The tax office charged the entrepreneur UAH 34 million in debt for P2P cryptocurrency trading. But he went to court and completely destroyed the arguments of the tax office

However, the court sided with the crypto investor. dev.ua looked into the details of the decision of the Luhansk District Administrative Court of April 20, 2026.

How an individual entrepreneur traded crypto and why the State Tax Service came

In 2021–2022, the Ukrainian was registered as an individual entrepreneur (KVED 66.19 «Other auxiliary activities in the field of financial services»). He was engaged in the purchase and sale of virtual assets on crypto exchanges through P2P transfers.

The turnover was solid: in 2021, over 23 million UAH was received in his account, and in 2022, over 47 million UAH. The entrepreneur honestly filed declarations, indicating these amounts as income, but at the same time he also entered huge expenses for the purchase of the cryptocurrency itself (over 70 million UAH in two years). Accordingly, the net profit was small (for example, 51 thousand UAH in 2022), from which he paid taxes.

When the man decided to close the sole proprietorship in 2023, the tax office initiated an audit. And then the most interesting thing began.

Paper invoices for Bitcoin: the logic of tax officials

Tax officials looked at the movement of funds on bank cards and said: we see the income, but we don’t recognize the expenses.

The State Tax Service argued that the entrepreneur did not provide classic primary documents: contracts, invoices, certificates of work performed, or invoices for the purchase of crypto. The exported digital orders from crypto exchanges, which the individual entrepreneur provided to the tax service on a CD, were simply ignored by the inspectors because «the name of the counterparty was not indicated there.»

As a result, the tax authority decided that all 70+ million hryvnias of turnover was net profit. Moreover, since turnover exceeded 1 million hryvnias, the State Tax Service stated that the individual entrepreneur should have registered as a VAT payer.

The tax bill looked like this:

• Underpayment of income tax (personal income tax) + fine = UAH 15.8 million.

• Underpayment of military duty + fine = UAH 1.3 million.

• Unpaid VAT + fine = UAH 16.8 million.

• Total: almost 34 million hryvnias.

The tax office even managed to write out a demand for a description of the property in the tax lien. The husband went to court with a counterclaim.

What the court decided: digital orders are valid, but crypto is not a commodity

The court completely shattered the position of the State Tax Service along two key lines.

1. Electronic orders from the exchange are legal documents. The judge drew attention to the fact that P2P trading on exchanges does not involve signing paper contracts with counterparties. The market works differently: the exchange automatically generates orders with date, time, amount and currency. The court recognized the downloaded order history (which the individual entrepreneur provided on a disk) as a proper primary document, fully confirming his expenses. Accordingly, the State Tax Service unjustifiably charged 17 million in taxes on income that did not actually exist (because the money was used to exchange assets).

2. Crypto cannot be subject to VAT. Tax authorities tried to prove that trading in crypto is a «supply of goods or services,» and therefore should be subject to 20% VAT. However, the court reminded us of a basic thing: there is still no law in Ukraine that would determine the legal status of virtual assets.

«National legislation does not define the legal status of virtual assets, and accordingly, the mechanism for taxation of transactions with them, in particular VAT, has not been introduced. (…) Cryptocurrency is not included in the State Classifier of Products and Services or the Ukrainian Classification of Economic Activities,» the court decision states.

Since crypto is legally neither a good nor a service, the entrepreneur had no obligation to register as a VAT payer and pay UAH 16.8 million.

Final

The Luhansk District Administrative Court completely canceled all tax notices-decisions for UAH 34 million. The State Tax Service’s lawsuit to collect the debt was rejected. In addition, the court ordered the tax service to compensate the plaintiff for almost UAH 35,000 in court fees.

However, the court rejected the claim to compensate for another 63,000 UAH of attorneys' fees because the lawyers did not provide detailed reports of the work performed — ironically, it was the paper bureaucracy that played against the defense attorneys.

This decision once again emphasizes: while the relevant law on taxation of virtual assets in Ukraine is pending in parliament, the tax authorities' attempts to «pull» old VAT norms on crypto and demand paper invoices for bitcoin are being defeated in the courts. Well… sometimes :)