Dear Readers,

The Ministry of Finance extended the Pilot Project on Horizontal Monitoring until 31 December 2024. The corresponding order also introduced certain changes and additions to the Rules for Conducting the Pilot Project on Horizontal Monitoring (hereinafter the “Rules”).

Examination of Historical Data

According to the amendments, a tax review at the pre-project stage can be replaced by the examination of historical data for unaudited periods. As before, a taxpayer may voluntarily apply for a tax audit (instead of examining historical data).

The Rules describe the procedure for examining historical data, according to which a participant is obliged to provide the tax authorities with the necessary documents and information within the specified time frames. Violation of this obligation entails administrative penalties.

If a taxpayer rectifies the violations identified during the examination of historical data within 30 business days after receiving the conclusion on the results of the examination, the tax authorities will not conduct a tax audit. If a participant of the Pilot Project rejects to conduct the examination of historical data and/or violates the procedure for conducting such examination, the tax authorities initiate a tax audit.

The amendments provide for the suspension of pre-project work for the period of analysis of historical data, tax audit, and appeal of the audit results.

The updated version of the Rules requires the parties to sign a Protocol on the Results of Pre-Project Work. A taxpayer applies for the conclusion of the Agreement on the Pilot Project for Horizontal Monitoring within one month after the completion of the pre-project work.

Requirements for Joining Horizontal Monitoring

During the Pilot Project period, the tax authorities, together with the Pilot Project participants, develop requirements for the submission of documents, establishing links between them, forming internal control systems, and implementing an information system for horizontal monitoring with its integration into the tax authorities' systems.

The Rules stipulate that by 1 October 2024, the tax authorities will formulate the above-mentioned requirements.

Participants of the Pilot Project may join the horizontal monitoring only if they comply with the established requirements.

Unilateral Termination of the Agreement

The updated version of the Rules empowers the tax authorities to unilaterally terminate the Agreement on Cooperation and/or the Pilot Project Agreement with a participant of the Pilot Project who provided the tax authorities with false information or engaged in fictitious financial transactions, forged documents, or distorted data in accounting systems, including the information system of horizontal monitoring.