, the tax authorities will either establish the payer’s location and lift the status of Stan 10 or assign the status of Stan 23 (the payer’s location has not been established) or Stan 32 (the actual location has not been established, a legal address of mass registration). Subsequently, the tax authorities may file a lawsuit seeking to annul the state registration of a company.

In addition, if no data have been provided, the registrar will make an entry about the absence of a confirmation of the details of a legal entity. Such an entry may lead to the following adverse implications:

• a legal entity may not obtain a certificate of tax registration (failing to obtain such a certification, a company will find it rather difficult to operate, specifically: it will be impossible to open a bank account, to obtain a work permit, etc.);
• a legal entity will not be able to make any modifications/amendments to its founding documents in the state register;
• there may be problems associated with obtaining any permits or licenses, in dealings with counterparties;
• an entry may be made in the state register about the absence of an organization at the location;
• the VAT payer status of a company may be annulled;
• the tax authorities may refuse to accept financial statements

In practice, it occurs as follows: the tax police will, on its own initiative, assign the status No. 10 to a newlyformed or an already existing company, which means that the company and its chief executive officer are wanted and will then transfer this information to the tax inspectorate.

A company may learn about the assignment of the status No. 10 independently, or the tax authorities will send a letter addressed to the chief executive officer, asking the chief executive officer to come to give explanations. This letter may not reach the addressee due to a postal failure, which will enable the tax authorities to draw up a statement on the absence of the company at the address specified in the certificate of state registration or an extract from the state register and transfer documents to the tax police. The company will then be pronounced as a mala fide counterparty in the database of the tax administration. As a consequence, the company will be deprived of the VAT payer status, and the tax police will assign the status No. 10 to it.

Presently, the procedure for lifting tax statuses has not been set out by law, and for that reason, an individualized approach and an additional verification will be necessary.

We recommend that when negotiating the lease of premises, companies should verify whether there are the relevant title documents confirming the right to occupy the premises in place and whether they are in full compliance with the applicable laws, and already existing companies should be ready at any time to provide such documents at the tax authorities’ request