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Specifics of Transition to an Electronic Document Management System (+ Review of Solutions)

Legal IT Hub Program of the Ukrainian School of Practical Knowledge is regularly exploring needs of legal aid providers in technological solutions (you can join the survey right now on the web-site of the Ukrainian School of Practical Knowledge).

The survey outcomes showed that establishment of the electronic document management system have encountered some difficulties. To be specific, the issue was about filing documents and financial statements with electronic signatures on-line.

Experts of the international auditing company KPMG in Ukraine* have developed and #pro_bono provided the materials on convenience of electronic record-keeping. The information from the article is available on the company’s official web-site.

Almost all Ukrainian businesses have changed the way they operate into remote work in the Covid-19 pandemic, however, employees still have to come to office to sign and send documents to counteragents. We believe that now many businesses are thinking over convenience of electronic document management. Perhaps, there have been the events of recent months that spur the Ukrainian companies move more actively in this direction.  When considering introduction of electronic document management important is to review a number of nuances as being set forth further.

From paper-based to electronic document management

To introduce an electronic document management system, a company should approve Document Management Regulations which would, in particular, cover a detailed procedure of how these documents shall be agreed, designated and stored. Qualified electronic signatures are mandatory for signatories.  Today, such signatures are obtained, for example, from the State Tax Service of Ukraine, National Bank of Ukraine and some commercial banks.

Besides, for the tax accounts to be submitted electronically, you are required to file an application to the tax authorities to join the agreement for legal recognition of electronic documents. Most of the Ukrainian businesses have passed this stage, and the tax accounts are submitted electronically.

What an electronic document should be

Both the Ministry of Finance of Ukraine and the tax authorities have explained time and again that an electronic document has the same legal effect as a paper document. Meanwhile, an electronic document must have all those mandatory particulars and meet the requirements as been established for the same in paper form.

Therefore, if it goes about a source document, all particulars thereof must be in conformity with accounting standards and principles.   Or should, for instance, an electronic agreement be entered into, all essential terms and conditions (subject matter, price, etc.) as been required by civil law are to be included.

An electronic document is information filed just electronically. Accordingly, the essential point to remember is that in court or under tax inspection, for example, scanned copy of a paper document does not constitute an electronic document and has no legal effect, and an electronic document printed out on paper shall not be deemed an original.

It should also be considered that an electronic document must be signed with electronic signatures by both parties. A document will have no legal effect if one of the parties signs an electronic document with electronic signature, and another then just prints it out and signs with pen.

Defining a date of an electronic source document

Under the Ukrainian law, date of signing is not an essential particular of a source document. At the same time generation of an electronic document is deemed to be completed exactly on the day it is signed. If a company renders services and confirms such transactions with an electronic deed, a question may arise, whether the day an electronic deed was generated on or one the last signature was affixed to, should be deemed as the date VAT and VAT invoice liabilities occur on.

In one of their letters, the State Tax Service of Ukraine has expressed the opinion that an electronic deed of works performed shall gain status of a source document only after being duly executed. Additionally, tax authorities pointed out that the date when an electronic document will be deemed as ultimately duly executed as a source one has been ambiguously determined, whether it will be the day it is drawn up or one it is signed with the electronic signatures by both parties. Appropriate question was addressed to the Ministry of Finance of Ukraine which, in turn, gave no direct answer, having advanced an opinion that the issue of date of an electronic deed for VAT purposes should be resolved by tax legislation.

Tax authorities suggest ambiguous opinions in their individual advice. One of those piece piece of advice includes the conclusion that electronic documents come into legal force only after being affixed with electronic signatures of every contractual party. However, tax authorities give no direct answer as to proper identification of the date of an electronic deed and recommend to address the Ministry of Finance of Ukraine.

Still, there are some other individual tax advice with an opinion that since the date on which a document is signed constitutes no mandatory particular of a source document, the date when VAT liability occurs and VAT invoice is drawn up will be one of an electronic deed regardless of the date electronic signatures are affixed upon.

Thus a company with intention to introduce an electronic document management system should consider for feasibility of having an individual advice from the tax authority thereon.

What to do under tax inspection

It is explicitly provided by the Tax Code of Ukraine that under inspection by tax authorities you may be required to print out electronic documents. Yet no need is to certify such paper copies of electronic documents with counteragents or, even more so, with notaries. Suffice will be to certify copy within your company, i.e. with stamp or note “true copy” and employee’s signature, position and full name.

Brief recommendations

Generally, electronic document management is regulated by the Ukrainian law. As one of the methods to minimize tax risks and prevent questions from regulating authorities, businesses should provide in the Accounting Policy for possible use of electronic signature and electronic source documents. It is reasonable to provide in agreements with counteragents for option to draw up source documents electronically. It is also advisable to provide for a duly executed list of employees who are involved in electronic document management and certification procedure for paper copies of electronic documents in case of tax inspection.

The material was provided by experts of KPMG in Ukraine: Viktor Sheker, Director of KPMG in Ukraine, Dariia Kuznetsova, Chief Consultant of KPMG in Ukraine.

* Trademarks of KPMG International are exclusively owned by KPMG International; use of the same in this document shall not constitute a fact of audit or certification of this document by KPMG International or by any member company thereof.

Legal IT Hub Program offers a survey of some electronic document management resources.

These will help an organisation perform the following essential functions: electronic signing, exchange of documents with a counteragent, registration of and status designation for a document, option to download on computer, and integration with other services (1C, cloud storages, etc.). Please, review specifications and choose the option appropriate for you:

PROMPTLY

$ Functionality-based price

+ limitless number of working documents at any tariff

+ integration with ERP-system option

– no option to file electronic reports to regulatory authorities

Electronic document management service: https://vchasno.ua. The base mail version includes electronic document exchange functionality. You may use tariffs with advanced functionality for additional charge: Internal document approval, generation of approval route with automatic re-direction, project/direction-matched labelling.

PAPERLESS

$ service is provided free of charge.

+- the system of electronic document exchange but not management

– no option to file electronic reports to regulatory authorities

Electronic document exchange service: https://paperless.com.ua. The service constitutes an ideal solution for electronic document signing and exchange with counteragents.  However, contains no option for approval of and routing documents whitnin an organization. This is a PrivatBank resource, although no need to be the bank’s client or have Privat24 account to use it since individual registration is required.

DOCUMENT.ONLINE

$ Price is based on number of working documents

+ full functionality available for each tariff

+ integration with ERP-system option

– no option to file electronic reports to regulatory authorities

Service https://document.online. Demo-version gives opportunity to use 10 documents free of charge. For a larger option you are required to choose appropriate tariff (option to involve your employees to the chosen tariff).  Each tariff offers options to generate document templates, set a document approval route, delegate approval and signing powers, and joint editing of documents. Documents are stored on  Microsoft Azure servers. Dear friends, we hope this information was useful and helpful for you in choosing a relevant resource for your organization. You should keep in mind that electronic document management shall be introduced into activities of your organization in a systemic way. To enable this, you should develop  the Document Management Regulations or the Order on Electronic Document Management to regulate in explicit and understandable way the rules of electronic interaction in your organization. Pro Bono Space will be pleased to find for you an assistant lawyer to draw up proper documents.

Go to probono.info@gmail.com!

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