Entered into force the Law of Ukraine as of 16.01.2020 № 466-IX “On amendments to the Tax Code of Ukraine regarding improvement of tax administration, elimination of technical and logical inconsistencies in tax legislation” (except for some amendments that will come into force starting from 01.07.2020 and 01.01.2021).
General amendments introduced by this Law:
- eliminated technical and logical mistakes in the Tax Code of Ukraine (hereinafter – the Code);
- norms of the Code brought in line with provisions of the Law of Ukraine “On the state registration of legal entities, individuals-entrepreneurs and public associations”, “On the basis of social protection for individuals with disabilities in Ukraine”, “On public procurement”, “On the pledge”, “On electronic documents and electronic document flow”, “On electronic trust services”, the Code of Ukraine on bankruptcy procedures, etc.;
- determined functions and definitions of controlling bodies in connection with the reorganization of the State Fiscal Service of Ukraine;
- introduced norms on the single legal entity in the structure of the State Tax Service of Ukraine;
- eliminated problems of double taxation by introducing a mutual agreement procedure;
- improved functioning of the Electronic cabinet, namely:
expansion of the list of documents that can be obtained by taxpayer through the Electronic cabinet (refusal notification regarding admission of tax declaration, some documents on the results of audits, individual tax consultations, etc.);
clarification regarding the document delivery procedure to taxpayer eliminated through the Electronic cabinet;
provision of taxpayers with the opportunity to submit an electronic message (with documentary evidence) to correct inaccurate, incomplete or outdated information about themselves, access to which is provided through the Electronic cabinet;
regulation of organizational processes related to the formation and acceptance of reporting submitted by the electronic means in electronic form;
- resolved problematic issues of determining the payment date of the tax liability if the deadline for payment of the tax liability falls on a weekend or holiday (a day following the weekend or holiday);
- determined clear requirements for registration of the loss cases, damage or early destruction of documents by the taxpayer;
- extended term for which the term of providing individual tax consultation can be extended from 10 to 15 days;
- possibility to renew the deadline for submitting a complaint in administrative procedure by the taxpayer, if less than 6 months have passed since receiving the decision;
- non-residents have the opportunity to appeal certain decisions to the controlling body that issued them;
- newly introduced conditions for remuneration of civil servants of the controlling bodies.
Debt collection:
- debt collection from part of net profit (income) of the state unitary enterprises and their associations will henceforth be carried out in the manner prescribed by Articles 59-60 and 87-101 of the Code;
- reduced period during which the taxpayer to whom the tax claim was sent is not subject to debt collection measures from 60 to 30 calendar days;
- amended grounds for the release of property belonging to the taxpayer–debtor from the tax lien;
- reduced from two to one month period during which the taxpayer can independently assess the property.
Responsibilities of the taxpayers and controlling bodies
New responsibility concept is being introduced, which envisages:
- obligatory analysis and proof of presence of the taxpayer’s intent and guilt in committing a tax violation by the controlling bodies;
- bringing the taxpayer to financial responsibility for committing a tax violation is subject to the presence of guilt in the act, except for some tax violation’s liability for which it occurs regardless of guilt (alienation of property that is in the tax lien without the consent of controlling body; failure to submit documents for registration, expenditure transactions on the taxpayer’s account by a bank or other financial institution before receiving notification of the relevant controlling body; individuals – entrepreneurs’ failure to notify about the bank status while opening an account, etc.);
- determination of circumstances that mitigate the individual’s liability for tax violation (under the influence of threat, coercion, material, official or other dependence; coincidence of serious personal or family circumstances; independent notification about personally committed violation);
- determination of additional circumstances exempting the taxpayer from financial liability, in particular the commission of the following action: by individual acting in accordance with the opinion of the Joint Chamber, the Grand Chamber of the Supreme Court, an exemplary case of the Supreme Court on the application of the rule of law; as a result of illegal decisions, actions or inaction of controlling bodies;
- reduction in the amount of fines for committing a tax violation by 50 percent in the presence of at least one mitigating circumstance;
- responsibility of the controlling bodies for commission of tax violations, regardless of guilt;
- determination of fixed amount of compensation for damage (one minimum wage) caused by illegal decisions, actions or inaction of the controlling bodies, to obtain which the taxpayer must prove only the illegality of decisions, inaction of the controlling bodies (illegal decision that led to loss of the taxpayer’s status; failure to enter applications on refunding of the budgetary amount of compensation in the Register and / or violation of terms of the beginning of internal audit, obstruction of the release of individual’s property from the regime of temporary detention, etc.);
- determination of the list with types of damage caused by illegal decisions, actions or inaction of controlling bodies, which can be claimed for compensation by the taxpayer (cost of loss, damaged or destroyed property; additional costs incurred by the taxpayer (penalties paid to the taxpayer’s contractors, the cost of additional work, services, additional materials, etc.); costs related to administrative and / or judicial appeals, etc.). Amount of such compensation shall not exceed 50 minimum wages.
The Law also envisages:
- cancellation of penalties towards individuals in case of non-submission or violation of deadlines for submitting information for the formation of the State register of individuals – taxpayers (in case of the change of name, address, etc.);
- cancellation of penalties in cases of mistakes regarding the registration number of the taxpayer’s account card in tax reporting on the amounts of income accrued (paid) in the taxpayer’s favor, amounts of tax withheld from them corrected by the tax agents independently, including within 30 calendar days from the date of receipt of notification about mistakes identified by the controlling body;
- 2-fold increase in fines for the taxpayers for certain violations in the tax administration sphere (Article 117, 118, 119, 119-1, Paragraph 120.1 and 121.1 of the TCU and other: violation of procedure for registration at controlling bodies – up to 2040 UAH; term and procedure for submitting information on opening (closing) bank accounts – up to 680 UAH; procedure for submitting information on individuals – taxpayers – up to 2040 UAH; procedure for submitting information on the real estate lease agreements to the controlling bodies, a new fine is up to 1360 UAH and terms for storage of documents on calculation and payment of taxes and fees is up to 4080 UAH).
Also, the following penalties were established:
- in the amount of 2 percent of the supply volume (excluding VAT) but not more than 1200 UAH for each untimely registered tax invoice for operations on the supply of products / services that are exempted from the VAT or that are taxed at a zero rate, etc. (Paragraph 120-1.1);
- in the amount of 5 percent of the supply volume (excluding VAT) but not more than 3400 UAH for each tax invoice that is not registered for the supply of products / services that are exempted from the VAT or that are taxed at a zero rate (Paragraph 120-1.2 );
- for supervisor’s failure to report about controlled foreign companies – in the amount of 100 subsistence minimum for able-bodied individual for each such fact (more than 210.200 UAH); for late submission in the amount of 50 subsistence level for able-bodied individual for each such fact (more than 105.100 UAH) (Paragraph 120.7) and others;
- elimination of inconsistencies and discrepancies in norms of the Code regarding the accrual of fines on the basis of audit acts.
Tax audit
- statute of limitations for determining the monetary obligations by the STS body is suspended in cases where there is no possibility to conduct audit due to the absence of payers at the location, non-admission of audit by the payer, appeal against the audit orders for a long time, seizure of documents by the law enforcement agencies, legislative prohibitions on audits (moratorium) or court decisions prohibiting audits;
- procedure for registration of tax notifications-decisions by the STS bodies is improved, particularly in terms of providing a justification of the identified violations and detailed calculation of penalties;
- procedure for consideration of the taxpayer’s objections and submission of tax notification-decision is improved by introducing its submission to the objections consideration commissions at the controlling body, one of the functions of which will be to investigate the presence or absence of circumstances that exclude the taxpayer’s guilt in committing a violation;
- court decision (investigating judge) is excluded from the grounds for conducting unscheduled audit;
- provided during the audit for the tax body right to receive explanations from employers and / or their employees and / or individuals whose work is used without documentation (Sub-paragraph 20.1.47 of the Code);
- right provided for the tax body during the audit to conduct unscheduled audits of already inspected periods in case of receipt of information from foreign state bodies, which indicates the presence of violations (Sub-paragraph 78.1.21, Paragraph 78.1 Article 78 of the Code);
- possibility to stop audits of all the taxpayers’ categories, not just large ones;
- limited possibility for controlling bodies to make changes in the schedule of documentary scheduled audits (changes will be allowed not more often than once in the first and once in the second quarter of year, except when changes are related to changes in the taxpayer’s name was included in the schedule, and / or correction of technical mistakes);
- established that the audit act cannot be considered as a statement or notification of the criminal violation, namely tax evasion;
- increased from 3 to 5 years the audit period and issuance of tax notifications-decisions on payment of the personal income tax and military levy on the payment of wages.
Taxpayer’s accounting
- changed taxpayer’s criteria for belonging to the large taxpayers (payment of tax payments exclusively – 1.5 million EUR (there was 1 million of tax and customs payments));
- established accounting procedure of the non-residents (foreign companies, organizations) (their registration and accounting at the controlling bodies is carried out after accreditation (registration, legalization) at the controlling bodies on the territory of Ukraine of a separate subdivision, either until the non-resident obtains the real estate or land property rights in Ukraine, or until the opening of accounts in banks of Ukraine. In case of accreditation of a separate subdivision on the territory of Ukraine, registration of his / her separate subdivision shall be carried out simultaneously with the registration and accounting of the non-resident);
- improved procedure for registration of the value added tax payer;
- provided accounting of individuals – entrepreneurs with a sign of “independent professional activity”.
Implementation steps of the BEPS Action Plan
Transfer pricing:
- improved control over transfer pricing with the implementation of provisions 8-10, 13 of the BEPS Action Plan steps regarding:
control over the distribution of functions, risks and intangible assets within the group of companies;
rules for operations with commodities by eliminating restrictions on the use of exclusively stock exchange quotations of certain stock exchanges and providing the opportunity to use quotation prices for such products;
introduction of a three-tier documentation structure for international groups of companies, which includes transfer pricing documentation (local file), global documentation (master file) and country-by-country reporting – according to certain criteria companies will have to submit 2 additional documents: global documentation (master file) and country report (country-by-country reporting);
International procedures:
- application of mutual agreement procedure (Step 14) which envisages a mechanism for submitting an application for consideration of the case under the mutual agreement procedure, requirements for such application, order of the controlling bodies’ actions, etc .;
- taxation of payments equated to dividends when conducting transactions with non-residents;
Controlled foreign companies:
- definition of controlled foreign companies and their taxation (Step 3), which envisages:
introduction of the taxation concept on profits of controlled foreign companies at the level of controlling individual or legal entity who is the controlling individual of such company;
obligation of submitting a report on controlled foreign companies by controlling individuals to the controlling body;
- limitation of expenses from financial transactions with related parties (Step 4);
International taxation:
- prevention of abuse in connection with the application of double taxation agreements (Step 6);
- prevention of avoidance of the status of a permanent establishment and taxation of permanent establishments (Step 7).
In addition, the Law:
- changes from 20% to 25% the determination of ownership’s share of the corporate rights to the term of related party;
- expands the term reasonable economic reason (business purpose) (Sub-paragraph 14.1.231 of the TCU), as a result of which its application regarding operations with both residents and nonresidents is possible.
Corporate income tax
- expanded range of the tax agents:
for legal entities and individuals – “simplifiers”, as well as individuals pursing independent professional activity – in respect of income (profit) paid to a non-resident with the source of their origin from Ukraine,
for legal entities – “simplifiers” regarding the received adjusted profit of the controlled foreign company;
- absence of accrued depreciation for the period of non-use (operation) of fixed assets in economic activities in connection with its modernization, reconstruction, completion, retrofitting and conservation;
- separate accounting of interest that has been capitalized (subject to inclusion in the cost of a non-current asset) is introduced according to national accounting regulations (standards) or international financial reporting standards;
- specifies the procedure for accounting of interest paid on loans, borrowings and other debt obligations (thin capitalization), in relation to the:
extension of restrictions on accounting for such interest on loans, borrowings and other debt obligations received from both related and unrelated residents and non-residents;
determination of one criteria for the application of this procedure and increase of the pre-taxed financial result – provided that the total amount of accrued interest on such liabilities exceeds 30 percent of the amount of calculated object of taxation with the income tax for reporting (tax) period in which the accrual of such interest, increased by the amount of financial expenses according to the financial reporting and the amount of depreciation according to the tax reporting of the same reporting (tax) period;
- introduced new differences which reduce the pre-taxed financial result in terms of amounts:
accrued income in the form of dividends in the taxpayer’s favor from the controlled foreign company;
accrued in the taxpayer’s favor income in the form of dividends and from participation (not less than 10%) in the capital of non-residents that are not included in the list of states (territories) of low-tax jurisdictions;
negative value of the taxation object (on the date of approval of the transfer deed or distribution balance) of the reorganized taxpayer (by merger, amalgamation, transformation or division, separation) into the taxpayer – successor, if such taxpayers were related individuals for more than eighteen consecutive months before the date of merger completion;
- introduced new differences which increase the pre-taxed financial result in terms of amounts:
30 percent of the cost of products, including non-current assets, works and services (except for operations recognized as controlled in accordance with Article 39 of this Code), sold to non-residents who are included in the list of states (territories) of the low-tax jurisdictions;
part of adjusted profit of the controlled foreign company, proportional to the share owned or controlled by the legal entity, calculated in accordance with the rules determined in Article 392 of the Code;
expenses incurred by the taxpayer in non-resident’s favor, if such operations have no business purposes;
- clarified and amended differences used to increase the pre-taxed financial result, regarding the amount of fines, penalties imposed by the controlling bodies and other public authorities for violations of the law;
- clarified procedure and features of the non-resident’s taxation in terms of supplementing the list of income of non-residents with the source of their origin from Ukraine, which are subject to taxation, namely the:
income from the sale or other alienation of shares, corporate rights, shares in foreign companies, organizations formed in accordance with the laws of states other than those traded on the stock exchange;
income from the alienation of the non-resident’s rights on extraction and development of mineral deposits, mineral springs and other natural resources located on the territory of Ukraine.
- increased from 6 thousand UAH to 20 thousand UAH amount used in determining the fixed asset (Sub-paragraph 14.1.138 of the Code);
- increased limit from 20 million to 40 million UAH of income, when object of the corporate income tax can be not adjusted for financial differences;
- introduced accelerated depreciation of fixed assets for the period 2020-2030.
Value added tax
- introduction of a single reporting period for the VAT reporting – a calendar month (including the single tax payers) in order to simplify the VAT administration, apply a single approach to the formation of reporting indicators and their reflection in the information systems of the State Tax Service;
- determination of the tax base for electricity supply operations, based on the price prevailing in the electricity market without need to add the VAT liabilities, if such electricity market price is less than the purchase price;
- determination of the tax base for operations on export of products outside the customs territory of Ukraine (agreement (contractual) cost of such goods specified in the customs declaration);
- ensured possibility of forming a tax credit by the taxpayers who use the cash method of tax accounting in the case if payment for purchased products / services is made more than after 1095 calendar days;
- solution of taking into account the amount of funds withdrawn and credited by the controlling body to the taxpayer’s account in the system of electronic tax administration in accordance with Article 95 of the Code at the expense of the VAT tax debt repayment on the declared tax liabilities;
- prolonged from the 15th to the 20th of the month deadline for registration of consolidated tax invoices in the Unified register of tax invoices;
- establishment of temporary VAT exemption for the transfer of vehicles to the low-income population, as well as to the special purpose bodies (ambulance and central executive bodies implementing state policy in the sphere of civil protection, rescue, fire and man-made safety) for operational performance of tasks aimed at protecting and preserving the health of population;
- renewal of zero VAT rate application on the soybean and rapeseed export operations (prior to amendments to soybean and rapeseed export operations, the VAT exemption regime was applied, which excluded the possibility of declaring VAT refunds on such operations)
- clarified applicable cash method of the VAT tax accounting, including contractors and subcontractors;
- provided extension of the VAT exemption on import of breeding purebred animals to the agricultural producer.
Personal income tax
- determined procedure for profit taxation of controlled foreign companies;
- taxation at the basic 18% rate on income received by the taxpayer from the sale during reporting tax year of the third and subsequent real estate (vehicles) (the first object per the year remains at zero rate, the second – at 5% rate);
- trucks are excluded from the objects that are not subject to depreciation of individuals – entrepreneurs on the general taxation system;
- clarified the individuals – entrepreneurs’ list of expenses in terms of expenses for the real estate tax other than land payment, for non-residential real estate, cost of reconstruction, modernization and other types of improvements for fixed assets;
- cancellation of the personal income tax on pensions, amount of which exceeds 10 subsistence level;
- 5% of the personal income tax is exempted from the sale of unfinished construction object, provided that such property is owned by the taxpayer for more than three years.
Simplified taxation system
- reduced period from 15 to 10 days before which the single tax payer of Group III with 5% rate can apply for a change in the rate of this tax by 3% + 20% of the VAT;
- limited application of benefits in the form of land tax for single tax payers of Group I – III, providing the real estate for rent;
- determined that the cancellation of the single tax registration is possible in the case of valid tax debt exceeding 1020 UAH.
Excise tax
- norms of the Code are brought in line with the Law of Ukraine “On the electricity market” in the part of:
exclusion of the wholesale electricity supplier from the list of excise tax payers;
clarification of definition of the excise tax payer – producer of electricity;
- operations on realization and / or transfer (within one enterprise) of the electric power generated on objects of the electric power are excluded from objects undergoing charging with the excise tax;
- list of excisable products is supplemented with a tobacco-containing product for electric heating (TVEN) by means of a heater with electronic control;
- clarification in definition of terms e-cigarette and liquids used in e-cigarettes. The excise tax rate on liquids used in electronic cigarettes (3000 UAH per 1 liter) was determined, as well as the procedure for its taxation and marking of containers (packaging) with liquid used in electronic cigarettes and excise tax marks.
Rent payment
- changed rates of rent for the use of subsoil for the extraction of minerals (ferrous metals (excepting the iron ore), non-ferrous and alloying metals; iron ore);
- revised list of operations to which adjustment factors are applied, which are determined depending on the type of mineral (mineral raw materials) and conditions of its extraction;
- changed particular frequency ranges for which the rent is paid;
- revised rental rates for the special use of forest resources, namely reduced categories from 5 to 3 (Paragraph 256.3 Article 256 of the Code).
Local taxes
- increased tax for residential real estate, the total area of which exceeds 300 square meters (for an apartment) and / or 500 square meters (for a house) – 25000 UAH per year for each such real estate object;
- changed deadlines for making and publishing decisions on local tax rates by local self-governments, as well as informing controlling bodies about the taken decisions;
- obligation for controlling bodies to inform the local self-government bodies about the status of settlements with local budgets;
- determined definition of “Day” and “Estimated hour” for calculation of the tourist tax base;
- established possibility of determining the tax liabilities for land payment on the basis of not entered title documents for land plots in the state registers.
- clarified procedure for accrual and sending notifications on the amounts of land payment to individuals by the controlling body.