How Did COVID-19 and Martial Law Affect Tax Audits?

Recent years have become a serious challenge for businesses in Ukraine. The COVID-19 pandemic, followed by the full-scale military invasion, significantly affected not only the economy but also the government’s approach to tax control. Tax audits underwent substantial changes caused both by restrictions and by the need to support taxpayers under extraordinary circumstances.

The Pandemic Period: Moratorium and Restrictions

With the outbreak of COVID-19 in 2020, Ukrainian legislation introduced a moratorium on documentary and factual tax audits. This step aimed to reduce administrative pressure on businesses facing quarantine restrictions, suspension of operations, and declining revenues.

Key features of tax control during the COVID-19 period included:

• Suspension of limitation periods for tax audits.
• Exceptions to the moratorium for certain audits related to VAT refunds or risks of tax evasion.
• Deferral of penalties and reduction of certain financial sanctions.

In this way, the government attempted to balance fiscal interests with the need to support businesses during the crisis.

Martial Law: New Challenges and Adaptation

Following the introduction of martial law in Ukraine on February 24, 2022, tax audits were again restricted or completely suspended, especially during the first months of the war. However, as certain regions stabilized and the tax system adapted, the state’s fiscal policy gradually changed.

Key changes related to martial law included:

• Suspension of most scheduled audits, except for audits of businesses involved in risky operations or suspected fraud.
• Possibility of resuming audits in relatively safe regions.
• Restoration of tax control from 2023 with gradual expansion of permitted audit categories.
• Greater focus on remote audits, information requests, and analysis of tax reporting.

What Businesses Should Know

• Audits have not disappeared — they have transformed. In many cases, tax authorities now conduct control measures informally, including through electronic document exchange.
• High-risk sectors remain the primary focus. Tax authorities concentrate on risky transactions, shell companies, and suspicious counterparties.
• The right to appeal remains in force. Even under martial law, taxpayers retain the right to defend their interests before tax authorities and courts.
• Audit and response deadlines may change. Businesses should closely monitor legislative updates.

COVID-19 and martial law became catalysts for changes in tax control procedures. Although the government seeks to ensure budget revenues, it also takes into account the extraordinary conditions faced by businesses. The Ukrainian Bar and Real Estate Association recommends:

• Respond promptly to tax authority requests.
• Preserve documentation confirming force majeure circumstances.
• Seek legal assistance in disputed audit situations.

Legal support from the specialists of the Ukrainian Bar and Real Estate Association is your reliable strategy for protecting assets and maintaining business reputation.