Stable economic development is impossible without a free and secure business environment.

However, what happens when government agencies place excessive pressure on entrepreneurship, forcing businesses—whose establishment and development required an incredible amount of effort and resources from their founders—to leave the Ukrainian market?

This is not a hypothetical question, as there is currently a serious problem of unfounded criminal prosecutions of business entities by law enforcement agencies. Such practices not only lead to direct budget losses but also significantly worsen Ukraine’s business climate and investment attractiveness. The imperfections in current legislation and the inconsistent practice of its application often serve as the basis for initiating criminal proceedings without proper legal grounds. This, in turn, creates additional pressure on businesses and can be used as a means of unfair competition or unlawful influence.

To address this issue, the Verkhovna Rada of Ukraine has adopted a series of laws aimed at protecting businesses from excessive interference by law enforcement agencies. In particular, legislative initiatives known as “Stop the Mask Show” and “Stop the Mask Show – 2” were designed to reduce pressure on entrepreneurs. However, despite the changes implemented, the practice of unfounded criminal proceedings against businesses remains unchanged.

To further improve the mechanism for protecting businesses, on January 20, 2025, Bill No. 12425 was registered with the Verkhovna Rada of Ukraine “On Amendments to the Criminal Code of Ukraine and the Criminal Procedure Code of Ukraine Regarding the Protection of Taxpayers from the Pressure of Criminal Prosecution” (Bill No. 12425) was registered with the Verkhovna Rada of Ukraine.

As stated in the Explanatory Note to Bill No. 12425, “the bill aims to improve legislation in order to distinguish between tax and criminal legal relationships. Currently, there is a practice whereby business entities may become subject to criminal prosecution due to insufficiently clearly defined criteria regarding the obligation to pay taxes and tax liabilities.”

Draft Law No. 12425 proposes amendments to the Criminal Code and the Code of Criminal Procedure of Ukraine, specifically as follows:

1. the note to Article 212 of the Criminal Code of Ukraine specifies that the obligation to pay taxes is confirmed only by a decision of the tax authority regarding an agreed-upon tax liability. Criminal liability arises in the presence of a tax debt;

2. The note to Article 212-1 of the Criminal Code of Ukraine establishes that the obligation to pay the Unified Social Tax (UST) and insurance contributions is confirmed by a decision of the tax authority or a court. Criminal liability arises in the event of arrears;

3. Part 1 of Article 284 of the Criminal Procedure Code of Ukraine is supplemented by paragraph 11, pursuant to which criminal proceedings under Article 212, 212-1 of the Criminal Code of Ukraine shall be terminated if the tax or pension obligation has not been settled or is being contested through administrative or judicial proceedings.

These changes are important because, first, they will help ensure the principle of legal certainty, significantly reducing the possibility of arbitrary interpretation of the provisions of the Tax Code of Ukraine by pre-trial investigation authorities for the purpose of artificially fabricating the elements of a criminal offense under Articles 212 and 212-1 of the Criminal Code of Ukraine. Second, they will reduce the number of cases in which information is entered into the Unified Register of Pre-trial Investigations (URPI) for the alleged commission of criminal offenses under the aforementioned articles on fabricated grounds.

Since, as practice shows, criminal proceedings under Articles 212 and 212-1 of the Criminal Code of Ukraine are quite often initiated based on reports from operational officers of law enforcement agencies, such reports, by their very nature, do not contain sufficient information to indicate the presence of elements of a criminal offense. However, such reports are sufficient for entering the relevant information into the Unified Register of Pre-trial Investigations and for subsequently conducting investigative and procedural actions against business entities: searches, seizures, and property arrests. As a result, such actions effectively paralyze the business’s lawful economic activities.

Even if, following the results of the pretrial investigation, the investigator concludes that the criminal proceedings against the business entity should be closed, services such as YouControl, ContrAgent, Opendatabot, and others continue to publish information about court rulings issued within the framework of such proceedings (orders granting temporary access to items and documents, orders for the seizure of property, etc.). This situation undoubtedly damages the business reputation of the business entity and may hinder its future lawful activities due to the refusal of counterparties to cooperate with a “problematic” company.

The proposed amendments are undoubtedly a progressive step, as they should, in theory, prevent criminal prosecution under Articles 212 and 212-1 of the Criminal Code of Ukraine without a corresponding decision by a supervisory authority (or a court).

Another important measure to prevent unfounded criminal prosecution is the amendment to the Criminal Procedure Code of Ukraine proposed by this draft law, which adds the following paragraph to Article 284, paragraph 11: “In criminal proceedings concerning criminal offenses provided for in Articles 212 and 212-1 of the Criminal Code of Ukraine, circumstances that could indicate the commission of a criminal offense—whether cited by the victim, the complainant, or identified from another source, relate to a tax (monetary) obligation that has not been settled, or relate to an obligation to pay insurance contributions to the mandatory state pension insurance system, the demand for payment of which is being challenged or may be challenged through administrative or judicial proceedings.”

These changes will ensure that even in the presence of a decision by a tax authority concerning a tax liability that has not been agreed upon, or concerning an obligation to pay insurance contributions for mandatorystate pension insurance, a business entity will be able to challenge such decisions through administrative or judicial proceedings without the risk of criminal prosecution, and even if criminal proceedings are initiated, it will have an unconditional right to file a motion to dismiss such proceedings.

Thus, the proposed amendments to the Criminal Code and the Code of Criminal Procedure of Ukraine are intended to protect businesses not only from criminal prosecution without a decision by the tax supervisory authority, but also from prosecution during the period of appealing such a decision in accordance with the procedure established by law, until a higher-level tax authority or a court issues a final decision on the matter.

On the other hand, the proposed amendments will promote a more efficient use of human and material resources by the law enforcement system, allowing it to focus its efforts on investigating crimes that pose a danger to society, combating corruption and other economic offenses that cause real harm to the state, rather than exerting unfounded pressure on businesses.

In summary, it can be said that the proposed legislative initiative is a truly important and promising step toward improving legal regulation and protecting businesses from unfounded criminal prosecution. However, its practical implementation remains a key issue. It is important that it does not remain merely on paper, like many other initiatives aimed at protecting businesses from pressure that have been actively implemented over the past decade, but rather becomes a truly effective and practical legal norm in practice.