Ministry of Economy,

Environment, and Agriculture of Ukraine

 

Proposals from the business community on

improving the SMKOR system

The Ukrainian Business Council (UBC), which is an association of business associations created to consolidate business and implement socially important reforms for the sustainable economic development of the country, comprising 126 business associations with 27,000 member companies from various sectors of the economy, expresses its respect to you and addresses the following issue.

The problem of blocking tax invoices due to the imperfect work of the SMKOR has had a negative impact on business operations for many years.

However, in October 2025, significant positive changes took place due to the update of the Resolution, which led to a reduction in the number of blockages: the number of companies affected by the blocking of tax invoices/adjustment calculations in October 2025 = 10,100 (in January 2025 there were 22,500, in April 19,200, in July 20,000)

The percentage of blockages in October 2025 decreased significantly = 0.2% (it was: January = 0.54%, April = 0.46%, July = 0.35%).

At the same time, the SMKOR system still has significant flaws, is based on the ideology of “presumption of guilt,” and needs further improvement in order to minimize the blocking of legitimate businesses.

URB members emphasize the need to restore the presumption of innocence to taxpayers and provide jointly developed proposals to businesses for improving the SMKOR system:

1. Change in the ideology of the SMKOR from “punitive” to analytical – through the introduction of a legislative restriction on the time for blocking tax invoices (for example, for 30 days), following the example of the global mechanism used in the fight against money laundering (initially, funds are frozen for a short period of time for additional investigation and only if there are valid grounds are they blocked for a longer but limited period). At the same time, it is the temporary nature of the blocking that will serve as the basis for the introduction of real tax control measures by the State Tax Service. This will make it possible to abandon the presumption of “taxpayer guilt,” restore the presumption of innocence to the taxpayer, and make the system more analytical and focused on the end result—combating schemes.

2. The criteria for the effectiveness of the SMKOR (in general and in terms of territorial bodies) must be approved, in particular:

– the ratio of suspended tax invoices/adjustment calculations to registered ones (by number of invoices), %

– ratio of suspended tax invoices/adjustment calculations to registered ones (by VAT amount), %

– number of enterprises whose tax invoices/adjustment calculations were suspended (risky) – month to month, in dynamics;

– time of unblocking (costs of unblocking) tax invoices/tax credit notes – month to month, in dynamics;

– number of tax invoices/tax credit notes for which court decisions were made in favor of taxpayers to the number of tax invoices/tax credit notes for which court decisions were made in favor of the state.

3. It is necessary to publish the confidential audit of the SMKOR, which was conducted a year ago.

4. A list of criteria should be defined and established for persons who cannot be members of central and regional tax commissions, in particular due to a lack of experience in VAT administration or tax audit departments.

5. Legislative changes are needed to clearly define the mechanism for enforcing court decisions regarding the obligation of tax authorities to register tax invoices.

6. It is important to conduct a full cost-benefit analysis of the current VAT administration system and calculate the cost of VAT administration in Ukraine, in particular the maintenance of the Unified Register of Tax Invoices, the VAT Electronic Administration System, and the SMKOR for businesses, the tax service, and the judicial system.

7. It is advisable to provide VAT payers with the opportunity to contact a single hotline of the relevant department of the State Tax Service of Ukraine to obtain advice on unblocking tax invoices, agreeing on data tables, or enforcing court decisions (ensuring the principle of extraterritoriality of services provided by the State Tax Service of Ukraine);

8. Consider the possibility of introducing a risk-based approach to identifying risky transactions rather than risky business entities.

9. It is advisable to personalize the decisions of the tax service, to ensure the responsibility of officials who make/confirm decisions of the automated system regarding the suspension of registration of tax invoices, refusal to approve taxpayer data tables, or confirmation of the impossibility of timely execution of court decisions.

10. Amend paragraphs 19 and 25 of the Procedure for suspending the registration of invoices, approved by Resolution of the Cabinet of Ministers No. 1165 dated December 11, 2019, in terms of decisions on whether to take into account/disregard VAT payer data tables exclusively by regional commissions, so that the State Tax Service of Ukraine only considers complaints about the disregard of value-added tax payer data tables (administrative appeals);

11. Develop methodological principles for classifying taxpayers as risky so that these criteria are clearly reflected in the taxpayer’s electronic office.

12. Make changes to the SMKOR software that would reflect the criteria for classifying a transaction as risky and notify counterparties of the reasons why the taxpayer cannot register such a tax invoice.

The Ukrainian business community urges you to systematically address the issue of SMKOR and take the necessary steps to improve it.

 

Sincerely,

Business Associations

Members of the Ukrainian Business Council