Blocking accounts without a court order: when it is legal and what to do to avoid it
2 April 16:43
A bank or tax office can block your account without a court order. The Supreme Court has confirmed that using a personal account for business can be grounds for blocking. In addition, the State Tax Service has the legal right to block accounts in two specific cases. Here’s a look at when such actions are legal, how to avoid them, and what to do if your funds are at risk. Details are in the article
Yakov Voronin, attorney at law, Doctor of Law, Associate Professor, Chairman of the Public Control Council at the Bureau of Economic Security, Chairman of the Committee on Customs and Tax Law of the Ukrainian National Bar Association, in an exclusive commentary
Two legal scenarios
“Blocking of bank accounts without a court decision is a situation that shocks most taxpayers when they encounter it. Let me tell you the truth: The State Tax Service does have the legal right to do this, but only in two specific cases,” Yakiv Voronin
The first case is a self-declaration, in other words, if you have indicated the amount of tax in your declaration but have not paid it within 90 days after the deadline. In this case, the tax authorities get carte blanche to collect these funds directly.
“The mechanism here is quite simple: the tax authority makes a decision on recovery, sends it to you and your bank, and it is subject to immediate execution. There are no additional procedures,” Yakov Voronin
The second case is the unified social tax debt. The unified social tax has a special status. When a debt arises, the tax office first sends you a demand for payment. If you don’t pay off the debt, the demand is transferred to the executive service.
“The bailiffs immediately block all your accounts, both business and personal. They write off any funds on these accounts to repay the debt. And again, no court is needed,” Yakov Voronin
In all other cases – taxes, fines, and penalties accrued after an audit – the tax authorities are forced to take legal action.
“This gives taxpayers time and opportunities to defend themselves, because the State Tax Service has to file a lawsuit, win the case, get a court order, and only then hand over the documents to the bailiffs. If you have no assets to collect within three years, the tax debt should be recognized as uncollectible and written off. But there is an exception – the unified social tax debt has no statute of limitations, it can be collected from you even after decades,” Yakov Voronin
In practice, the tax authorities are in no hurry to write off bad debts – they often “hang” for 5 years. In such cases, it is worth writing an application for write-off, and if they ignore it, a complaint to the State Tax Service of Ukraine.
“That is why I always advise to regularly check the status of payments to the budget in the taxpayer’s electronic office,” Yakov Voronin
This is a very simple habit that can save you from serious problems, the lawyer summarizes.
