• Changes to the Tax Code of Ukraine
  • January 7, 2014
  • Law Firm: Dentons Canada LLP - Toronto Office
  • On 12 November 2013 the Law of Ukraine dated 24 October 2013 No.657-VII, which introduced significant changes to the Tax Code of Ukraine was published. The Law enters into force on 1 January 2014, save for certain provisions already effective from 13 November 2013.

    The most significant changes in our review:

    Facilitated Procedure for Registration as a VAT payer:

    • Registration as a VAT payer may be carried out at the stage of state registration of a business entity;
    • Taxpayers who entered into an agreement on recognition of electronic documents with a tax authority may file an application for registration as a VAT payer in electronic form;
    • Cancellation of a VAT payer certificate. The record on registration of a person as a VAT payer in the Register of VAT payers will be deemed the fact of registration as a VAT payer;
    • The requirement for the availability of taxable transactions for voluntary registration as a VAT payer has been canceled;
    • Clarification regarding the reservation of a taxpayer’s right to receive pecuniary compensation from the budget in future periods, i.e. the possibility to change the direction of the compensation from the budget, has been provided;
    • Such tax invoice details as “number and date of the customs declaration under which the goods imported into the customs territory of Ukraine were cleared at customs” have been cancelled.

    Corporate Profit Tax:

    • Disclosure of temporary and permanent tax differences in financial statements becomes a taxpayer’s right rather than an obligation;
    • The criterion for determining controlled transactions for transfer pricing purposes has been defined more precisely. In particular, it is clarified that controlled transactions are, inter alia, transactions where one party - non-resident is registered in the country (territory) where the tax rate five or more percentage points lower than in Ukraine or who pays income tax (corporate tax) at the rate of more than five percentage points lower than in Ukraine;
    • The procedure of registration of securities for taxation purposes has been refined.

    Facilitated Procedure for Registration as a Single Tax Payer:

    • Registration as a single tax payer may be carried out at the stage of the state registration of a business entity or an individual entrepreneur;
    • Cancellation of a single tax payer certificate. The record on the registration of a person as a single tax payer in the Register of Single Tax Payers will be deemed the fact of registration as a single tax payer.

    Administration:

    • Notification regarding the persons subject to taxation (Form 20-) should be made not at the location of such persons but at the principal place of registration;
    • The data about a taxpayer must be published on the official website no later than the following business day;
    • The reasons for unscheduled inspections are updated. The tax authorities will have to indicate the specific facts which are the basis for unscheduled inspections;
    • Within five business days from the day of receipt of the inspection report, taxpayers may submit any additional documents, not only the documents marked as missing in the inspection report.

    Draft Law on Introduction of Changes to the Tax Code of Ukraine Regarding Certain Tax Rates No. 3757 dated 16 December 2013 approved by the Verkhovna Rada and on 23 December submitted to the President of Ukraine for signature.

    The Draft Law provides for the introduction of changes to the Tax Code of Ukraine aimed at the following:

    • Increase in the excise tax on beer by 35 percent on cider and perry (without the addition of alcohol) by 50 percent, on alcohol and other strong drinks by 14 percent. It also stipulates for the increase in the excise tax rate on tobacco products, tobacco and manufactured tobacco substitutes and the increase in the minimum excise obligation to pay the excise tax on tobacco products by 11.6 percent;
    • Reduction of the value added tax rate (to 17 percent) established by the current provisions of the Tax Code of Ukraine will take place in 2015;
    • Gradual decrease in the rate of the corporate profit tax from the current 19 percent rate during the next three years as follows:

     

    2014

    2015

    2016

    Rate provided for by the current wording of the Tax Code of Ukraine

    16%

    16%

    16%

    Rate provided for by the Draft Law

    18%

    17%

    16%

    • Extension of the exemption from value added tax on raw hides and curried leather without further dressing, scrap metal operations until 1 January 2015;
    • Introduction of the exemption from value added tax on waste paper operations.