Regarding main novations and perspectives of tax legislation in 2023

In 2023, the regulations enter into force regarding:

Payment of advance payments from the corporate income tax for structural subdivisions that carry out trade in currency values in cash form (Law of Ukraine № 2720-IX as of 03.11.2022 "On amendments to the Tax Code of Ukraine and other laws of Ukraine regarding taxation specifics of trade activities in currency values in cash").

From January 1, 2023, it is foreseen to pay advance income tax payments for each foreign currency exchange point entered in Register of foreign currency exchange points in the amount of:

three minimum wages for each foreign currency exchange point located in a settlement with a population of more than 50 thousand;

one minimum wage for each foreign currency exchange point located in other settlements or outside settlements.

Taxpayers, during 2023, will pay the following advance payments, taking into account the following features:

- using the 0.33 coefficient from January 1, 2023 to June 30, 2023;

- using the 0.66 coefficient from July 1, 2023 to December 31, 2023.

Amount of advance payments paid during the reporting (tax) year will reduce the corporate income tax calculated based on the results of such reporting (tax) year in an amount not exceeding amount of the accrued tax liability for such tax (reporting) period.

Introduction of a new version of the Ukrainian classification of the FEA products (Law of Ukraine № 2697-IX as of 19.10.2022 "On the Customs Tariff of Ukraine").

New version of the Ukrainian classification of the FEA products is being introduced from January 1, 2023, built on the basis of the Harmonized System of Description and Coding of Products version 2022 and the Combined Nomenclature of the European Union 2022.

These changes will affect filling in tax invoices and adjustment calculations to tax invoices.

Taxation of entrepreneurial activity of electronic residents (Law of Ukraine № 2654-IX as of 06.10.2022 "On amendments to the Tax Code of Ukraine and some other laws of Ukraine regarding the taxation peculiarities of entrepreneurial activity of electronic residents").

Enters into force on April 1, 2023 and provides for the regulation of electronic residence status:

- foreigner, who has reached the age of 18, is not a tax resident of Ukraine and is registered in the "E-resident" system;

- is a payer of Group III of the simplified taxation system without the VAT:

pays 5%  tax of income within the limit (1167 minimum wages), if exceeds the 15%limit

income with a source of origin from Ukraine is not allowed, except for passive income;

tax agent of the "E-resident" is a bank in which current account of the single tax payer of Group III of the "E-resident" is opened.

Amounts of some tax rates and procedure for calculating some tax liabilities will change from January 1, 2023, namely:

Specific rates of the excise tax and the minimum excise tax liability for payment of the excise tax on tobacco products are increased by 20% (Paragraph 17 Sub-section 5 Section XX "Transitional provisions" of the Tax Code of Ukraine).

A gradual rate increase is planned from 2021 to 2025 (by 20% each year).

Such changes are aimed at bringing rates established by Ukrainian legislation closer to the rates defined in provisions of EU Directive 2011/64/EU as of 21.06.2011 on the structure and rates of excise duties on tobacco products and increase the price of excise products.

Excise tax rates on liquids used in electronic cigarettes are increasing (Law of Ukraine № 2139 as of 15.03.2022 "On amendments to the Tax Code of Ukraine and some other legislative acts of Ukraine regarding the introduction of differentiated rent payments for natural gas extraction").

Rate increases to 10 thousand UAH for 1 liter (now it is 3 thousand UAH for 1 liter). Norm is valid during the marital law and/or state of emergency.

Some tax benefits become terminated

The following tax benefits will cease to apply from January 1, 2023, namely:

- which were provided in the field of cinematography, space activities and the supply of software products (Paragraphs 3, 26¹  and 61 Sub-section 2 Section XX of the Transitional Provisions of the Tax Code of Ukraine):

– cinematography – the VAT exemption regime for import of certain products used in the cinematography sphere into the customs territory of Ukraine expires;

- space industry - the VAT exemption regime for import to the customs territory of Ukraine by subjects of space activity of certain products defined by the Customs Code of Ukraine, as well as the exemption from taxation of provision to the customs territory of Ukraine of the results of scientific research and research design works performed for the needs of space activities;

– provision of software products – regime of the VAT exemption for provision of software products expires;

which were temporarily, until January 1, 2023, provided to hotels and similar means of temporary accommodation in relation to the VAT of provision of temporary accommodation (accommodation) services at a 7% rate (Paragraph 74 Sub-section 2 Section XX of the Transitional Provisions of the Tax Code of Ukraine). At the same time, the specified benefit continues to be applied according to Sub-paragraph "c" Paragraph 193.1 Article 193 of the Tax Code of Ukraine.

Amounts of the minimum wage and subsistence minimum are changing (Law of Ukraine № 2710-IX as of 03.11.2022 "On the State budget of Ukraine for 2023").

The Law establishes that during 2023:

the minimum wage per month will be 6.700 UAH,

subsistence minimum for one able-bodied person – 2.684 UAH.

These provisions will lead to changes in taxation of activity of individuals-entrepreneurs.

Annual income limits for individuals-entrepreneurs

Income limit for individuals-entrepreneurs on the simplified taxation system, which is the upper limit of earnings of individuals-entrepreneurs, upon exceeding which it can be transferred to the general taxation system, is tied to the minimum wage, so in 2023 the limits will be as follows:

for Group I – 1.118.900 UAH (167 levels of the minimum wage);

for Group II – 5.587.800 UAH (834 amounts of the minimum wage);

for Group III – 7.818.900 UAH (1167 amounts of the minimum wage).

Single tax

Amounts of the single tax for Groups I and II of individuals-entrepreneurs are tied to the living wage and the minimum wage. Accordingly, in 2023, amount of the single monthly tax will be:

for Group I – 268.4 UAH (10% of the subsistence minimum);

for Group II –1.340 UAH (20% of the minimum wage);

for Group III rates will not change compared to 2022:

- 3% of income for the VAT payers;

- 5% of income amount for the VAT non-payers;

- special regime of 2% for non-payers of the VAT during the martial law.

Single contribution to obligatory social insurance

Amounts of single contribution in 2023 will be as follows:

minimum – 1.474 UAH per month (22% of the minimum wage);

maximum monthly allowance is 22.110 UAH per month (22% of 15 minimum wages).

2022 is the first reporting period for:

Reports on controlled foreign companies (Law of Ukraine № 466 as of 16.01.2020 "On amendments to the Tax Code of Ukraine on improving tax administration, eliminating technical and logical inconsistencies in tax legislation").

From 2022, according to Step 3 of the BEPS Plan, the income taxation concept of controlled foreign companies was introduced at level of the controlling person – individual or legal entity who is the controlling person of such company.

Reporting (tax) period for controlled foreign companies is a calendar year or another reporting period that ends within a calendar year.

At the same time, report on controlled foreign companies is submitted by the controlling person simultaneously with submission of the annual declaration on property status and income or the corporate income tax declaration for the relevant calendar year by the electronic communication means in the electronic form.

For the first time, reports on controlled foreign companies will be submitted for 2022 together with tax reporting for 2023. At the same time, fines and penalties will not be applied to reporting of controlled foreign companies for 2022 and 2023.

Calculation of the total minimum tax liability (Law of Ukraine № 1914 as of 30.11.2021"On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine on ensuring balance of budget revenues").

Positive value of difference between amount of the total minimum tax liability and the total amount of paid taxes, levies, payments and rental expenses is part of the corporate income tax liabilities of taxpayers – owners, tenants, users of land plots classified as agricultural land plots.

Calculation of the total minimum tax liability will be carried out for the first time based on the results of 2022.

Temporarily, for the 2022 and 2023 tax (reporting) years, the general minimum tax liability is not calculated and paid for land plots located in territories where hostilities are (were) taking place or in territories temporarily occupied by the armed forces of the Russian federation, and/or for land plots identified by the regional military administrations as littered with explosive objects and/or on which there are fortification structures.

Residents of Diia City (Law of Ukraine № 1946 as of 14.12.2021 "On amendments to the Tax Code of Ukraine and other laws of Ukraine on stimulating the development of the digital economy in Ukraine").

Special taxation regime for residents of Diia City, which provides for the possibility of their transition to the corporate income tax under special conditions (similar to the tax on withdrawn capital), which provide for the 9% tax rate and taxation of only a number of operations.

Separate tax base in the special tax regime for Diia City residents will be amount of non-compliance of the controlled operation with the "arm's length" principle, which will be taxed at the 18% rate.

The first reporting period for the special taxation regime for Diia City residents is the 2022 calendar year.

New forms of tax reporting are applied, in particular:

Corporate income tax declaration (Order of the Ministry of Finance of Ukraine № 274 as of 13.09.2022 "On approval of changes to the corporate income tax declaration form" (registered in the Ministry of Justice of Ukraine on 03.11.2022 under № 1358/38694) (entered into force from 11/18/2022).

Changes were made in order to bring the declaration form to provisions of the TCU regarding the special taxation regime for Diia City residents under special conditions.

The first reporting period is the calendar year 2022.

Property and income tax declaration (Order of the Ministry of Finance of Ukraine № 143 as of 17.05.2022 "On amendments to the Property and income tax declaration form and Instructions for filling in Property and income tax declaration" (registered in the Ministry of Justice of Ukraine on 03.06.2022 under № 593/37929) (enters into force on 01.01.2023)).

Property and income tax declaration form received new additions:

Annex F4 – calculation of the personal income tax liabilities and military levy, taxable income from the sale of immovable and/or movable property object(s) during the reporting (tax) year;

Annex Minimum wage – calculation of the total minimum tax liability for the tax (reporting) year, which is calculated by individuals-entrepreneurs (except for individuals who chose the simplified taxation system) – owners, tenants, users under other conditions (including emphytheusis conditions) of land plots classified as agricultural land.

Tax declaration on Restate other than land plot (Order of the Ministry of Finance of Ukraine № 371 as of 10.11.2022 "On changes to the form of Tax declaration on Restate other than land plot" (registered in the Ministry of Justice of Ukraine on 28.11.2022 under №1484/38820) (enters into force on the day of official publication)).

Order approves new Tax declaration form, which includes spaces for specifying code of the Codifier, information on the address of locations of tax facilities, term of using tax benefit in the reporting period, and the allocation of accrued amounts before the increase of tax liability.

In order to reduce errors (discrepancies) submitting clarifying tax declarations, to ensure simplification of automated accounting and analysis of submitted documents, both on the part of payers and controlling bodies, as well as to further expand service of payers, there is position "Registration number of the declaration in the controlling body, which is specified".

Land payment tax declaration (Order of the Ministry of Finance of Ukraine № 83 as of 18.02.2022 "On amendments to the Land payment tax declaration form (land tax and/or rent for land plots of state or communal ownership)" (registered in the Ministry of Justice of Ukraine on 07.03.2022 under №303/37639) (entered into force on 22.03.2022)).

The specified Order sets out new version of the Land payment tax declaration, which must be submitted starting in 2023.

Main changes:

if the taxpayer has several taxation objects located on the territory of administrative-territorial units that are part of different territorial communities, and therefore correspond to different codes for the Codifier of administrative-territorial units and territories of territorial communities of administrative-territorial units, if such administrative-territorial units are served by one tax authority, then the number of tax declarations must correspond to the number of administrative-territorial units;

column "Category of land plots" of Section I "Calculation of the land tax amount " of the Declaration must contain information about the category/purpose of land plots, which must correspond to the information specified in documents certifying right to ownership/use of land plots;

column "Regulatory monetary assessment" of Section I "Calculation of the land tax amount" and Section II "Calculation of the rent amount" of the Declaration must contain the normative monetary assessment, taking into account the cumulative value of indexation coefficient, which is applied from date of the last approved normative monetary assessment: in case of assessment of a land plot – assessment of unit of land area is indicated, if assessment has not been carried out – assessment of unit of arable land area in the Autonomous Republic of Crimea or in the region is indicated.

Bills adopted by the Verkhovna Rada of Ukraine in the second reading and signed by the President of Ukraine

Law of Ukraine № 2836-Х as of 13.12.2022 "On amendments to the Tax Code of Ukraine on facilitating the restoration of the energy infrastructure of Ukraine" signed by the President of Ukraine on 29.12.2022 (enters into force three days after its publication), which provides, in particular:

- exemption of payers from responsibility for untimely submission of reporting, documents and notifications provided for the transfer pricing purposes and taxation of controlled foreign companies with establishment of obligation to submit such documents within six months after termination or cancellation of the martial law in Ukraine;

- exemption of the corporate income tax payers from liability for untimely submission of financial reporting together with audit report and the clarifying declaration on this tax, which is submitted in case of clarification of indicators of such financial reporting with establishment of obligation to submit such documents within three months after termination or cancellation of the martial law in Ukraine;

- exemption of the VAT of operations involving import to the customs territory of Ukraine of electric generating sets, transformers, generators, equipment and materials for them (full list of products is defined by Paragraph 92¹ Section XXI of the Customs Code of Ukraine);

- exemption from the VAT of import of products to the customs territory of Ukraine, which are provided free of charge by the Energy Community as assistance to business entities that produce, transmit and distribute electric energy, and are imported by such entities for purposes of restoring and repairing the infrastructure of such enterprises with approval of the Ministry of Energy (full list of products is defined by Paragraph 92³ Section XXI of the Customs Code of Ukraine);

- exemption from the VAT of operations involving import of products to the customs territory of Ukraine by public associations and/or charitable organizations included in Register of non-profit institutions and organizations for their further transfer free of charge (without any monetary, material or other types of compensation) to such military personnel and volunteer formations that ensure national security and defense.

- exemption from taxation for the production of finished products of grape wine materials produced at primary winemaking enterprises, which are exported by these enterprises;

is considered as excise warehouse premises or territory, in each (on each) of which the total capacity of fuel storage containers used exclusively for refueling electric generators, does not exceed 2 thousand liters, as well as premises or territory in each (on each) where at the same time, fuel is stored or sold in a consumer container with a capacity of up to 5 liters inclusively, received from manufacturer or person who filled it into such a container. These two criteria for determining excise composition are applied simultaneously.

exemption from the excise tax of operations involving import to the customs territory of Ukraine and sale of products in the customs territory of Ukraine, namely:

motor vehicles intended for transportation of 10 people or more, including driver (with a working volume of engine cylinders of not more than 5 thousand cubic centimeters; more than 5 thousand cubic centimeters, new and used);

passenger cars and other motor vehicles intended mainly for transportation of people,

motor vehicles for cargo transportation,

provided that, if such operations are carried out by public associations and/or charitable organizations included in Register of non-profit institutions and organizations for their further voluntary transfer by such persons to the Armed Forces of Ukraine and voluntary formation of territorial communities, National Guard of Ukraine, Security Service of Ukraine, Foreign Intelligence Service of Ukraine, State Border Service of Ukraine, Ministry of Internal Affairs of Ukraine, other military formations formed according to the laws of Ukraine, their units, military units, units without prior or subsequent reimbursement of their cost;

- business entity has a right to store fuel that is consumed to refuel electric generator in the amount of up to 2 thousand liters at each facility equipped with electric generator, without obtaining permits (permissive documents, license for the fuel storage, results of providing other administrative services);

- fuel storage, which is consumed for refueling electric generator in the amount of more than 2 thousand liters at each facility equipped with electric generator is carried out by the business entity on the basis of free submission of declarations to territorial bodies of the central executive body implementing state tax policy on the conduction of fuel storage.

Also with the specified amendments to the Tax Code:

- deadline for registration of tax invoices and adjustment calculations without application of financial sanctions, date of which falls in a period from February 1 to May 31, 2022, has been postponed from July 14 to July 15, 2022;

- deadline for taxpayers to submit the VAT declarations without financial sanctions for the February – May 2022 tax periods has been transferred from July 19 to July 20, 2022);

- deadline for paying tax liability for a period February – May 2022 is set for August 1, 2022;

- taxpayers are given an opportunity to correct errors that led to an understatement of tax liabilities during the martial law, without charging and paying financial sanctions.