Arresting of vat in the electronic administration system as a criminal proceeding tool: the need for changes to the CPC of Ukraine

№ 7, 2025

Authors: Oleksandr LISOVOL

Issue: № 7, 2025

Doi: https://doi.org/10.37634/efp.2025.7.7

This paper examines a critical gap in the Ukrainian legal framework that hinders effective criminal prosecution of large-scale tax fraud involving fictitious VAT credits. In recent years, the Ukrainian tax system has struggled to counteract the manipulation of VAT through the use of shell companies and transit enterprises, which generate artificial tax credits via fictitious transactions. While the electronic VAT administration system (SEА VAT) was introduced to automate and control the movement of tax liabilities, its design has created legal ambiguity regarding the status of VAT limits formed within it. The paper substantiates the need to amend the CPC to recognize digital tax indicators, such as VAT limits, as eligible objects for pre-trial seizure, particularly when formed through suspicious or criminal schemes. The proposed legislative changes aim to ensure that such VAT amounts may be provisionally blocked to prevent their use in tax evasion or illicit budget refund claims. The author supports the proposal with legal argumentation, a review of judicial practice, and comparative insights from digital asset regulation. Key safeguards are suggested to preserve the rights of bona fide taxpayers, including judicial oversight, case-by-case analysis, and requirement of clear identification of the beneficiary or transit entity involved in the fictitious operations. Overall, the paper contributes to the modernization of procedural mechanisms in financial criminal law, proposes an urgent legal remedy for combating VAT fraud in wartime economic conditions, and offers a legal basis for addressing broader challenges posed by intangible digital assets within the criminal process.

Keywords : VAT, asset seizure, SEА VAT, CPC of Ukraine, fictitious operations, beneficiary, criminal procedure

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