Fiscal Registrars for Individual Entrepreneurs in 2022: Installation Requirements, Stipulated Penalties, and Appeal Procedures

Key Information about RRO for FOP in 2022: Fines and Their Appeal

From January 1, 2022, in accordance with the requirements of the Tax Code of Ukraine, individual entrepreneurs (FOP) – single tax payers of groups 2-4 are obliged to use cash registers (hereinafter - RRO) and/or software cash registers (hereinafter - PRRO) when carrying out settlement operations regardless of the type of activity and volume of income.

And, although everyone hoped until the last moment for a postponement of this requirement or amendments to the Tax Code of Ukraine or the Law of Ukraine “On the Use of RRO in Trade, Public Catering, and Services” No. 265/95 (hereinafter - Law No. 265/95), the use of RRO remained inevitable.

Such innovations are not perceived very positively by FOPs. Many complain about significant costs associated with the purchase and maintenance of RRO/PRRO, some express dissatisfaction with the need to train staff or personally master the use of registers. However, in any case, it will be necessary to accept the fact that the use of RRO/PRRO is inevitable. It is worth noting that there are already many offers from specialized companies for the installation and operation of registers on the most favorable terms.

In this article, we want to tell you in detail:

• Which FOPs are obliged to install RRO/PRRO
• Are FOPs - single tax payers obliged to install RRO/PRRO
• For which payments must FOP necessarily use RRO
• What will be the fines for FOP for the absence of RRO and non-compliance with established requirements
• Who can conduct inspections of FOPs for compliance with RRO/PRRO installation and usage requirements
• What can be the grounds for an unscheduled tax audit regarding RRO for FOP
• What documents must be issued to FOP based on the results of the inspection
• Where and how FOP can appeal RRO fines

Which FOPs are obliged to install RRO in 2022

According to Article 3 of Law No. 265/95, business entities that carry out settlement operations in cash and/or non-cash form (using electronic payment means, payment checks, tokens, etc.) when selling goods (providing services) in the field of trade, public catering, and services, as well as operations for accepting cash for its subsequent transfer are obliged to use RRO and to provide the person who receives or returns goods, receives a service or refuses it (including using the Internet) with a settlement document of the established form and content for the full amount of the transaction.

Based on this, virtually all business entities that sell goods and/or provide services are obliged to install RRO or PRRO.
However, the law contains exceptions regarding certain types of activities, the conduct of which does not require the use of RRO and/or PRRO, as stipulated in Article 9 of the Law.

Are FOPs - single tax payers obliged to install RRO/PRRO

Paragraph 6 of Article 9 of Law No. 265/95 stipulates that RRO and/or PRRO, and settlement books are not used when selling goods (providing services) by FOPs - single tax payers who do not use RRO and/or PRRO in accordance with the Tax Code of Ukraine, i.e., single tax payers of the first group (in accordance with paragraph 296.10 of Article 296 of the Tax Code of Ukraine).

As for single tax payers of groups 2-4, exceptions apply to them, provided for in Article 10 of Law No. 265/95, which allow carrying out activities in the field of trade, public catering, and services without the use of RRO and/or PRRO, but with the use of settlement books (RK) and books of accounting for settlement operations (KORO).

The list of specific forms and conditions for carrying out activities in the field of trade, public catering, and services, which are allowed to conduct settlement operations without the use of RRO/PRRO with the use of settlement books and books of accounting for settlement operations, is enshrined in CMU Resolution On Ensuring the Implementation of Article 10 of the Law of Ukraine "On the Use of Cash Registers in Trade, Public Catering, and Services" dated August 23, 2000, No. 1336.

For which payments must FOP necessarily use RRO, and for which not

RRO is not used in the following cases:

• for non-cash payments via IBAN
• for payments through a bank's cash desk
• for payments through a self-service payment terminal - bank's PTKS (cash and electronic payment card)
• for payment for internet services without physical contact between seller and buyer.

RRO is required for all other settlement operations:

• for cash payments
• for card payments via a bank POS terminal
• for payments through a non-bank self-service payment terminal - for example - iBox
• for card payments via systems such as LiqPay, Portmone, iPay, Privat24, Monobank, Oschad 24/7, etc.

A short, 7-minute, and useful video about RRO for FOP and possible fines can be viewed on our YouTube channel "Biznesuy".

What will be the fines for FOP for the absence of RRO and non-compliance with established requirements

The main violations when operating RRO/PRRO include:

• conducting settlement operations for goods or services using RRO or PRRO or settlement books for an incomplete amount of the cost of goods or services
• in case of non-conduct of settlement operations through RRO or PRRO with fiscal mode of operation = non-implementation
• failure to issue a properly executed settlement document to the client in paper or electronic form
• conducting such a settlement operation without using a settlement book at a separate business facility of the business entity.

For such violations of the requirements for the use of RRO/PRRO (para. 1, Article 17 of Law No. 265/95), the following financial sanctions apply:

1. In the amount of 100% of the value of goods (works, services) sold with violations - for the first violation committed.
2. 150 percent - for each subsequent violation committed.

For conducting settlement operations without using/using improperly registered RRO/PRRO, according to paragraph 3 of Article 17 of the Law, financial sanctions are applied to business entities in the amount of 50 non-taxable minimum incomes, which is UAH 850.

A full list of violations and penalties can be found in Article 17 of Law No. 265/95.

Who can conduct inspections of FOPs for compliance with RRO/PRRO installation and usage requirements

According to Article 15 of the Law, controlling bodies monitor FOPs' compliance with settlement procedures for goods (services) by conducting actual and documentary inspections in accordance with the Tax Code of Ukraine.
Also, the provisions of Article 17 provide for a number of other violations and corresponding penalties for business entities.

Until the end of the quarantine, a moratorium is in effect, meaning a postponement of inspections – currently until March 31, 2022. This period can be used to install RRO and start using it.

However, in practice, despite this Law, tax authorities still conduct scheduled and documentary unscheduled inspections, guided by CMU Resolution dated 03.02.2021 No. 89 «On Shortening the Period of Restriction Regarding the Moratorium on Certain Types of Inspections» (Resolution No. 89).

When considering cases regarding taxpayers' appeals against orders for tax inspections, courts increasingly side with taxpayers, canceling such orders given that Resolution No. 89 contradicts the Tax Code of Ukraine, whose provisions have higher legal force.

What can be the grounds for an unscheduled tax audit regarding the use of RRO/PRRO by FOP

Exhaustive grounds and procedures for conducting inspections are established by the Tax Code of Ukraine. Grounds for an unscheduled inspection regarding RRO/PRRO may include:

• failure to submit RRO/PRRO reports at all, or submission of a "zero Z-report" (Tax Code of Ukraine, Article 80.2.4)
• absence of a POS terminal for card payments
• written appeal from a buyer (consumer) regarding the taxpayer's violation of the established procedure for conducting settlement operations, cash operations.

What documents does FOP receive based on the results of the inspection

Based on the results of inspections, FOPs are issued:

1. An Act - in case of detected violations.
2. A Certificate - in case of no violations.

The corresponding document is signed by officials of the controlling body and taxpayers.

The inspection act is the basis for adopting a tax notification-decision (PPR), therefore, the taxpayer has the right, within 10 business days from the day following the day of receiving the act, to submit objections, additional documents, and explanations to the tax authority that conducted the inspection, which confirm the absence of their fault or mitigate responsibility or exempt from it.

After this, a PPR is adopted, which provides for the accrual of monetary obligations, and which can already be appealed.

How FOP can appeal the results of a tax inspection

The results of the inspection (PPR) can be appealed in several ways.

The first is through administrative pre-trial procedure.

This must be a complaint to a higher-level body. For example, if the PPR was sent by the city state tax inspectorate, then the appeal should be made to the Central Office of the State Tax Service – the Department of Administrative Appeals.

A complaint in administrative procedure is submitted in writing to the higher-level controlling body within 10 business days following the day the taxpayer receives the appealed decision of the controlling body.

The second way is through judicial procedure.

In any case, even if you disagree with the tax authorities, it is advisable to sign the inspection act, with reservations if there are comments on the content of the act, or to state at the end of the act that «with this signature, we confirm the fact of receiving a copy of the act; objections will be submitted in the manner prescribed by current legislation».

Under no circumstances should you leave the place for your signature blank, or simply sign the act without any reservations (which may indicate agreement with its content). This is necessary to have a chance in the future to appeal the PPR that will be issued based on the act.

Within what timeframe can FOP appeal to court

An appeal to court can be filed both after a refusal to satisfy a complaint in administrative procedure and immediately without administrative appeal.

When appealing to court, it is important to consider the requirements regarding the deadlines for such an appeal. This is because different deadlines are established, depending on whether the administrative appeal procedure was used before going to court.

Thus, if the subject of the lawsuit is an appeal against decisions of the controlling body regarding monetary obligations, after using the administrative appeal procedure, the deadline for appealing to court is 1 month (compared to 1095 days, i.e., 3 years, if appealing in court without prior administrative appeal).

It should also be noted that if the decision of the controlling body is not appealed, the taxpayer is obliged to pay the amount of the monetary obligation determined by the controlling body within 10 business days.

Therefore, after receiving a PPR, it is important to quickly decide on an appeal plan.
In fact, within 10 business days, the taxpayer needs to decide:

• either appeal the PPR
• or pay the PPR.

Otherwise, without appeal, a tax debt arises. However, appealing the PPR interrupts the payment period for the monetary obligation. In such a case, the PPR can be left unpaid until a final decision is received.

When conducting inspections (grounds, procedure), and receiving the results of their conduct and appealing them, many nuances should be taken into account, which differ in each specific case.

We can help with protecting your rights and interests in court

Our team can help you understand and determine the legality or illegality of the appointment and conduct of an inspection, and decide on the optimal ways to appeal the decision of the controlling body.