Published 4 June 2020. Some rules have changed since; ask us for the current position.
The law adopted on 16 January 2020 (Draft Law No. 1210) was finally signed by the President on 21 May, published in the official newspaper Holos Ukrainy (Голос України) on 22 May and came into force on 23 May. Its purpose is to amend the Tax Code of Ukraine (Податковий кодекс України, TCU) in relation to tax administration and to close gaps in the previous legislation. In particular, the rates of some taxes have changed, and new reporting rules and new penalties now apply.
A number of other changes take effect on 1 July 2020 and from the beginning of next year.
Tax administration
Under the new wording of Article 52 of the TCU, individual tax rulings (індивідуальні податкові консультації) are now provided orally, in writing and online. All three have the same legal force. A ruling is issued within 25 days, and this period can be extended by 15 days (previously by 10). From next year, a ruling will no longer protect the taxpayer from liability.
Registration of companies, individual entrepreneurs (FOP) and non-governmental organisations with the tax authority takes place on the day the registration data is received from the Unified State Register (ЄДР). Previously, the procedure could drag on until the next working day.
Non-resident companies, their representative offices and separate divisions are registered after they submit an application and any of the following events occurs:
- accreditation of the representative office or branch (within 10 days);
- opening of a bank account;
- acquisition of real estate.
The rules on tax payment deadlines have been clarified. If a deadline falls on a weekend or public holiday, the next working day is treated as the last operating day. Additional tax liabilities assessed by the tax authority are now paid within 10 working days (previously calendar days) of receiving the relevant notice.
Under the latest changes, scheduled tax audits for the current year may be carried out no more than once in the first quarter and once in the second quarter, except where technical errors are corrected or the taxpayer changes its name. Taxpayers are notified of an upcoming audit electronically through their online taxpayer account no later than 10 days before it starts.
The deadline for appealing tax notices-decisions (податкові повідомлення-рішення, ППР) remains 10 working days. However, it can now be extended if the taxpayer proves that the deadline was missed for good reasons. The request, together with supporting evidence, is filed with the higher supervisory authority within 6 months of the expiry of the appeal deadline.
Tax changes
Corporate income tax payers now include individual entrepreneurs on the simplified system and persons engaged in independent professional activity, where funds from their income earned in Ukraine were transferred to a non-resident. Winnings from gambling on slot machines are now also taxable. An annual reporting period applies to taxpayers whose annual income does not exceed UAH 40 million (previously UAH 20 million). The threshold for fixed assets has risen from UAH 6,000 to UAH 20,000, which means that more assets can now be written off as low-value items. From 2021, the tax rate for controlled foreign companies (CFCs) will be 9% where profit is distributed and 18% where it is not. CFCs are commercial entities in which a Ukrainian resident holds a 25% share of the capital.
The period for registering a business as a VAT payer has changed: previously 20 calendar days, now 10. The application is filed only electronically. The deadline for registering consolidated tax invoices in the Unified Register of Tax Invoices (ЄРПН) has been extended from the 15th to the 20th day of the month. A calendar month is now the single reporting period for all VAT payers.
As for personal income tax (ПДФО), individuals who own or control foreign companies pay it at 19.5% (18% plus 1.5%). The sale of the first car in a year is taxed at a zero rate, the second at 5% and the third at 18%. The sale of an unfinished construction project is not taxed (previously 5%) if the owner held it for more than three years. The tax on pensions exceeding 10 subsistence minimums has been abolished.
In addition to small architectural forms (МАФи, such as kiosks) and markets, temporary structures are not subject to real estate tax. Industrial buildings that are leased out or rented are taxable. Simplified system taxpayers pay land tax if they lease out or lend the plot and the property on it.
Penalties
The fine for breaching the registration procedure with the supervisory authorities doubles: UAH 340 for an individual entrepreneur and UAH 1,020 for a legal entity (doubled again for a repeat breach). Operating a foreign representative office without registration will cost UAH 100,000. An error in an individual's taxpayer identification number, or failing to state it, carries a penalty of UAH 340 (previously UAH 170).
Concealing information about the lease of real estate will cost realtors and notaries UAH 680 (UAH 1,360 for a repeat breach). The fine for failing to file a controlled transactions report equals 300 subsistence minimums for an able-bodied person (over UAH 630,000 in 2020).
Most of the changes focus on tax administration and on bringing international standards into Ukraine's tax system. According to experts, the "lightning-fast" entry into force of so many changes may hit businesses hard, as they will have to adapt to the new reality quickly.
If you have questions about how your company should operate under the new rules or need tax advice, contact the Key Solutions team.
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