Administrative address of funds on the taxpayer's account

Can the administrative seizure of funds on a taxpayer's account be applied, within what period and in what order are funds released from seizure?

Paragraph 94.2 of the Tax Code sets forth the circumstances under which administrative seizure of a taxpayer's property may be applied.

Pursuant to clause 94.4 of the TCU, the seizure may be imposed by the controlling authority on any property of the taxpayer, except for property that cannot be recovered in accordance with the law and funds on the taxpayer's account.

The seizure of funds in the taxpayer's account/e-wallet is carried out solely on the basis of a court decision by applying to the court by the controlling authority (second paragraph of subpara. 94.6.2 of the TCU).

Pursuant to clause 3 of Section VII of the Procedure for the Application of Administrative Seizure of Taxpayer Property, approved by Order of the Ministry of Finance of Ukraine No. 632 dated 14.07.2017, in order to apply for the seizure of funds on the taxpayer's account/e-wallet, the tax authority shall file an application to the court in accordance with the procedure provided for by the Code of Administrative Procedure of Ukraine.

Pursuant to clause 76 of Section V of the Instruction on Cashless Payments in the National Currency of Payment Service Users, approved by Resolution of the NBU Board No. 163 dated 29.07.2022, the payer's payment service provider, where the payer's account(s) are opened, shall take measures to ensure the execution of the document, in particular, a court decision to seize funds received on that operational day.

Pursuant to clause 31 of Section I of Instruction No. 163, the payer's payment service provider shall suspend expenditure transactions on users' accounts on the basis of a court decision issued at the request of a supervisory authority and received by the payer's payment service provider directly from the court or supervisory authority after receiving the court decision.

The grounds for terminating the administrative seizure of a taxpayer's property are set out in clause 94.19 of the Tax Code.

Paragraph 2 of Section VII of Procedure No. 632 stipulates that a bank, other financial institution, non-bank payment service provider, or electronic money issuer shall release funds from arrest by a court decision. In order to release funds from seizure, the tax authority shall apply to the court within two business days following the day when the tax authority becomes aware of the grounds for termination of such seizure.

Court decisions that have entered into force are binding on all state authorities, local governments, their officials and employees, individuals and legal entities and their associations throughout Ukraine (part two of Article 14 of the Code of Administrative Procedure of Ukraine dated July 6, 2005 No. 2747-IV as amended).

In accordance with clause 84 of Section V of Instruction No. 163, the payer's payment service provider shall accept for execution a document, in particular, a court decision to lift the seizure of funds, which was received in electronic or paper form.

The payer's payment service provider accepts for execution a document on lifting the seizure of funds in paper form, which was delivered to the payer's payment service provider by the executor (representative/attorney, assistant private executor), lawyer, investigator, representative of the court, investigating judge, prosecutor, supervisory authority or received by registered or valuable mail sent by the executor, investigator, court, investigating judge, prosecutor, supervisory authority. The payer's payment service provider establishes the powers of the person who delivered the document on the seizure of funds in the manner prescribed by its internal documents.

In accordance with the General Provisions of Instruction No. 163, the payer's payment service provider shall execute the user's payment instruction within the business day if the payment instruction is received within the business day, or within another period if provided for by the terms of the agreement. The payer's payment service provider shall execute the user's payment instruction received after the end of the transaction time no later than the next transaction day or within another period if provided for by the terms of the agreement.

Thus, the administrative seizure of funds on a taxpayer's account may be applied only on the basis of a court decision.

In order to release the funds from the seizure, the tax authority shall apply to the court within two business days following the day when the tax authority becomes aware of the grounds for terminating such seizure.

Once the court has made a decision to lift the seizure of funds and the decision enters into force, such decision is subject to mandatory execution by the payment service provider.

In accordance with clause 31 of Section I of Instruction No. 163, the payer's payment service provider shall resume the payment transactions on the user's account based on a decision of the tax administrator or court.

The activities of payment service providers are regulated by the Law of Ukraine No. 1591-IX "On Payment Services" dated June 30, 2021 and Instruction No. 163, as well as other legislation of Ukraine.