The Verkhovna Rada of Ukraine has urgently adopted several laws relating to taxation. However, significant changes to the draft laws were introduced in the voting process, and the final text of the laws passed by the Verkhovna Rada of Ukraine is not yet officially available. However, given the significant impact that these laws have on business, we draw your attention to key points arising from the published texts of the draft laws or from reports in the press.
All newly adopted laws must be signed by the President of Ukraine and officially published. Following the publication of the laws, if necessary, we will provide clarification or additional information.
The Draft Law on Amendments to the Tax Code of Ukraine and some other laws of Ukraine (on tax reform), registered by the Verkhovna Rada of Ukraine under number 1578, was adopted by the Verkhovna Rada of Ukraine on December 28, 2014.
The Draft Law includes the following main changes:
- A reduction in the number of taxes from 22 to 9, among which: corporate profit tax, personal income tax, VAT, excise tax, environmental tax, rent payment, duty, property tax and unified tax.
- A moratorium on inspections of small (where the average number of employees during the reporting period (calendar year) does not exceed 50 people and annual income from any activity not exceeding the equivalent of €10 million) and medium business (where the average number of employees during the reporting period (calendar year) exceeds 50 persons and does not exceed 250 people and annual income from any activity exceeding the equivalent of 10 million euros, but not exceeding the equivalent of €50 million for 2 years).
- A postponement of the enactment of electronic VAT administration to February 1, 2015 with the introduction of the test period from February 1, 2015 to July 1, 2015.
- The establishment of personal income tax on passive income (royalties, interest and investment income) at 15-20 percent and on dividends - 5 percent - for companies that pay corporate profit tax on general basis, 20 percent - for companies that do not pay corporate profit tax.
- An extension of the term “permanent establishment,” which now includes the place where the server is located.
- A change to the definition of royalties including features of using the software and purchase of copies of intellectual property embodied in electronic form.
- The rate of rent payments for oil and gas production is set for oil and condensate - 45 percent of deposits up to 5 km, 21 percent - on deposits of more than 5 km, for natural gas sold not for households – 55 percent - for deposits of up to 5 km, and 28 percent - for deposits of more than 5 km.
- Property tax will be calculated on residential property only on objects that exceed 60 square meters for apartments, and 120 square meters - for houses.
- The introduction of an excise tax for the sale through retail distribution network of alcohol, tobacco and fuel at the rate of 5 percent of sales turnover.
- The mandatory use of cash registers for individual entrepreneurs from June 1, 2015, except for those who operate in the markets.
The Draft Law on Amendments to the Tax Code of Ukraine concerning improvement of tax control over transfer pricing, registered by the Verkhovna Rada of Ukraine under number 1264-1, was adopted by the Verkhovna Rada of Ukraine on December 28, 2014.
The Draft Law offers the following main changes:
- The list of controlled transactions was specified as follows: the controlled transactions are extended with business transactions with related parties - residents with permanent establishment (representation) and business transactions for the sale of goods through the commission agent - non-residents and transactions involving one or more not related intermediaries if such transaction would be subject to control without intermediaries and / or intermediaries do not perform the essential functions / risks. The priority of officially recognized sources of information was cancelled. Taxpayers and controlling authorities must use information sources publicly available, providing an opportunity to compare business and financial conditions of operations.
- The concept of “related persons” was specified - the amount of credits (loans), repayable financial assistance and / or loans repayable financial assistance guaranteed by one person about another person exceeding the amount of equity more than 3.5 times (for financial institutions and companies dealing exclusively with leasing activities - more than 10 times) was indicated as criteria for being treated as related.
- The period of the audit on transfer pricing was extended from six to 18 months with the possibility to extend for another 12 months, if necessary.
- The introduction of penalties for non-inclusion in the controlled transaction into the report.
Reducing the amount of single social contribution
The Draft Law on Reform of compulsory state social insurance and legalization of payroll, registered by the Verkhovna Rada of Ukraine under number 1573, was adopted by the Verkhovna Rada of Ukraine on December 29, 2014.
The draft Law, in particular, provides for reduced rates of single social contribution in the calculation of wages (income) to individuals and / or in the calculation of remuneration under the civil contracts by applying the reduction coefficient of 0.4 or 0.6, provided the taxpayer has simultaneously fulfilled certain conditions: the average salary for the company increased by 30 percent compared to the average salary in 2014; average payment per insured person after applying the reduction coefficient will not be less than 700 Hryvna; the average salary for the company is at least three times the minimum salary and some other requirements for legalization of payroll.
State budget for 2015
The Draft Law on State budget for 2015, registered by the Verkhovna Rada of Ukraine under number 1000, was adopted by the Verkhovna Rada of Ukraine on December 29, 2014. The draft Law, in particular, sets the 2015 minimum wage at 1218 Hryvna per month, followed by an increase from December 1 to 1378 Hryvna.
Additional import charge
The Draft Law on Measures to stabilize the balance of payments of Ukraine in accordance with Article XII of the General Agreement on Tariffs and Trade 1994, registered by the Verkhovna Rada of Ukraine under number 1562, was adopted by the Verkhovna Rada of Ukraine on December 28, 2014.
The draft Law, in particular, establishes a temporary—for a period of 12 months—introduction of an additional import charge at the following rates:
- 10 percent for products classified in product groups 1-24 according to the Ukrainian classification of goods for foreign economic activities (food, live animals, trees and plants, cereals, seeds, fats and oils, alcohol and tobacco, etc.).
- 5 percent for products classified in product groups 25-97 according to the Ukrainian classification of goods for foreign economic activities (goods industry group, non-food raw materials, automobiles, pharmaceuticals, etc.).
- 10 percent for goods imported (sent) by persons subject to tax and import duty under Article 374 of the Customs Code of Ukraine (goods (excluding excise) total invoice value of which exceeds the equivalent of €1,000 imported by persons on the territory of Ukraine in hand baggage and / or accompanied baggage through checkpoints across the state border of Ukraine which are open to air traffic and goods (excluding excise), the total invoice value of which exceeds the equivalent of €500 and total weight exceeding 50 kg imported by persons on the territory of Ukraine in hand and / or accompanied baggage through means other than open to air traffic, checkpoints across the state border of Ukraine, as well as goods the total invoice value of which exceeds the equivalent of €150 transported (sent) to the customs territory of Ukraine to one recipient in a dispatch from one sender in international mail, international express mail, or unaccompanied luggage).
It is envisaged that additional import charges shall not apply to essential commodities imports such as oil, gas, coal, gasoline and diesel, gratis goods under international agreements and some other goods.
The Draft Law on Amending the Tax Code of Ukraine on peculiarities of amending tax liabilities with respect to corporate profit tax and value added tax in the case of tax compromise, registered by the Verkhovna Rada of Ukraine under number 1071-d, was adopted by the Verkhovna Rada of Ukraine on December 25, 2014.
The draft Law proposes the following major changes:
- The possibility for taxpayers to file the revised calculation of tax liabilities of corporate profit tax and / or value added tax for any tax period prior to April 1, 2014 voluntarily, subject to a 5% penalty on the amount of declared or defined tax liabilities in the tax notification.
- The exemption of taxpayers from administrative and criminal liability, and the possibility of conciliation procedures under the Administrative Justice in applying the tax compromise.