September 24, 2026
Vita Prykhodko, Attorney, for Yurydychna Hazeta
A company director, as its executive body, represents the company in its relations with individuals and legal entities, as well as with state authorities and institutions. The director makes key management and business decisions that largely determine the company’s operational efficiency and development.
At the same time, the director bears the greatest degree of responsibility for both the results of the company’s business activities and compliance with legal requirements. Such liability may be organizational or property-related, as well as administrative or criminal in nature.
The law provides that the director of a legal entity must act in good faith and reasonably in the interests of the company and is liable for losses caused to the company by his or her culpable acts or omissions.
Tax liability of a director may arise where serious violations of tax legislation are identified. These may include intentional tax evasion, submission of inaccurate tax reporting, maintaining double accounting records, using fictitious counterparties, or failure to pay VAT and other mandatory payments.
In particular, Article 47 of the Tax Code of Ukraine provides that liability for failure to submit tax reporting documents, violations of the procedure for completing such documents or the deadlines for their submission to the controlling authorities, as well as for the accuracy of the information contained therein, is borne by legal entities, residents or non-residents of Ukraine that are designated as taxpayers under the Code, as well as their officers.
The law provides that a director, as an officer, may be held liable even where the relevant actions were formally performed by an accountant or another employee.
In most cases, violations of tax legislation result in administrative liability for the company’s director and, in some cases, its accountant. This raises a common question: why does the accountant or chief accountant prepare the tax and accounting reports, while the director is held liable?
The legal grounds, duties and right to impose liability for violations are established by the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”. Article 8 of the Law provides that matters relating to the organization of accounting within an enterprise fall within the competence of its owner(s) or an authorized body (officer), in accordance with the law and the company’s constitutional documents. To ensure the maintenance of accounting records, an enterprise independently selects one of the following organizational models, subject to the requirements of the Law:
Responsibility for organizing accounting and ensuring that all business transactions are properly recorded in primary documents, as well as for retaining processed documents, accounting registers and reporting for the prescribed period, but for no less than three years, rests with the authorized body (officer) managing the enterprise or with the owner, in accordance with the law and the company’s constitutional documents. Thus, to a significant extent, the person responsible for maintaining the company’s accounting records is determined by the rules established in its internal documents. The scope of liability of a company officer may be defined by the charter, job descriptions, employment contract and other documents.
Where administrative liability is concerned, the most common violations relate to failure to meet reporting deadlines and late payment of taxes or mandatory payments. Administrative liability for violations of the procedure for maintaining tax records is provided for by Article 163-1 of the Code of Ukraine on Administrative Offenses. The provision establishes that the absence of tax records or violations by directors and other officers of enterprises, institutions and organizations of the statutory procedure for maintaining tax records, including failure to submit or late submission of audit reports where such reports are required by Ukrainian law, is punishable by a fine ranging from five to ten tax-free minimum incomes of citizens.
Another fairly common administrative offense is the failure to pay, or late payment of, agreed tax liabilities. Failure by officers of enterprises, institutions and organizations to submit, or their late submission of, payment orders for the transfer of taxes, duties and other mandatory payments due is punishable by a fine imposed on the officers in the amount of five to ten tax-free minimum incomes of citizens.
Late payment of taxes may have two adverse consequences. On the one hand, the Tax Code of Ukraine provides for financial sanctions against the taxpayer; on the other hand, company officers, including the director and chief accountant, may be subject to administrative liability.
The most severe form of legal liability for violations of tax legislation is criminal liability for intentional tax evasion, as provided for by Article 212 of the Criminal Code of Ukraine. Intentional evasion of taxes, duties and other mandatory payments that form part of the taxation system and have been introduced in accordance with the procedure established by law, committed by an officer of an enterprise, institution or organization, irrespective of its form of ownership, or by a person carrying out business activities without establishing a legal entity, or by any other person required to pay such amounts, where such actions result in the actual failure of funds to be received by the state or local budgets or state targeted funds in significant amounts, is punishable by a fine ranging from five thousand to ten thousand tax-free minimum incomes of citizens, with or without disqualification from holding certain positions or engaging in certain activities for a period of up to three years.
The law defines:
It should be noted that a person who has committed an offense under Article 212 of the Criminal Code may be exempt from criminal liability if, before being brought to criminal liability, the relevant taxes, duties and mandatory payments are paid and the damage caused to the state by their late payment, including financial sanctions and penalty interest, is compensated.
One of the factors that has significantly increased tax risks for businesses is the introduction of automatic exchange of financial information and the expansion of international cooperation between tax and law enforcement authorities in different jurisdictions. Ukrainian controlling authorities may obtain information concerning foreign assets and ultimate beneficial owners of Ukrainian companies. Such information exchange is carried out under international treaties, including double taxation conventions, tax information exchange agreements and other multilateral cooperation mechanisms.
To reduce the risk of being held liable, a director should ensure proper oversight of the company’s compliance with tax legislation. This includes maintaining transparent tax and accounting records, supervising the activities of the accounting department even where certain functions have been delegated, conducting regular audits, obtaining legal support for material transactions, as well as conducting due diligence on counterparties and complying with the lawful requirements of the controlling authorities in a timely manner.