Entry into force of the Law of Ukraine as of 30.11.2021 № 1914 “On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to ensure balance of budget revenues” starts from January 1, 2022 (except for some changes that come into force the day after publication of the Law, from November 21, 2021 and July 1, 2022):
from day following the day of publication of the Law, changes come into force particularly regarding:
- tax agents’ payment of tax amounts on income from the sale of electricity produced from alternative energy sources by generating units owned by individuals – taxpayers at the location of such generating units;
- exemption from taxation of the income amounts received by taxpayer in the form of support provided by Fund of the President of Ukraine for Support of Education, Science and Sports;
- exemption from military levy’s taxation of the income amounts received under the budget program “Ensuring functioning of the Entrepreneurship Development Fund” and the state program of financial and credit mechanisms to provide citizens with housing on terms determined by the Cabinet of Ministers of Ukraine, as well as amount of funds received by the taxpayer on a non-refundable basis from the Innovation Development Fund;
- possibility of temporary preferential customs clearance of cars, the last country of state registration of which is the occupying power (aggressor);
from the first day of the third month from date of entry into force of the Law, changes come into force regarding:
increase in excise tax rates on ethyl alcohol and other alcoholic distillates, alcoholic beverages, beer;
Amendments to the Law of Ukraine “On recognition of the Law of Ukraine “On establishment of the free economic zone “Crimea” and on Peculiarities of economic activity in the temporarily occupied territory of Ukraine” and on Amendments to Certain Legislative Acts Ukraine” (on state guarantees for internal and external local borrowings (loans) of the Autonomous Republic of Crimea and granting right to the National Bank of Ukraine to establish procedure for the cross-border movement of cash currency of the occupying state and / or procedure of cash operations of the occupying state on the territory of Ukraine) came into force on November 21, 2021;
Changes force regarding the taxpayer’s receipt of tax information about other taxpayers with the prior consent of such persons will come into force on July 1, 2022.
Norms applicable from 1 January 2022:
- on the exemption from taxation of the social assistance cost in kind to low-income families received from social service providers and the social services cost provided according to the Law of Ukraine “On social services”;
- on the exemption from taxation of the income amounts received by taxpayer in the form of support provided by Fund of the President of Ukraine on the support of education, science and sports;
- on the exemption from military levy’s taxation of the income amount received by taxpayer in the form of partial or full compensation of interest (percentage) rates paid under the budget program “Ensuring functioning of the Entrepreneurship Development Fund”, as well as amount received by the taxpayer on a non-refundable basis from the Innovation Development Fund.
General peculiarities regarding tax administration:
- indexation of excise tax rates on alcoholic beverages, environmental tax and rent was carried out;
- controlling bodies have opportunity to provide reporting at the request of local governments in terms of taxpayers (previously it was only in terms of legal entities);
- powers of village, settlement, city councils to provide information (documents) to the controlling bodies on the allocated land plots in kind to owners of land shares (units) on the basis of decisions of the local self-government body were determined;
- the following terms used in the Tax Code of Ukraine were specified: "mining", "conditions for mineral resources of object (subsoil area)", "mineral resources", "volume of extracted minerals (mineral raw materials)", "primary processing (enrichment) of mineral raw materials", "royalties", "agricultural commodity producer";
- the following concepts were defined: “pre-sale preparation for purposes of Section IX of the Code”, “Investment gold for purposes of Section V of the Code”;
- controlling bodies are given a right to openly record, photo, video, collect and use such multimedia information (photo, video, sound) during audits;
- taxpayer’s possibility to receive tax information about other taxpayers with the prior consent of such persons is provided;
- terms of recovery of lost documents are in line with the terms of documentary checks on the verification of claimed reimbursement from budget and / or the negative value added tax value (there was an audit period of 60 days, while the recovery of documents – 90 days);
- taxpayers are exempted from obligation to provide information and its documentary evidence at the request of controlling body, if such documents have already been provided;
- codes of Ukrainian classification of the FEA products specified in the Tax Code of Ukraine were brought in line with the new version of codes of Ukrainian classification of the FEA products 2017.
Tax debt repayment:
- A precautionary measure to repay tax debt in the form of establishing temporary restriction on the departure abroad of a legal entity’s head – debtor;
- strengthening measures to inform taxpayers and local governments about the tax debt amount of legal entities and individuals;
- collection of funds to repay tax debt on the taxpayer’s self-declared obligations will be carried out by decision of the head of controlling body without going to court;
- tax claim will be sent with a detailed calculation of the tax debt amount.
Corporate income tax:
- Non-resident will annually be able to receive confirmation in Ukrainian regarding tax payment from the controlling body not only in paper but also in electronic form in manner prescribed by Order of the Ministry of Finance;
- state-owned enterprises and companies the authorized capital of which is more than 50 percent of shares belong to the state, which did not agree with owner or its authorized body on its accounting policy in determining methods for calculating amount of doubtful debt reserve coefficient of doubt, will not be able to write-off bad debts to reduce the taxation object;
- major taxpayers, starting from 2022, will have a right to reduce the taxation object by not more than 50 percent of the outstanding amount of negative value of taxation object of the previous tax (reporting) years;
- restrictions on the non-consideration of royalty amounts in determining taxation object will not apply in cases of royalty accrual in favor of right holders, as remuneration under agreements concluded with collective management organizations according to the Law of Ukraine “On effective management of copyright rights and / or related rights”;
- non-repayable financial help (products, works and services provided free of charge) in favor of related parties who were unprofitable in a previous year will not be taken into account in reducing taxation object;
- part of liabilities for the income tax of enterprises belonging to taxpayers – owners, tenants, land users, classified as agricultural land will the positive value of difference between amount of the total minimum tax liability and the total amount of taxes, levies, charges and costs of the land renting. Calculation of the total minimum tax liability will be carried out as part of a separate annex to tax declaration;
- temporarily, until January 1, 2027, will be exemption from taxation of profits of agricultural producers exclusively involved in the following activities: breeding and rearing of poultry, except for rearing chickens, laying hens’ eggs and hatcheries activities; breeding and rearing of quails and ostriches, production of poultry meat, except for the chicken meat production, chicken fat melting, slaughter, processing and packaging of chicken meat, as well as activities for the sale of actually produced (grown) such products except for chicken meat). Released funds are used to create or re-equip the material and technical base, increase production and introduce the latest technologies;
- temporarily, from January 1, 2022 to January 1, 2024, the taxpayers – producers of electricity at the “green” rate will have a right to determine tax liability from the corporate income tax by the cash method.
Value added tax:
- VAT exemption for operations with investment gold was introduced on:
import to the customs territory of Ukraine and supply of investment gold in the customs territory of Ukraine;
provision of services to agents involved in the supply of investment gold;
provision of services related to production of investment gold and / or services for conversion of gold into investment gold;
- it is specified that for calculation of the total volume of operations for purposes of mandatory registration by a VAT payer (reaching 1 million UAH), operations carried out through a special application or application on smartphones, tablets or other digital devices are also taken into account;
- introduced peculiarities of the VAT taxation of operations on import and supply of tobacco products, for which the maximum retail prices are set:
VAT on transactions of import and supply of tobacco products, carried out only by producers and “trading houses” of such producers, will be subject to the VAT;
basis of the VAT taxation on import and supply of tobacco products, carried out by producers and their “trading houses”, will be the maximum retail price of such goods excluding the VAT;
operations on the subsequent supply of tobacco products will be exempted from the VAT;
- there are determined clear deadlines (statutes of limitations) for registration of adjustment calculation in the Unified register o tax invoices, namely 1095 calendar days from the date of drawing up tax invoice, to which such adjustment calculation is made;
- there are reduced terms for formation of the VAT tax credit on the basis of “old” tax invoices / adjustment calculations, namely from 1095 to 365 days from the date of drawing up tax invoice / adjustment calculation (term is interrupted for a period of registration suspension of tax invoice / adjustment calculation in the Unified register o tax invoices;
- VAT exemption regime for supply and import of waste and ferrous scrap and non-ferrous metals, as well as paper and cardboard for recycling is extended for 5 years;
- supplying waste and ferrous scrap and non-ferrous metals in the VAT exemption regime, the general procedure for proportional attribution of VAT amounts to the tax credit (adjustment) is introduced;
- cash method for supply, transmission, distribution of electric and / or thermal energy, coal and / or its enrichment products, centralized water supply and sewerage services is extended for 4 years;
- it is established that the cash method will also be applied to supply of customer service.
Income taxation of individuals and individuals – entrepreneurs:
- Cost of social assistance in kind to low-income families received from social service providers and cost of social services provided according to the Law of Ukraine “On social services” are exempted from taxation;
- income from the sale of own agricultural products (except for livestock products) is exempted from taxation, if its total amount per the year does not exceed 12 times the minimum wage (78 thousand UAH in 2022). To date, such income is exempted from taxation regardless of amount but provided that products were grown on land plots, area of which does not exceed size specified by land legislation;
- amount of income received by taxpayer in the form of support provided by Fund of the President of Ukraine for Support of Education, Science and Sports is exempted from taxation;
- it is established that right to obtain a tax rebate in terms of the education cost, treatment of children can be used not only by parents but also guardians, trustees, foster parents, parents-educators;
- it is determined that amounts of tax accrued by tax agent on income from the sale of electricity produced from alternative energy sources by generating units owned by individuals – taxpayers are paid by such tax agent to the budget at the location (registration) of such generating units;
- procedure for taxation of payments from formation without the legal entity’s status is determined: taxpayer – recipient of such payments is obliged to submit annual tax declaration with supporting documents and pay tax at 9 percent rate;
- tax liability for owners, tenants, land users classified as agricultural land will be defined as positive difference between amount of the total minimum tax liability and the total amount of taxes, levies, charges and expenses for the land lease. Calculation of the total minimum tax liability for individuals will be determined by tax authorities, meanwhile individuals – entrepreneurs will calculate it independently as part of a separate annex to tax declaration;
- investment income, proceeds from sale during the reporting tax year of the third and subsequent real estate, movable property in the form of a car and / or motorcycle, and / or moped or other vehicle is reduced by the value of investment asset, real estate and movable property declared by a person as declaration object in order of the one-time (special) voluntary declaration;
- income from sale of agricultural land directly received by taxpayer in the process of privatization directly during the reporting tax year is exempted from taxation, provided that such property is owned by taxpayer for more than three years;
- income received by taxpayer from sale during the reporting tax year of the third and subsequent real estate is subject to taxation at the 18 percent rate. In this case, such income may be reduced by the documented costs of acquisition (construction) of real estate located in Ukraine;
- individuals – entrepreneurs are allowed to include in costs of royalties paid in favor of copyright holders, as a reward for the use of copyright and (or) related rights or as a deduction in favor of copyright holders under agreements concluded by such taxpayer with collective management organizations according to the Law of Ukraine “On effective management of property rights of copyright holders in the copyright and (or) related rights spheres”.
Simplified taxation system (legal entities):
- Economic entities, starting from 2022, involved in such economic activities as poultry breeding, quail, ostrich breeding and rearing, as well as poultry meat production will not be able to be the single tax payers of Group IV
at the same time, income of agricultural producers involved in these economic activities, except for chicken breeding, chicken meat production, etc., will be temporarily exempted from taxation until January 1, 2027;
- part of the single tax liability of Groups III and IV (legal entities) who are owners, tenants, users of other conditions (including emphyteusis) of land classified as agricultural land, will be a positive value of difference between the total the minimum tax liability and total amount of taxes, levies, charges and expenses for the land lease. Calculation of the total minimum tax liability will be carried out as part of separate annex to tax declaration of the single tax payers of Groups III and IV (legal entities);
- income of single tax payers of Group III (legal entities) will not include amount of income received by taxpayer in the form of partial or full compensation of interest (percentage) rates payable under the budget program “Ensuring Functioning of the Entrepreneurship Development Fund” and the state program introduction of financial and credit mechanisms for providing citizens with housing on terms determined by the Cabinet of Ministers of Ukraine, as well as amount of funds that taxpayers will receive on a non-refundable basis from the Innovation Development Fund;
- norms of tax legislation regulating the single tax payers Group IV will expire on January 1 of the year following entry into force of the law of Ukraine on stimulating development of Ukraine’s agro-industrial complex, taking into account the Common Agricultural Policy of the European Union in terms of state assistance and rural development.
Simplified taxation system (individuals):
- It is established that individuals – entrepreneurs who provide Internet access services, belong exclusively to the single tax payers Group III, if they meet requirements established for such Group;
- conditions for electing single tax payers Group IV as an individual – entrepreneur were clarified. Such payers must operate on agricultural land and / or water fund lands with an area of not less than 0.5 ha, but not more than 20 ha in total (currently the minimum plot size is 2 ha);
- standard form of income and expenses accounting is established for the single tax payers of Group III (individuals – entrepreneurs) who are value added tax payers;
- tax liability for owners, tenants, users of land classified as agricultural land will be defined as positive difference between amount of the total minimum tax liability and total amount of taxes, levies, charges and expenses for the land lease. Individuals – entrepreneurs will calculate it independently as part of a separate annex to the single tax payers’ declaration.
Excise tax
- Postponement from January 1, 2022 for tobacco producers and importers of 5% excise tax on retail sales of tobacco products, which is currently paid by retail, which will reduce retail costs for preparation and reporting, as well as prevent budget losses from excise tax and VAT revenues as a result of the use of scrolls and sale of tobacco products for cash without the use of registrars of settlement operations;
- introduction of 5% retail excise taxation from January 1, 2022 on the amount of excisable products, presence or location of which is not confirmed in the place of trade (aimed at compliance with cash discipline and cessation of unaccounted turnover of excisable products), such excisable products are sold directly to citizens and other end users for their personal non-commercial use;
- restoration of a fine for the taxpayer’s violation of payment term of excise tax to the budget (within fifteen working days after receipt of the excise tax stamps on tobacco products);
- improving, starting in 2022, the mechanism for stopping accumulation of tobacco balances at reduced rates by introducing taxation using a coefficient of 1.5 sales volumes of tobacco products in excess of the average monthly volume before raising the tax rate (currently imperfect mechanism provides for restrictions on increase in rates that are not subject to taxation);
- temporarily in 2022 an introduction of the cash method of determining tax liabilities for electricity producers, who have special responsibilities to ensure public interests according to the Law of Ukraine “On electricity market”;
- introduction of procedure for sealing places of possible access to alcohol on the territory of producers and enterprises that are producers of products with its use;
- submission of reports on the production and turnover of tobacco raw materials by tobacco fermentation plants;
- termination of simultaneous use of premises and equipment for industrial production of tobacco products by several economic entities;
- it is specified that the maximum retail prices for excisable goods (products) are set by producers or importers for tobacco products, tobacco, industrial tobacco substitutes, industrial tobacco substitutes and liquids used in electronic cigarettes by declaring such prices in manner prescribed by the Tax Code of Ukraine;
- it is established that exemption from taxation of import of unfermented (unprocessed) tobacco raw materials to the customs territory of Ukraine by tobacco fermentation plants is granted on condition of further production of fermented (processed) tobacco raw materials from such raw materials and its sale;
- list of excisable products that are not marked with excise tax stamps has been expanded:
test samples of alcoholic beverages that are not intended for the retail sale and are imported to the customs territory of Ukraine by economic entities that have licenses for the wholesale of relevant products, for research or testing (calibration of laboratory equipment, tastings, study of physicochemical parameters, design) but not more than 3 liters of each product;
ordinary (non-sparkling) wines and fermented beverages, actual strength of which exceeds 1.2 per cent by volume of ethyl alcohol but not more than 15 per cent by volume of ethyl alcohol, provided that the ethyl alcohol contained in the finished product has a completely enzymatic (endogenous) origin.
Licensing of excisable products and liability in this sphere
Amendments to the Law of Ukraine “On the state regulation of production and turnover of ethyl alcohol, cognac and fruit alcohol, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel” are envisaged:
- introduction of E-licensing (submission of documents for obtaining a license in the E-form) (except for licenses for the wholesale of fuel in the presence of places of fuel wholesale, retail sale of fuel, its storage fuel for further sale to other consumers);
- indefinite validity of production licenses;
- exclusion of the license suspension procedure:
for production licenses by replacing the notification of:
need to make the next payment for license for 90, 75, 60, 45, 30 and 15 days before the due date for such payment;
date from which license is revoked in case of non-payment of the next license payment – 9 days before the due payment date for the relevant license;
for the wholesale, retail and storage licenses by replacing notification of the need to make the next payment for license is 30, 20, 10 and 5 days before the due payment date for the license;
- addition of grounds for license revocation:
for production licenses:
absence of the next payment for license (preliminary constant informing);
disconnection, cessation of operation or non-installation of the round-the-clock video surveillance systems at all stages of production and release;
absence of video recording activities at the location / conduction of activity;
refusal of access to audit with video recording;
violation of the application terms for change of information specified in license;
transfer of premises (equipment) from the technological cycle of tobacco production;
production, storage, transportation and sale of the counterfeit or unaccounted products turnover of which is regulated by the Law № 48;
decision of the National Security and Defense Council of Ukraine on the application of sanctions (Article 4 of the Law of Ukraine “On sanctions”), regulation of Order on the revocation of license;
for the wholesale, retail and storage licenses:
absence of the next payment for license (preliminary constant informing);
establishing the retail sale through registrars of settlement operations (accounting books of settlement operations) not specified in license;
absence at the location / activity place;
violation of application terms for change of information specified in license;
refusal without legal grounds of access of the controlling body’s representative to audit.
Rent payment
The following is offered for rent payers of the subsoil use:
- clarification of definition of taxation objects in terms of bringing provisions of the Tax Code to legislation in the extraction sphere, which will lead to adjustment of the rent tax base by taxpayers;
- differentiation system of iron and manganese ore rates, which will ensure efficient distribution of economic benefits of mining enterprises in conditions of high price volatility.
Property tax
It is established that when tax authorities accrue property tax liabilities to individuals, tax notifications-decisions on payment of relevant tax sent to the taxpayer must contain relevant information on each of taxation objects (area of the real estate object, brand, vehicle model, etc.), rates and tax benefits provided to individuals.
Land payment
- Legal grounds for accrual of land tax on land shares (plots), which are in use on the basis of decision of local government on the allocation of land in kind (on the ground) to the land share (plot) owner;
- it is established that local governments provide information on the allocation of land in kind (on the ground) to the land shares (plots) owners to controlling bodies at the land location:
identity document and confirmation of citizenship of Ukraine (passport);
taxpayer’s registration card number;
cadastral plan of the land plot from the land management project on organization of territory of land shares);
certificate for the land share (plot);
- for taxpayers of Group IV, the amount of tax rates per hectare of agricultural land on which the facilities of agricultural producers are classified in a subclass "Buildings for poultry" will be 50 percent of the tax base (regulatory and monetary valuation of land).
Registrars of settlement operations:
- At the legislative level, it is obligatory for economic entities to indicate the numerical value of the bar code of excise tax stamp (series and number) in the retail sale of alcoholic beverages applying registrars of settlement operations / its software version;
- authority that establishes Procedure and form of accounting for inventories for individuals – entrepreneurs, including single tax payers (Ministry of Finance of Ukraine);
- amount of financial sanction for the sale of products that are not accounted for in the prescribed manner or for failure to provide documents confirming such accounting at the point of sale (business) during the audit is halved.
Amendments to the Law of Ukraine “On local self-government in Ukraine”
There is an obligation of the executive bodies of village, settlement, city councils to provide the controlling bodies with information determined by the Tax Code of Ukraine (previously it was to provide only information about the land owners and users).
Amendments to the Code of Administrative Procedure of Ukraine
- State body is obliged to submit to the court all available documents and materials that can be used as evidence in the case (according to current norms, the state body was deprived of the procedural opportunity to provide the court with all available evidence while representing interests of the state in administrative proceedings during the administrative case in court);
- there are established peculiarities of proceedings in cases of administrative lawsuits concerning the temporary restriction of right of citizens of Ukraine to leave territory of Ukraine (case must be considered by the court within 48 hours from the date of filing the claim appeal; court levy is not paid; appeals may be filed within ten days from the date of their proclamation; the appellate court considers the case within ten days the expiration of a term for appeal with notification of the parties).
Amendments to the Law of Ukraine “On the procedure for leaving Ukraine and entering Ukraine by citizens of Ukraine”
List of grounds for temporarily restricting right of Ukrainian citizens to leave Ukraine has been amended by a new ground, according to which right of Ukrainian citizen to leave Ukraine may be temporarily restricted if he / she is a legal entity’s head or permanent representative of a nonresident with an outstanding tax debt in amount and within the time limits specified by the Tax Code of Ukraine.
Amendments to the Law of Ukraine “On judicial levy”
There is no judicial levy for filing lawsuits, appeals in cases of lawsuits of regulatory authorities on the temporary restriction of right of citizens of Ukraine to leave territory of Ukraine.
Amendments to the Law of Ukraine “On access to public information” and the Law of Ukraine “On personal data protection”
It is possible to disclose information about the presence of tax debt of individuals and publication of such information on the web portal of the State Tax Service.
Amendments to the Law of Ukraine “On recognition of the Law of Ukraine “On establishment of free economic zone “Crimea” and peculiarities of economic activity in the temporarily occupied territory of Ukraine” and Amendments to certain legislative acts of Ukraine”:
Peculiarities of application of state guarantees on internal and external local borrowings (loans) of the Autonomous Republic of Crimea are determined;
National Bank of Ukraine has been granted a right to establish procedure for the cross-border movement of cash currency of the occupying state and / or procedure for conducting operations with cash currency of the occupying state on the territory of Ukraine.