Tax invoice: how the system of checks, blocking and unblocking works

The author of the article: Denis Korablyov

Modified date: 17 December 2025

A tax invoice is one of the key documents in the VAT system: it confirms the authenticity of business transactions, allows for the formation of a tax credit, and affects a company’s reputation in the eyes of both the state and business partners. However, the automated monitoring system (SMKOR) can block its registration even for minor discrepancies or technical errors. This article provides a detailed overview of how tax invoices are checked, why they may be blocked, which documents are required for unblocking, and how companies can prevent such situations in the future.

If you are a VAT payer, a VAT invoice (VI) is not just a formality for you, but the main document that confirms your transactions. Every sale of goods or services is recorded through the registration of the VI in the Unified Register, and it is based on this data that the tax authorities see the entire supply chain: manufacturer → wholesaler → retailer → end customer.

The VI is a basis for a tax credit, an indicator of business “transparency,” and at the same time a source of risk, because the monitoring system can stop its registration even without human involvement.

In this guide, we will explain how VAT invoices are checked in the SMKOR system, why VIs are blocked, what to do in such cases, which documents are needed for unblocking, and how to prevent blocking in the future.

Why the VAT invoice is so important

A VAT invoice is not just a reporting document. It is the main document for confirming VAT transactions in Ukraine. It has two key functions:

For business – the right to a tax credit

A VAT payer can reduce their tax liabilities by the amount of VAT if the invoice is registered in the Unified Register. Without a registered VI, they cannot include this amount in the tax credit, even if the goods or services were actually received.

For counterparties – a guarantee of transaction integrity

Using previously submitted VAT invoices, a business can verify its counterparty and avoid “risky” partners. Since 2017, VAT invoices have been partially open and can be checked through the “Unified Register of VAT Invoices” service, available in the Taxpayer’s Electronic Cabinet.

How the VAT invoice verification process works upon registration

Every VAT invoice undergoes automatic verification by the risk assessment monitoring system (SMKOR). This system independently analyzes the invoice and makes one of two decisions:

• register the document, or
• stop the registration (so-called “VAT invoice blocking”).

The stopping of VAT invoice registration is regulated by the Procedure for stopping VI/RK registration in the Unified Register of VAT Invoices (hereinafter – the Procedure).

In general, a VAT invoice goes through four stages of verification, each with its own criteria.

Stage 1. Verification for unconditional registration criteria

At this stage, the system determines whether the invoice meets the criteria for automatic registration without additional analysis. If it matches at least one of these criteria, it is registered immediately.

Criteria for unconditional (automatic) registration:

• the buyer is a non-VAT payer or the invoice is issued for a preferential operation (i.e., if the buyer cannot claim a credit on this invoice, there is no need for further verification);
• the monthly invoice volume is less than 1 million UAH. At the same time, the supply to a single recipient does not exceed 100,000 UAH per month, VAT was paid for the previous month, and VAT declared for the last reporting period exceeds 40,000 UAH. Additionally, the manager holds this position in no more than 5 companies;
• the seller pays a significant amount of VAT (over the last 12 months more than 10 million UAH of paid and declared VAT);
• the invoice contains only those operations (by UKTZED/DKPP codes) that were indicated in a previously submitted and accepted tax data table, and the taxpayer does not have a risky status;
• the invoice is issued for certain operations (check the list in Clause 5, item 3 of the Procedure);
• the invoice amount is up to 10,000 UAH, there is no risky status, and the manager holds this position in no more than 5 companies;
• corrections submitted within 10,000 UAH (also without risky status and manager in no more than 5 companies).

Risky status creates problems even for small invoices. Therefore, it is very important to remove the company from the list of risky VAT payers in time.

If the invoice does not meet any of the above criteria, it will not be automatically registered and will proceed to the next, second stage of verification.

Stage 2. Assessment of taxpayer risk

At this stage, it is checked whether the taxpayer is considered risky. Risk criteria are defined in Appendix 1 to the Procedure; there are eight in total. The review is conducted by a commission of the regional tax authority, not the SMKOR automatic system.

If the commission decides that the taxpayer meets at least one risk criterion, this decision is uploaded to SMKOR, and the system automatically stops the invoice registration.
If there is no such decision, the invoice proceeds to the next stage: analysis of a positive tax history.

Risk criteria for the taxpayer:

• the taxpayer is registered based on invalid or forged documents;
• ownership or management of the company has been transferred to non-existent, deceased, or missing persons;
• the taxpayer was registered by individuals who declared that they did not intend to conduct business activities;
• information has been received that business activities are being conducted without the knowledge of the founder or director;
• the legal entity does not have a bank account;
• VAT reports were not submitted for the last two reporting periods;
• financial statements were not submitted for the last reporting period (for those on the general taxation system);
• the tax authority has information indicating the taxpayer’s riskiness (there are 20 tax information codes under which a taxpayer may be classified as risky).

Tip: if your company meets at least one criterion and is included in the list of risky taxpayers, it is important to immediately submit explanations and documents to remove it.

Stage 3. Analysis of positive tax history

After the risk assessment, the system proceeds to analyze the VAT payer’s positive tax history.
This is one of the key stages that can “save” the invoice from being blocked. The system checks 9 indicators of positive history. If the taxpayer meets at least one criterion, the invoice is registered automatically. If none are met, the document proceeds to the final stage, where the risk of the transaction itself is assessed.

Criteria for positive tax history:

• the volume of registered invoices in the current month does not exceed 3 million UAH (applies to small or new businesses);
• stable assortment of purchased goods (demonstrates that you buy a consistent range of goods or services, nothing unusual);
• residual value of fixed assets in the reports is at least 5 million UAH;
• land area owned or leased is at least 200 ha (aimed at agricultural producers);
• over the last 12 months, the taxpayer paid personal income tax per employee exceeding twice the amount of the tax based on the minimum wage, with more than 5 employees on average per month;
• over the previous reporting year, taxes and single social contributions exceeding 10 million UAH were paid;
• over the last 12 months, VAT paid exceeded 1 million UAH;
• all previously stopped invoices have been registered (those for which the deadline for submitting explanations has passed);
• long-term positive history.

Stage 4. Assessment of transaction risk

If the previous stages did not reveal grounds for stopping registration, the system analyzes the transaction itself for risk. The system checks 6 criteria of transaction risk during invoice verification. If the transaction meets at least one, the registration of the VAT invoice is blocked. If not, the invoice is registered automatically.

Transaction risk criteria:

• discrepancy of 1.5 times or more between the supply volume of goods (services) and the purchase (import) volume of goods (services);
• lack of a license for excisable goods indicated in the invoice being registered;
• absence of a current entry in the Register of excise taxpayers for the business entity selling fuel;
• stopping the registration of a correction invoice (RC) for a change in the product nomenclature;
• preparing an RC to reduce tax liabilities by an amount exceeding the “virtual balance of goods/services” – the difference between purchase and supply volumes, i.e., its virtual balance in SMKOR;
• preparing an RC to an invoice that was registered to a non-VAT payer, and registration of such RC occurs more than 90 days after the invoice registration.

At this stage, the system completes the verification. The taxpayer receives information in the form of a receipt regarding the registration of the invoice or the stop of its registration.

All these verification stages are carried out automatically, so even minor inaccuracies in product codes, counterparties, or dates can lead to the VAT invoice being stopped.

What to do if VAT invoice registration is stopped

If the system stops the registration of a VAT invoice, the taxpayer receives a receipt indicating the reason for the block in the Electronic Taxpayer Cabinet.

To register the VAT invoice, it is necessary to submit written explanations and supporting documents.
The submission deadline is 365 days from the day after the invoice date (Clause 6 of Order No. 520).

Explanations should be brief but clearly describe the essence and real purpose of the transaction. They must include documents that confirm the stated circumstances, such as:

• agreements or contracts;
• powers of attorney and acts;
• primary documents regarding the supply of goods or services;
• financial documents (payment orders, bank statements);
• certificates of conformity, waybills, etc.

Explanations are reviewed by commissions of the regional tax authorities. The review period is 5 working days. Based on the review, the commission decides whether to register the invoice, reject registration, or request additional documents.

If you believe the commission’s decision is unfair, you can file a complaint with the central commission of the tax authority.

If you need assistance analyzing VAT invoices, preparing explanations, or unblocking invoices, the buh.ua team can help. We support audits, prepare documents, and protect clients’ interests in tax disputes.

How to Prevent VAT Invoice Blocking

The most effective way to avoid VAT invoice blocking is to submit a VAT Payer Data Table. This document helps the tax authorities understand the specifics of your business: which goods or services you purchase, what you produce, and what you supply further.

During VAT invoice verification, the SMKOR system compares the product and service codes in your invoice with those in your Data Table. If the information matches, the likelihood of blocking is significantly reduced. The table is especially useful for businesses with non-standard operations, multiple business types, or frequently changing assortments.

You are experts in your field, so everything may seem simple to you. However, tax authorities are not experts in every industry and cannot know the nuances of each business. Therefore, we strongly recommend submitting such a data table to prevent future VAT invoice blocking.

Additionally, here are some practical tips to reduce the risk of VAT invoice registration being stopped:

• Submit tax reports on time;
• Update reports on fixed assets;
• Do not conduct transactions that do not match the company’s material base;
• Buy and supply only goods that match your business profile;
• Control the volume of goods supplied relative to the volume purchased;
• Pay taxes and fees on time.

Possible Consequences of Not Submitting Explanations

1. The VAT invoice will remain unregistered in the ERPN. Therefore, the buyer will not be able to include it in their tax credit, which may cause conflicts with the counterparty expecting a “credit” invoice.
2. Violation of contractual obligations. Many contracts include a clause on mandatory VAT invoice registration. Failure to comply may result in fines, claims, or refusal to cooperate.
3. Fines for late registration (or lack thereof). If explanations regarding invoice registration are not submitted within 365 days, the tax authority may impose a fine of 25% of the VAT amount stated in the invoice (Clause 90, Subsection 2, Section XX of the Tax Code, para.13 of 120.1 of the Tax Code).
4. Risk of further attention from the tax authority. If you remain passive after registration is stopped, the system records this as “schematic behavior,” increasing the likelihood of blocking subsequent invoices, even if they are fully correct.
5. Deterioration of the taxpayer’s tax history. This may lower the taxpayer’s reputation in the eyes of the tax authorities and can affect future automatic invoice blocking, difficulties with budget reimbursements, and inclusion in the list of high-risk taxpayers.

In other words, not submitting explanations is essentially equivalent to voluntarily agreeing that the invoice is fictitious or questionable. Even if it is genuine, without explanations it cannot be rehabilitated.

The tax authority records such inaction as “risky behavior,” which affects the company’s tax history and increases the risk of further inspections.

FAQ: Frequently Asked Questions about VAT Invoices