On 30 December 2016 the President of Ukraine signed the Law of Ukraine No. 5368, "On Amending the Tax Code of Ukraine (Regarding the Improvement of Investment Climate in Ukraine), which came into effect on 1 January 2017 (the "Law").
An overview of key and most business-sensitive changes is given below.
1. Administering Taxes
- A taxpayer’s full-scale electronic cabinet has been introduced to ensure that access is given to all tax information relating to the taxpayer, budget settlements are reconciled, tax reports are filled in and submitted, overpaid funds may be managed, tax and excise invoices are registered, any inspections are notified and inspection reports and certificates are given, and correspondence is maintained with controlling authorities, etc.).
- The criteria based on which a taxpayer is classified into the large taxpayer category have been changed: aggregate supply volume amounting to UAH 1 bln is now required instead of income in the amount of UAH 500 mln; tax payments are increased from UAH 12 mln to UAH 20 mln.
- A plan schedule of documentary scheduled tax inspections is now required to be published on the official website of the State Fiscal Service.
- A period for controlling authorities to give notice to a taxpayer of a place and time of hearing objections to the tax audit report has been increased from 2 to 4 business days prior to the date of their hearing.
- A unified database of individual tax consultations has been introduced and will be published on the website of the State Fiscal Service.
- A public register of applications for payment by installments and deferral of monetary or tax liabilities will from now on be kept on the website of the State Fiscal Service.
- It has been defined that tax audits may be undertaken by fiscal bodies at a regional level only, while local tax inspectorates will fulfill servicing functions only.
- The liquidation of tax police has been initiated.
2. Value Added Tax (VAT)
- A unified public Register of Applications for Budgetary Refund of VAT has been introduced instead of two registers, which the Ministry of Finance of Ukraine will administer.
- A public Temporary Register has been introduced with respect to applications for repayment of budgetary refund amounts filed before 1 February 2016, under which, as of 1 January 2017, the value added tax amounts are not refunded from the budget.
- The right to transfer a tax credit supported by a documentary tax audit has been allowed upon reorganization by merger with or into other VAT taxpayers as a part of the legal successor's tax credit.
- A tax invoice registered after 1 July 2017 with the Uniform Register of Tax Invoices has been defined as a sufficient ground for accruing tax credit amounts and any additional confirmation is no longer required.
3. Transfer Pricing
- The threshold to recognize a transaction as controlled one has been increased: the taxpayer's annual income from any activities determined based on accounting rules is increased from UAH 50 mln to UAH 150 mln for a tax (reporting) year and a volume of taxpayer's business transactions with one counterparty is increased from UAH 5 mln to UAH 10 mln.
- A list of controlled transactions is supplemented with business transactions made with non-residents who are not profit (corporate) tax payers or released from paying such tax.
- A list of states, transactions with which residents are treated as controlled, has been supplemented with states whose competent authorities do not timely and fully exchange tax and financial information requested by Ukrainian tax authorities.
4. Corporate Profit Tax
- A non-resident is now able to obtain from a controlling authority a confirmation regarding payment of a tax in the Ukrainian language.
- A financial result before taxation may now be adjusted to take into account expenses for repair, reconstruction, upgrading and other improvements of non-productive fixed assets and intangible assets.
- The restrictions on payment of the interest to non-residents who are related to the profit taxpayer have been clarified as applicable only to the interest accrued on liabilities arising, in particular, to non-resident related parties.
- Tax holidays has been introduced for the period until 31 December 2021 (zero rate of the corporate profit tax) for companies that meet certain criteria, such as, inter alia, annual income being less than UAH 3 mln.
5. Personal Income Tax
- Daily allowances for business trips abroad have been increased from 0.75 % of the minimum salary to EUR 80 per day (not included into the individual's income).
- The taxable income has been defined as not inclusive of amounts paid by any legal entity or individual to domestic higher education establishments and vocational schools to get an education, training or retraining of a student or employee, but no more than a triple amount of the statutory minimum salary in effect as of 1 January of the reporting (tax) year, for each full or incomplete month of studying, training, or retraining of such individual.
- A taxpayer has been authorized to pay by installments during three years an amount of tax liability accrued on the debt written off by the creditor at its sole discretion and not related with its bankruptcy procedure before expiration of the limitation period under the loan obtained for purchasing residential property (mortgage loan).
6. Other Changes
- The transitional provisions have introduced a separate regulation for payment of certain taxes within temporarily occupied territory.
- Secondary water users are excluded from the list of payers of the fee for special water use starting from 1 January 2018.