The company made a mistake in the declaration of the income tax. However, they discovered it after the expiration date. Does the taxpayer have the right to correct a mistake independentlyin this circumstance? Can the mistakes be corrected during tax audit? What is the threat to correct the mistake for a period that has already been verified by inspectors? Answers to the questions are in the following.
Can the mistake be corrected by the taxpayer independently, if its term of validity has already expired?
It should be recalled that taxpayers have the right to independently determine the amount of obligations of the payer in cases specified by the Tax Code of Ukraine (hereinafter − TCU), not later than the end of 1095th day (2555th day − in case of verification of a controlled transaction in accordance with Article 39 of the Tax Code), which occurs on the last day of the deadline for submission of the tax declaration (if provided later − by the day of its actual submission) and/or the deadline for payment of monetary obligations accrued by the controlling body (para.102.1 of TCU). If during the specified period the inspectors have not determined the amount of the obligation, the payer is free of such obligation, and the dispute regarding such a declaration and/or tax notice is not the subject to administrative or judicial review (para. 102.1 of TCU).
However, let’s suppose that the mistake led to an increase of the income tax, since the costs were undervalued (under reflected), and the period of 1095 days has already expired. Can such a mistake be corrected?
The payer has such a right to correct the mistake. After all, such prohibitions are not provided by the current legislation. In accordance with para. 50.1 of the TCU, which regulates an independent correction of mistakes: “If, in future tax periods (including the statutory limitation periods specified in Article 102 of this Code), the taxpayer independently (including according to electronic verification) detects mistakes contained in the previously submitted tax declaration (except for the restrictions specified in this article), he/she is obliged to send a specifying calculation to such a tax declaration in the form valid at the time of submission of the specifying calculation.
The taxpayer has the right not to submit such calculation, if the corresponding specified indicators are indicated by him/her in the tax declaration for any next tax period during which such mistakes were independently detected (including by results of electronic verification)”.
So, if carefully read para. 50.1 of TCU, then it only refers to the obligation to correct mistakes in case of their detection, if the period of limitation for them has not expired. But it is said nothing about the mistakes that have been already outside the statute of limitations. That is, the TCU does not oblige to correct mistakes, but does not prohibit doing so.
However, tax authorities may not agree with this right. Let’s say, in a letter from the State Tax Service of Ukraine of 23.05.2012, No. 8803/6/15-1415, they explicitly said that the expense mistake on which the limitation period of 1095 days had expired from the time of its making can not be corrected anymore.
But, by submitting a specified declaration, you will automatically “allow” inspectors to this period, since the limitation period will start its counting again from the date of submission of the specified declaration.
In addition, please note that if there was overpayment, statements about the return of excessive paid monetary obligations or their compensation in cases stipulated by TCU can be submitted not later than 1095th day, which comes after the day of such overpayment or obtaining the right to such reimbursement (para. 102.5 of TCU).
Can the mistakes be corrected during tax audit?
During the documentary planning and unscheduled inspection, it is not possible to submit an adjustment calculation to the previously submitted tax declaration, which is the subject to verification (para. 50.2 of TCU).
So, for example, if the inspectors come to verify the value added tax (hereinafter − VAT), it is not forbidden to correct mistakes on the income tax. But it is forbidden to independently correct its mistakes during the documentary verification of the income tax. It is better to do it before it starts.
What is the threat to correct the mistake for a period that has already been verified by inspectors?
Correcting a period that has already been verified by controllers gives them the right to conduct unscheduled inspections for the relevant period (para. 50.3 of TCU).
