28 November 2025
On 26 November 2025, the Second Senate of the Constitutional Court of Ukraine delivered a decision in the case upon the constitutional complaint filed by the Representative Office of ANDRITZ HYDRO GmbH (hereinafter, the “Representative Office”) regarding the constitutionality of the provisions of paragraph 120 1.1 of Article 120 1 of the Tax Code of Ukraine (hereinafter, the “Code”) as amended by the Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding the Stabilisation of Settlements on the Wholesale Electricity Market of Ukraine” No. 2198-VIII dated 9 November 2017.
The judge-rapporteur in the case is Vasyl Lemak, judge of the Constitutional Court of Ukraine.
The contested provisions of the Code, in particular, determine the amount of fines for violating the deadlines for registering tax invoices and/or adjustment calculations in the Unified Register of Tax Invoices.
In the opinion of the author of the petition, the penalties provided for by the contested provisions of the Code, which apply to cases of late registration of tax invoices, are clearly excessive and violate the principle of the rule of law, in particular its components such as fairness, proportionality and commensurability. The representative office also argued that disproportionate penalties violate the constitutional right to property, and that the contested provisions constitute interference with the peaceful enjoyment of one's property.
Having examined the issues raised in the constitutional complaint, the Court concluded that the contested provisions are in line with the Constitution of Ukraine.
In examining the issues raised in the constitutional complaint, the Court proceeded from the assumption that the principles of the rule of law (Article 8.1), respect for human rights and freedoms (Article 3.2), in particular with regard to the inviolability of property rights (Article 41.1 and 41.4) and the right to engage in entrepreneurial activity that is not prohibited by law (Article 42.1), as well as the principles of individualisation of legal responsibility (Article 61.2) and the presumption of innocence (Article 62).
The Constitution of Ukraine attaches great social importance to taxes, since their proper payment is essential for the effective functioning of Ukraine as a social state (Article 1) and the balance of the Ukrainian budget (Article 95.3), and their payment is a constitutional duty of every citizen (Article 67.1). The Basic Law of Ukraine also stipulates that only the laws of Ukraine establish, in particular, the taxation system, taxes and fees (Article 92.2.1), as well as legal liability for violations of tax legislation.
The court emphasises: “When establishing appropriate sanctions for tax offences by law, the legislator has broad discretion, which shall at the same time comply with constitutional principles.”
Examining the legitimacy of the contested provision of the Code, the Court notes that the introduction of financial liability for violating the deadline for registering a tax invoice and/or adjustment calculation in the Unified Register of Tax Invoices is aimed at protecting Ukraine's economic security by ensuring the legality of electronic administration of value added tax.
The issue of balancing Ukraine's budget as a component of economic security protection is of particular public importance in the context of martial law due to the need to protect Ukraine from large-scale armed aggression by the Russian Federation.
The Court notes that the contested provision of the Code does not violate the fair balance between the constitutional value of protecting Ukraine's economic security and protecting the taxpayer's rights, and is therefore a proportionate means of interfering with the right to property in conjunction with the right to engage in entrepreneurial activity that is not prohibited by law.
Having examined the contested provision of the Code in conjunction with its purpose, the Court concludes that the second paragraph of Article 120 1.1 of the Code is a suitable legislative means of achieving the relevant objective and meets the criterion of necessity in a democratic society.
Furthermore, in its Decision, the Court points to the need to resolve the issue of the applicability to the taxpayer of the guarantees established in Articles 61.2 and 62 of the Constitution of Ukraine, for which it considers it appropriate to examine whether the essence of the sanction (fine) provided for in the contested provision of the Code is commensurate with criminal punishment.
The Court takes into account that the contested provision of the Code allows for the imposition of significant fines, and its purpose is not monetary compensation for the damage caused, but punishment and prevention of repeat offences; the specified fine is imposed in accordance with the general rule of law. Taken together, this indicates the essence of the sanction in the contested provision of the Code, which may be recognised as commensurate with criminal punishment.
The court concludes that the application of sanctions to taxpayers, which are by their nature comparable to criminal punishment, shall be combined with the legislator's obligation to regulate the procedure for bringing them to justice in a manner that would embody the guarantees established by the Constitution of Ukraine for the relevant entity, namely the principle of individualisation of legal liability and the principle of presumption of innocence.
The Decision notes that when applying the aforementioned sanctions, it is crucial for the legislator to establish the obligation for the law enforcement authority to prove the guilt of the entity being held legally liable. In this case, the form (degree) of guilt is one of the circumstances that shall be taken into account by both the supervisory authority and the court when examining all factual and legal aspects of the case.
The entire constitutional principle of the presumption of innocence will undoubtedly be violated if the legislative regulation does not contain a requirement to establish the guilt of the entity being held legally liable.
Having concluded that the legislator has a duty to provide taxpayers with the guarantees established in Articles 61.2, 62 of the Constitution of Ukraine in cases where a sanction is applied to them that is essentially commensurate with criminal punishment, the Court takes into account the limits of its powers established by the Constitution of Ukraine.
The court takes into account that the legislator is gradually introducing the concept of guilt as an element of a tax offence, which increases its role in tax law. Parliament has also regulated the general conditions for imposing financial liability for tax offences.
The court also takes into account that, in accordance with a number of provisions of the Code, a necessary condition for holding a person financially liable for committing a tax offence is the establishment of the person's guilt by the controlling authorities. However, it emphasises that the provisions establishing cases of mandatory proof of guilt by the controlling authorities do not apply to the disputed provision of the Code.
In view of the above, the Court considers that the analysis of those provisions of the Code, the content of which concerns the fulfilment by the Verkhovna Rada of Ukraine of its constitutional duty to implement in legislative regulation the constitutional guarantees provided for Articles 61.2, 62 of the Basic Law of Ukraine, is not covered by the subject of constitutional review in this case.
In this regard, respecting the principle of separation of powers, the Court concluded that there were no grounds in this case to go beyond the scope of constitutional review, in particular with regard to the provisions of the Code establishing the procedure for bringing taxpayers to legal liability. The Court also emphasises that the legislative regulation of the relevant issues shall comply with the Constitution of Ukraine and the legal positions of the Court set out in this Decision.
Therefore, the Court held that the contested provisions of the Code do not contradict Articles 8.1, 41.1, 41.4, 42.1 of the Constitution of Ukraine. However, in cases involving sanctions that are essentially equivalent to criminal penalties, legislative regulation shall ensure that taxpayers comply with the constitutional principles of individualisation of legal liability and presumption of innocence, as provided for in Articles 61, 62 of the Basic Law of Ukraine.
