en
The scope of voluntary disclosure has been expanded
The scope of voluntary disclosure has been expanded
According to the amendment made to Article 13.2.49-2 of the Tax Code, the scope of voluntary disclosure has been expanded. The update was commented on by expert Anar Bayramov.
Prior to the amendment, voluntary disclosure referred to the voluntary declaration by taxpayers to the tax authorities of circumstances that were not identified during an on-site tax audit after its completion and that resulted in tax liabilities, as well as liabilities related to mandatory state social insurance, unemployment insurance, and compulsory health insurance contributions.
Under the latest amendment to the Tax Code, voluntary disclosure means the voluntary declaration by taxpayers to the tax authorities of circumstances that were not identified during an on-site tax audit or horizontal monitoring after its completion and that give rise to tax liabilities, as well as liabilities related to mandatory state social insurance, unemployment insurance, and compulsory health insurance contributions. In addition, it includes the voluntary declaration of such circumstances for periods preceding the three-year period specified in Article 85.5 of the Code, regardless of whether an on-site tax audit has been conducted.
First of all, it should be noted that the main advantage of voluntary disclosure for taxpayers is that no financial penalties or additional interest are imposed in such cases. The taxpayer is required to pay only the tax debt determined under the voluntary disclosure. A comparison of the amendments shows that two new situations have been added with regard to voluntary disclosure. The first is that taxpayers may submit a voluntary disclosure even after the completion of horizontal monitoring. It should be noted that the concept of “horizontal monitoring” was also introduced into the Tax Code as of January 1, 2026. Further explanations on this matter will be provided in subsequent articles.
Example 1: In 2027, the tax authority conducted horizontal monitoring in respect of a taxpayer. In 2028, the taxpayer is allowed to submit a voluntary disclosure for the year 2027, which was subject to horizontal monitoring. Prior to the amendment, taxpayers were allowed to submit a voluntary disclosure only after an on-site tax audit had been conducted.
The second situation concerns the voluntary declaration of periods preceding the three-year period specified in the Tax Code. According to Article 85.5 of the Code, the taxpayer has the right, within three years after the end of the tax reporting period, to request the assessment and reassessment of incorrectly withheld taxes, interest, and financial penalties, as well as the refund or offset of overpaid taxes, interest, and financial penalties. After the end of the taxable reporting period (from the date of the decision issued based on the results of an on-site tax audit conducted in accordance with Articles 38.3.3 and 38.3.4 of the Code), this period may extend to five years.
Example 2: In 2026, a taxpayer will be able to submit a voluntary disclosure in respect of the tax return for the year 2021. The key point here is that the taxpayer is granted the opportunity to submit a voluntary disclosure return for periods preceding the three-year period specified in Article 85 of the Tax Code.
It should also be noted that in some cases, by making a voluntary disclosure in profit tax or income tax returns, taxpayers do not limit themselves to declaring only the resulting tax liability, but also gain the opportunity to eliminate discrepancies existing in Appendix No. 1 to the return. For example, if a taxpayer failed to declare an asset owned by them in a return submitted five years earlier, they may eliminate this discrepancy during voluntary disclosure. Naturally, in such cases, there is a possibility that the tax authority may send discrepancy notices. In such situations, the taxpayer may be required to submit a reasoned response to the identified discrepancies to the tax authority.
According to the amendment made to Article 13.2.49-2 of the Tax Code, the scope of voluntary disclosure has been expanded. The update was commented on by expert Anar Bayramov.
Prior to the amendment, voluntary disclosure referred to the voluntary declaration by taxpayers to the tax authorities of circumstances that were not identified during an on-site tax audit after its completion and that resulted in tax liabilities, as well as liabilities related to mandatory state social insurance, unemployment insurance, and compulsory health insurance contributions.
Under the latest amendment to the Tax Code, voluntary disclosure means the voluntary declaration by taxpayers to the tax authorities of circumstances that were not identified during an on-site tax audit or horizontal monitoring after its completion and that give rise to tax liabilities, as well as liabilities related to mandatory state social insurance, unemployment insurance, and compulsory health insurance contributions. In addition, it includes the voluntary declaration of such circumstances for periods preceding the three-year period specified in Article 85.5 of the Code, regardless of whether an on-site tax audit has been conducted.
First of all, it should be noted that the main advantage of voluntary disclosure for taxpayers is that no financial penalties or additional interest are imposed in such cases. The taxpayer is required to pay only the tax debt determined under the voluntary disclosure. A comparison of the amendments shows that two new situations have been added with regard to voluntary disclosure. The first is that taxpayers may submit a voluntary disclosure even after the completion of horizontal monitoring. It should be noted that the concept of “horizontal monitoring” was also introduced into the Tax Code as of January 1, 2026. Further explanations on this matter will be provided in subsequent articles.
Example 1: In 2027, the tax authority conducted horizontal monitoring in respect of a taxpayer. In 2028, the taxpayer is allowed to submit a voluntary disclosure for the year 2027, which was subject to horizontal monitoring. Prior to the amendment, taxpayers were allowed to submit a voluntary disclosure only after an on-site tax audit had been conducted.
The second situation concerns the voluntary declaration of periods preceding the three-year period specified in the Tax Code. According to Article 85.5 of the Code, the taxpayer has the right, within three years after the end of the tax reporting period, to request the assessment and reassessment of incorrectly withheld taxes, interest, and financial penalties, as well as the refund or offset of overpaid taxes, interest, and financial penalties. After the end of the taxable reporting period (from the date of the decision issued based on the results of an on-site tax audit conducted in accordance with Articles 38.3.3 and 38.3.4 of the Code), this period may extend to five years.
Example 2: In 2026, a taxpayer will be able to submit a voluntary disclosure in respect of the tax return for the year 2021. The key point here is that the taxpayer is granted the opportunity to submit a voluntary disclosure return for periods preceding the three-year period specified in Article 85 of the Tax Code.
It should also be noted that in some cases, by making a voluntary disclosure in profit tax or income tax returns, taxpayers do not limit themselves to declaring only the resulting tax liability, but also gain the opportunity to eliminate discrepancies existing in Appendix No. 1 to the return. For example, if a taxpayer failed to declare an asset owned by them in a return submitted five years earlier, they may eliminate this discrepancy during voluntary disclosure. Naturally, in such cases, there is a possibility that the tax authority may send discrepancy notices. In such situations, the taxpayer may be required to submit a reasoned response to the identified discrepancies to the tax authority.