CONSTITUTIONAL COURT OF UKRAINE REQUIRES PROOF OF TAXPAYER FAULT BEFORE IMPOSING SIGNIFICANT FINANCIAL SANCTIONS

On 26 November 2025, the Constitutional Court of Ukraine adopted Decision No. 5-r(II)/2025 in case No. 3-133/2021(299/21) (“Decision”) following a constitutional complaint filed by ANDRITZ HYDRO GmbH regarding the compliance of paragraph 120-1.1 of Article 120-1 of the Tax Code of Ukraine (“Tax Code”) with the Constitution of Ukraine.

The Constitutional Court of Ukraine concluded that paragraphs 1–2 of paragraph 120-1.1 of Article 1201 of the Tax Code comply with the Constitution of Ukraine. At the same time, the Court articulated an important legal position on the necessity to prove the taxpayer’s fault where financial sanctions comparable to criminal penalties are imposed.

Comparability of Financial Sanctions to Criminal Penalties

The Constitutional Court applied the criteria established by the European Court of Human Rights in Engel and Others v. the Netherlands to assess whether a financial sanction is comparable to a criminal penalty.

At the same time, the nature of the offence, as well as the nature and severity of the penalty, are decisive in determining whether an offence falls within the scope of a “criminal charge”.

The Burden of Proof as a Constitutional Guarantee

The Constitutional Court emphasised that where sanctions comparable to criminal penalties are imposed, constitutional guarantees must be fully observed, in particular:

• the principle of individualisation of legal liability (Article 61 of the Constitution of Ukraine);
• the principle of the presumption of innocence (Article 62 of the Constitution of Ukraine).

In such cases, the taxpayer’s fault must be established, and the burden of proof lies with the enforcing authority. The form of fault is an essential factor to be assessed by both the tax authorities and the courts.

The Court also confirmed the application of the presumption of innocence in such cases: when evaluating evidence, any doubts as to the taxpayer’s fault must be interpreted in favour of the taxpayer.

Implications of the Decision

The Constitutional Court emphasised that, in cases involving significant financial liability, establishing fault is a necessary condition for holding a person liable.

The conclusions of the Constitutional Court must be taken into account by the courts of Ukraine when considering tax and other disputes.

Additional Information

This legal alert is issued to inform AVELLUM clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The information above does not constitute legal or other advice and should not be considered a substitute for specific advice in individual cases.

For further information on this legal alert and other issues regarding the protection of taxpayers’ rights in Ukraine, please contact partner Vadim Medvedev.