The Law of Ukraine “On Reducing the Tax Burden” No. 655-VIII of 17 July 2015 (the “Law”) became effective on 1 September 2015.
The legislative changes are intended to ease the life of Ukrainian taxpayers, decrease their tax burden, and ultimately make Ukraine more attractive to investors.
The Law covers tax rulings, penalty accrual, deadlines for filing tax returns by mail, and abolishes fines for qualified taxpayers. Below we provide more details on these positive tax developments.
Improvement of tax rulings
Under the Law, the Ministry of Finance will take over from the State Fiscal Service as the body that issues and approves general (non-individual) tax rulings. The State Fiscal Service will continue to provide individual tax rulings upon a taxpayer’s request.
The Law introduces additional requirements to ensure that all tax rulings (both general and individual) contain sufficient and meaningful information, are issued in due time, and that the public can access them.
Following the introduced amendments, the taxpayers may expect to receive well-grounded and meaningful individual tax rulings. The tax authorities are now legislatively bound to consider actual grounds set out by taxpayers’ requests, and to substantiate applied norms of tax legislation as well as to provide conclusions on the practical applicability of particular norms of tax legislation. This is an important development, specifically considering that individual tax rulings defend taxpayers against responsibility (financial, administrative and even criminal) provided they have acted in accordance with such ruling.
Taxpayers are now entitled to challenge both individual and general tax rulings in court; previously this possibility was available only for individual tax rulings.
The amendments should not only improve the quality of tax rulings, but also make them more accessible to taxpayers. The Tax Code now requires authors of tax rulings to publish them on-line within ten calendar days (for individual tax rulings) and five calendar days (for general tax rulings) of issuance.
Term for reporting by mail extended
From 1 September 2015 tax reports sent by mail must be posted five days before the deadline instead of the previously required ten days.
Grace period for penalty accrual
The Law provides for a grace period during which the penalty for late tax payment does not accrue for self-assessed taxpayers. The accrual of the penalty will start 90 days after the deadline for a tax payment. Under the old rules, a penalty for late tax payment started accruing the day after the payment deadline.
The Law also states that the penalty will not accrue if a taxpayer self-corrects tax liabilities within 90 days of the deadline for payment.
Changes to tax audits
Under Ukrainian legislation, results of tax audits are formalised either in a tax audit act (if violations were identified) or a tax audit reference (if no violations were found). Prior to the changes introduced by the Law, taxpayers were only entitled to express reservations on a tax audit act. Now they may express reservations on tax audit references as well.
Taxpayers are now also entitled to require the tax authorities to conduct field audits (at a taxpayer’s premises) instead of remote audits (conducted in the tax office). This should be a positive change, as it will allow taxpayers to exercise supervision.
Positive developments for non-residents owning real estate in Ukraine
The rules for tax registration of non-residents who own real estate in Ukraine are now included in the Tax Code (previously they were contained only in a bylaw). Under these rules non-residents can undergo a simplified tax registration if such ownership does not require a permanent establishment in Ukraine.
Contrary to the bylaw, the Tax Code no longer requires non-residents to substantiate that their ownership of real estate in Ukraine does not require the creation of a permanent establishment.
Temporary abolition of fines for “low-turnover” tax payers
The law-makers decided to grant a temporary release from fines for underpayment of tax to taxpayers whose turnover for the preceding year did not exceed UAH 20 million.
However, this release is not unconditional, and will apply only if the taxpayer did not challenge the tax assessment and has paid additionally assessed tax liabilities.
The Ministry of Finance has not yet finalised the procedure for such release, so the abolition will not be enforceable until a relevant bylaw has been adopted.