Tax Code amendments come into force

Published 29.05.2020. Some rules have changed since; ask us for the current position.

On 23 May 2020, Law No. 466-IX came into force in Ukraine. It supplements a number of articles of the Tax Code and restates others. The changes aim to improve the administration of taxes and levies and to introduce the standards set out in the OECD BEPS Action Plan.

Key changes to tax legislation include:

1. Local council decisions on local taxes and levies will now remain in force indefinitely, until they are repealed. Under the new version of Article 266 of the Code, real estate (other than land plots) used by small and medium-sized businesses as temporary structures is exempt from tax (previously this applied only to small architectural forms (МАФи) and markets). At the same time, tax is payable on industrial buildings that are leased out. Businesses on the simplified system will also have to pay tax on land and the property on it if they lease or lend it out.
2. New rules on taxing controlled foreign companies (CFCs, КІК) apply from 2021. A foreign company will be treated as controlled if a Ukrainian resident holds 25% or more of it (in 2021–2022). The tax rate for such entities will be 9% where profit is distributed and 18% where it is retained. International groups of companies must keep three-tier documentation (master file, transfer pricing documentation and a country-by-country report).
3. An application for VAT registration must be filed 10 days before the start of the month in which the applicant plans to operate as a VAT payer. The previous deadline was 20 days.
4. Individuals selling unfinished real estate are exempt from personal income tax (ПДФО), while the sale of a third or subsequent car in a year is taxed at 18% (previously 5%).
5. Individual entrepreneurs (ФОП) in any single tax group, as well as self-employed persons, will pay corporate income tax on income (profit) paid to non-residents.

All taxpayers with annual income of up to UAH 40 million (previously UAH 20 million) may now use an annual reporting period. The value threshold for fixed assets has risen from UAH 6,000 to UAH 20,000. This means that assets cheaper than this amount can be expensed through 100% depreciation when they are put into use.

6. Scheduled documentary tax audits will take place no more than once in the first and second quarters (except where the taxpayer changes its name or corrects technical errors).

Overall, the changes are designed to:

• implement international currency control standards;
• reform the fiscal service;
• improve tax administration and expand online services for taxpayers.

Some further changes take effect on 1 June 2020, and others from the start of 2021.