Landmark Ruling by Ukraine’s Supreme Court
On December 12, 2025, Ukraine’s Supreme Court delivered a pivotal decision impacting how tax authorities scrutinize businesses. The Court ruled that multiple entrepreneurs sharing a single IP address does not, by itself, constitute sufficient evidence of business fragmentation or tax avoidance. However, such a coincidence may still serve as a red flag prompting tax officials to launch an audit. The case involved one limited liability company (LLC) and 17 individual entrepreneurs (sole proprietors), all of whom used the same IP address and identical email addresses when communicating with the tax service.
Tax inspectors argued that this situation indicated the entrepreneurs were effectively controlled by the LLC. The case documented a substantial amount of unpaid corporate income tax and value-added tax (VAT). Consequently, criminal proceedings were initiated for tax evasion. Yet the Supreme Court sided with the entrepreneurs, stating that without primary documents—such as contracts, invoices, or financial records—that could confirm a link, the tax authorities’ conclusions were unfounded.
Bohdan Yankiv: 'An IP address by itself neither proves nor disproves a connection. Additional, clearly documented primary evidence is required to establish such a link.'
Impact on Tax Audit Practices
According to a State Tax Service (STS) order dated June 2, 2015, the use of the same IP address or email by more than seven taxpayers with annual sales exceeding 4 million hryvnias is considered a risk criterion. In July 2025, the Odesa court upheld the business owners’ position, ruling that they won the case due to a wartime moratorium on tax inspections. Additionally, a Vinnytsia court ruling on April 13, 2026, confirmed the operation of the STS’s automated system, which flags IP address matches and generates risk reports.
Bohdan Yankiv further noted: 'An IP address acts as a trigger—a starting point after which additional documents may be uncovered. And if those documents are found, mounting a defense becomes extremely difficult.' This Supreme Court decision is likely to significantly influence how tax audits are conducted in Ukraine, emphasizing that concrete evidence is necessary before concluding that tax evasion has occurred.
The ruling underscores the importance of due process in tax disputes, making clear that without proper documentation, authorities cannot assert wrongdoing by entrepreneurs. This could reduce the risk of unjustified audits and foster a fairer business environment in Ukraine. Given the frequent changes in tax legislation, such judicial decisions are crucial for shaping enforcement practices and protecting entrepreneurs’ rights.
The recent ruling by Ukraine's Supreme Court not only clarifies the use of IP addresses in tax audits but also aligns with broader trends in taxation practices. For instance, the Ukrainian Tax Authority has recently intensified its focus on P2P transactions, as evidenced by new court decisions from 2025 that underscore the evolving landscape of tax compliance. Understanding these developments is crucial for businesses navigating the complexities of tax regulations in the current climate.