For a long time, Ukrainian business was under pressure from law enforcement officers, who could at any time come along with an inspection or a court decision on a search and block the further activities of the enterprise. The authorities decided to meet business halfway by putting things in order in the actions of law enforcement agencies when investigating economic crimes – a category that is most often accompanied by abuse. In this regard, a number of laws were adopted under the slogan “reducing pressure on the business”. So what has changed, and how safe can businesses now feel?
On November 16, 2017, a law is known as “stop masks” was passed. Video and photographic recording of searches, admission of lawyers, a ban on the seizure of primary documentation and storage servers have become mandatory. “Victims of factual criminal cases” have finally received an officially enshrined procedural status to protect their violated rights in terms of illegally seized property.
This law has really expanded the possibilities of protecting interests from unlawful pressure. The practical experience of the Ilyashev & Partners team shows that a lawyer now easily gets to any search and conducts proper work to protect the rights of his client even during the investigation. In addition, in case of illegal seizure of property or other valuables, legal work on their return also yields positive results.
On September 18, 2018, another law was adopted – “stop-2 mask show”. Now it is legislatively enshrined in the forced closure of actual criminal proceedings if the investigation of such a fact has already been carried out and the case was closed. Also, the person concerned can initiate the closure of a factual case by the statute of limitations.
So, this mechanism provided an opportunity not only to close far-fetched factual cases that hang over the enterprise and which the counterparty is so afraid of, but also to return the seized property, remove arrests from the enterprise’s accounts, and also get rid of other burdens.
And finally, a law directly related to the investigation of tax crimes, which came into force on September 25, 2019, decriminalizing fictitious entrepreneurship and raising the thresholds for criminal prosecution for willful tax evasion. The legislator tried to break the well-oiled scheme of proving tax evasion, which was based only on transactions with enterprises that allegedly had signs of fictitiousness.
Thus, today there is no criminal liability for fictitious entrepreneurship, and in order to initiate a case on the fact of deliberate tax evasion, law enforcement officers must have information about the evasion in the amount of more than UAH 3 million.
As for the “stop mask show” and “stop mask show-2”, these initiatives under the slogan “reducing pressure on the business” did not actually remove the pressure, but only provided additional mechanisms to protect against such pressure.
So, the legal adviser has more opportunities to protect the interests of the enterprise and its officials, both during the investigative action itself and according to its results. This applies to the return of things and documents that were illegally seized during a search, the removal of arrests from the property, as well as other encumbrances in connection with the presence of criminal proceedings.
Regarding changes to the Criminal Code of Ukraine aimed at eradicating the established practice of using sentences under Article 205 of the Criminal Code of Ukraine to put pressure on bona fide taxpayers, according to the statistics of the Office of the Prosecutor General, the number of registered criminal proceedings under Article 212 of the Criminal Code of Ukraine (deliberate evasion of taxes and fees) is practically hasn’t changed. In addition, publicly available court decisions indicate that law enforcement officers have practically changed the application of Article 205 of the Criminal Code of Ukraine (fictitious entrepreneurship) to Article 205-1 (falsification of documents submitted for registration of a legal entity or individual entrepreneur).
Thus, the established method of proving deliberate evasion through the prism of prejudice remained the same. Only the amount of damage for criminal liability for intentional tax evasion has increased, which now amounts to about UAH 3 million.
Indeed, the authorities are trying to reduce pressure on entrepreneurship, including to create a favorable business climate in Ukraine and to attract foreign capital.
However, some unscrupulous representatives of the law enforcement system will still not give up the usual scheme of pressure and earnings. When doing any business in Ukraine, you need to be ready to resist illegal actions not only from unscrupulous partners but also from the authorities.
We at Ilyashev & Partners recommend working out and implementing the most legal scheme of activities in advance so that in the event of the arrival of uninvited guests, the latter would be prosecuted for having entered the wrong place.