On 16 February 2017 the Ministry of Finance of Ukraine released its guidance elaborating on the recognition of invoices as primary documentation for the purposes of financial and tax accounting (the Guidance). The Guidance addresses practical aspects of implementation of the Amendments of 3 January 2017 (the Amendments) introduced to the Law of Ukraine "On Financial Accounting" (the Law on Accounting).

What the Amendments and the Guidance say

In general terms, the Amendments ease the requirements to primary documentation materially simplifying the accounting compliance. In particular:

  1. the Amendments eliminate the obsolete rule that the primary documentation is in itself a formal evidence of the occurrence of the business transaction;
  2. thus, it is no longer required that the primary documentation is prepared "in the course of, or immediately after, the business operation," allowing the taxpayers reasonable freedom in execution of primary documents; and, finally,
  3. it is re-affirmed that the primary documentation may be prepared in electronic form, permitting the taxpayers to eliminate excessive physical paperwork.

The Amendments were generally perceived to allow recognition of commercial invoices as primary documentation, thus, eliminating the requirement of causing separate transfer-acceptance acts. Nevertheless, the cautious taxpayers were reluctant to implement the new practice without further clarification from the Ministry of Finance.

In response, the released Guidance elaborates on requirements under which the commercial invoices may be regarded as primary documentation, namely:

  1. an invoice conforms to all the mandatory requisites set under the Law on Accounting; and
  2. the payment under such invoice is executed and supported by relevant bank statement or other documents.

That being said, current position of the Ministry of Finance is that unpaid invoices may not be recognized as primary documents, thus execution of separate transfer-acceptance acts may be required.

Implications for taxpayers

The Amendments and the Guidance set the ground to simplifying the accounting compliance and eliminating the practice of transfer-acceptance acts. While this is definitely a positive development for cross-border operations, certain outstanding issues remain with regard to domestic transactions, such as, inter alia, accrual date for VAT purposes.