Closing a Business Does Not Always Mean Ending All Settlements with the Tax Service: Why the State Tax Service Continues to Accrue Taxes

Termination of the state registration of a sole proprietor does not always mean that tax obligations cease on the same day. In practice, entrepreneurs often face situations where, after closing a sole proprietorship in the Electronic Cabinet, accruals of the single tax or the unified social contribution continue to appear. The reasons can be both legitimate and related to accounting errors.

Why taxes may be accrued after closing a sole proprietorship

The mere fact of entering a record into the Unified State Register about the termination of entrepreneurial activity does not exempt the person from fulfilling tax obligations that arose before the termination date.

According to Article 65 of the Tax Code of Ukraine, state registration of the termination of entrepreneurial activity is the basis for starting the procedure of removing the entrepreneur from the tax register. However, the final termination of registration occurs after completing all procedures prescribed by law.

After receiving information from the state registrar, the tax service conducts the final accounting of the taxpayer and, if necessary, may appoint a documentary audit.

When accruals after closing a sole proprietorship are lawful

Not every tax accrual after termination of entrepreneurial activity is an error. The Tax Code of Ukraine provides cases when, after state registration of the termination of a sole proprietorship, the controlling authority still has lawful grounds to determine or reassess tax obligations.

In particular, accruals may be lawful if the entrepreneur has not fulfilled all obligations related to the termination of activity.

There can be several reasons:

• liquidation declaration was not submitted;
• taxes for the last reporting period were not paid;
• there are unresolved discrepancies in the tax service’s data;
• the procedure for removal from the tax register is ongoing;
• a technical or software error occurred in the State Tax Service’s information systems.

Features for single tax payers of groups I and II

For entrepreneurs of the first and second groups, a special rule applies, established by paragraph 295.8 of Article 295 of the Tax Code of Ukraine. The single tax is paid for the entire calendar month in which the tax service received information about the state registration of termination of entrepreneurial activity.

That is why, after closing a sole proprietorship, an accrual for the last month of activity may appear in the Electronic Cabinet — and in such a case, it complies with the requirements of the law.

Unlike taxpayers of the first and second groups, entrepreneurs of the third group pay the single tax not in a fixed amount but as a percentage of the actual income received. Therefore, after termination of activity, tax obligations are determined for the last reporting period based on declared income. If no income was received after the termination date and all tax obligations were fulfilled, there are no grounds for new single tax accruals.

When accruals may be erroneous

If all taxes have been paid, liquidation reports submitted, and after completing the procedure the tax service continues to generate new obligations, this may indicate:

• a technical error in the State Tax Service’s information systems;
• unfinished removal from the tax register;
• incorrect display of the taxpayer’s integrated card;
• erroneous automatic accruals.

In such cases, it is necessary to contact the tax service with a request to conduct a reconciliation of calculations and check the taxpayer’s integrated card in the Electronic Cabinet. If the error is confirmed, the tax service must correct the accounting.

If the tax service refuses to correct the error, its decision can be appealed. For this, the taxpayer has the right to file a complaint with the State Tax Service of Ukraine or apply to the administrative court in accordance with Article 56 of the Tax Code of Ukraine.

Thus, closing a sole proprietorship does not mean automatic termination of all relations with the tax service. If accruals after termination relate to the last reporting period or existing obligations, they may be lawful. However, if new taxes arise without legal grounds or due to accounting errors, the entrepreneur has the right to demand their correction and appeal the actions of the controlling authority in accordance with the Tax Code of Ukraine.

Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp, our page on Facebook and on Instagram to stay updated on the most important events.