Additional import charge to be abolished as of 1 January 2016

The Law “On Promotion of Foreign Economic Activities” was adopted by the Verkhovna Rada of Ukraine on December 24, 2015. After the President signs the law, it will be published officially.

According to the Law, an additional import charge at the rates of five and 10 percent are introduced to goods imported into the customs territory of Ukraine under the customs regime of import, regardless of their country of origin, and signed by Ukraine free trade agreements (contracts) in 2015 shall be abolished as of 1 January 2016.

Changes to the Tax Code of Ukraine

The Law of Ukraine “On Introduction of Changes to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Regarding Securing Balance of Budget Incomes in 2016” was adopted by the Verkhovna Rada of Ukraine on December 24, 2015. After the President signs the law it will be published officially.

According to the draft law, the following main changes are suggested (the final text of the amendments adopted by the Verkhovna Rada of Ukraine is not yet available):

VAT

Budget refund

  • Improvement of the procedure of VAT refund from the budget.
  • Introduction of official publication of information on VAT refunds in the registry.

Administration

  • Tax authorities are prohibited from challenging VAT credit based on formal grounds.
  • A system aimed to protect bona fide taxpayers from late registration of VAT invoices / adjustments is improved.
  • A mechanism for preventing the use of artificially created VAT credit is established.

Agriculture sector taxation

  • A special VAT regime will apply to agricultural enterprises, which will be valid until 1 January 2017, where a certain percentage of VAT is paid to the budget and the rest will be paid to a special account for the enterprise’s own use. The special regime will be abolished as of 1 January 2017.
  • The special VAT regime for the supply of grain and industrial crops will be abolished as of 1 January 2016.

Other VAT issues

  • Introduction of VAT on the transit of natural gas with simultaneous cancellation of rent payment for transportation of natural gas by pipelines in Ukraine.
  • Introduction of the VAT exemption for goods and services which are supplied and imported as international technical assistance.
  • Introduction of VAT exemption for bank operations and for other financial institutions on supply of the property acquired by them due to foreclosure of such property.

Personal income tax

  • A single rate of personal income tax at 18 percent (instead of two currently applicable rates of 15 and 20 percent) will be established.
  • There will be a tax exemption on amounts forgiven (canceled) by the lender for loans in foreign currency received to purchase a single dwelling (mortgage).

Single tax (simplified tax system)

  • There will be a reduction of annual turnover from 20 million UAH to five million UAH for taxpayers of Group III.
  • There will be an increase of single tax rates for taxpayers of Group III from two to three percent (for VAT payers) and from four to five percent (for non-VAT payers).
  • The single tax will increase by 1.8 times for Group IV of taxpayers (agricultural companies).
  • In 2016 the ratio of indexation of the normative monetary value of land to determine the tax base for single tax payers of Group IV will be abolished.

Corporate profit tax

  • Advance payments of corporate profit tax will be cancelled.
  • The quarterly accounting period with respect to corporate profit tax for companies with turnover exceeding 20 million UAH will be introduced.

Excise duty

  • An excise invoice as a mandatory electronic document for carrying out all transactions for the sale of fuel on the domestic market will be introduced.
  • Excise duty rates in 2016 on alcohol, alcoholic beverages and beer will increase by 100 percent, tobacco products will increase by 40 percent (specific rate) and by three percent (ad valorem rate).
  • Excise duty rates on fuel will increase by 13 percent.

Real estate tax

  • There will be an increase to the maximum tax rate for real estate.
  • An additional tax rate in the amount of 25 thousand UAH for the following real estate will be introduced: apartments exceeding 300 sq.m. and houses exceeding 500 sq.m.

Ecological tax

  • Indexation of rates for forecast CPI - 26.7 percent.

Rent payment

  • Rent for natural gas transportation by pipelines on the territory of Ukraine will be abolished, and simultaneously there will be an introduction of  VAT on the transit of natural gas.
  • Royalty rates will be reduced for:
    • Gas produced by private or state enterprises from wells up to 5 km – from 70 percent (for state enterprises) and from 55 percent (for private enterprises) to 29 percent (for any enterprise.)
    • Gas produced by private enterprises from wells more than 5 km – from 28 percent to 14 percent.
  • The existing 0.55 coefficient for production during a geological study for 2 years will be cancelled.

Single social contribution

  • A flat rate of single social contribution of 22 percent will be established.
  • There will be an increase to the maximum threshold for calculation of Single social contribution from 17 to 25 minimum monthly wages.
  • Single social contribution will no longer be withheld from wages (income) of employees (individuals).