Contact
Yuri Nikolaychuk

Rechtsanwalt (Ukraine), Dipl.-Jur., LL. M., Steuerberater
Associate Partner
Phone: +380 (44) 586 23 03
E-Mail

CHANGES IN THE TAX LEGISLATION OF UKRAINE EFFECTIVE FROM 01.01.2018 (Kopie 1)

On January 1, 2018, the Law of Ukraine "On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Regarding Securing of Budget Revenues in 2018" № 2245-VIII dated 07.12.2017 has entered into force. The overview of main changes in the tax legislation effective from January 1, 2018 is provided below.

 

Administration of Taxes

  • The personal responsibility of officials and officers of fiscal authorities for the damages caused to a taxpayer by an unlawful decision, act or omission has been introduced. The damages shall be compensated at the expense of respective fiscal authority regardless of the fault of official or officer. The official or officer of the fiscal authority is liable before the state by way of recourse in the amount of compensation paid from the state budget.
  • A new provision has been added, according to which the State Fiscal Service of Ukraine is obliged to publish by 15th of July of the current year on its official website information on the rates and the approval dates of the rates of local taxes and duties on respective territories.
  • The criteria for qualification as a large taxpayer have been changed. Large taxpayers are legal entities and permanent establishments of non-residents whose income for the last 4 reporting quarters exceeds the equivalent of EUR 50 million or the total amount of taxes and duties paid in the same period exceeds the equivalent of EUR 1 million, if the amount of such taxes and fees, excluding customs payments, exceeds the equivalent of EUR 500 thousand.

 

Transfer Pricing (TP)

  • Transactions between a nonresident entity and its Ukrainian permanent establishment exceeding UAH 10 million in value are considered as controlled transactions for transfer pricing purposes.
  • The list of low-tax countries which serves TP purposes has been expanded by 19 new countries and territories, including, among others, Estonia, Latvia, Malta, Georgia, Hungary, UAE, Singapore and others. The transactions of Ukrainian companies with the counterparties which are registered or resident in the countries from the list are subject to special tax anti-avoidance restrictions and are considered as controlled transactions.
  • The advance pricing agreement (APA) procedure was updated. The APA may now be executed with retroactive effect. If the taxpayer breaches its obligations under the APA, the APA terminates from the date on which it became effective. The extension of APA is now possible.
  • The date from which the fiscal authorities may request transfer pricing documentation was changed from 1 May to 1 October of the year following the reporting year.
  • The new provisions were added which clarify that the changes in the list of low-tax countries and the list of legal form of non-residents take effect from January 1 of the next year.
  • It was clarified that transfer pricing self-adjustments resulting from controlled transactions which took place in 2015 and 2016 shall be performed in accordance with provisions of Article 39 of the Tax Code of Ukraine in the version valid as of date of adjustment.

 

Corporate Income Tax

  • In 2018 the basic corporate income tax rate remains 18%.
  • The definition of related parties has been extended by including two new criteria for legal entities. The legal entities are considered related if the ultimate beneficial owner of such entities is the same individual or if the powers of the sole executive body of such legal entities are exercised by the same person.
  • The list of payments for the software products which are not considered as royalties for tax purposes was expanded by the payment for the grant of right to distribute copies of software products without the right to reproduce them or if their reproduction is limited by the end-user's use.
  • The definition of a "syndicated financial credit" was introduced. A "syndicated financial credit" means the funds provided by several resident and/or non-resident banks or other lenders mentioned in the definition, including states and international financial organizations, within a single credit agreement in defined shares to legal entities for a definite period for the defined purpose and bearing interest. Payment of income to syndicate of lenders may be carried out through an agent, nominal holder (nominal owner) or an intermediary in relation to such income. The interest or other income payable under such credit is taxed at the rate provided for in respective international treaty of Ukraine, taking into account the tax residency of the participants of the syndicated credit and regardless of whether the payment of interest is carried out through an agent or directly.
  • A new provision was added according to which the annual corporate income tax returns shall be submitted within 60 calendar days following the last day of the reporting year.

 

Value Added Tax

  • VAT invoices/adjustment calculations the registration of which in the Unified Register of VAT Invoices (URVI) was suspended shall be registered by January 2, 2018, except for:
  1. VAT invoices/adjustment calculations for which no explanations and copies of documents were submitted as of December 1, 2017;
  2. VAT invoices/adjustment calculations the registration of which was denied and as of December 1, 2017 such denial has not been challenged by the taxpayer within an administrative or judicial proceedings.
  • The provision regarding taxpayer's unconditional right to credit input VAT on the basis of VAT invoice and/or the adjustment calculation to such VAT invoice drawn up and registered in the URVI after July 1, 2017 (Subpar. 3 of Par. 201.10 of Article 201 of the Tax Code of Ukraine) is suspended until the procedure of suspension of registration of VAT invoices approved by the Cabinet of Ministers of Ukraine becomes effective.
  • The 7% VAT rate is now applicable not only to import and sale in the territory of Ukraine of medicines, but also to import and sale of medical devices which are included in the State Register of Medical Equipment and Medical Products or which meet the requirements of applicable technical standard as confirmed by the conformity document and which are allowed for placing on the market and / or putting into service and use in Ukraine.
  • Until December 31, 2018, the import and sale in Ukraine of vehicles equipped exclusively with electric motors, including those produced in Ukraine, is exempt from VAT.
  • Until January 1, 2020, the VAT payable upon import of industrial (commercial) equipment can at the taxpayer's request be paid in installments during a period of 24 months without any interest, penalties and fines determined by the Tax Code of Ukraine. Such relief applies to machinery and mechanisms, electrical equipment and parts thereof, devices for recording or reproduction of sound, optical instruments and apparatus for photographing or cinematography, measuring, monitoring or measuring accuracy, medical and surgical apparatus, etc.
  • The rules on exemption from VAT of supply of software products have been modified. From now on the VAT exemption applies not only to supply of software products, but also to operations with software products where the remuneration is not considered royalty for tax purposes. The definition of "software products" was expanded and now additionally covers:
  1. copies (exemplars) of computer programs, their parts, components whether in material and/or in electronic form, including in the form of code (codes) and/or links for downloading a computer program and/or their parts, components in a code form (codes) for activating a computer program or in a different form;
  2. any changes, updates, additions and/or extensions of the functionality of computer programs, the rights to receive such updates, changes, additions within a definite period of time.

 

Personal Income Tax

  • The rates of personal income tax and defense tax did not change and remain respectively, 18% and 1.5%.
  • The provisions have been added according to which an individual shall be released from liability for late payment of property tax and land tax, if the tax assessment notice is not sent (handed over) to an individual by the fiscal authority within the time set by the law.
  • The rules for determination of income from sale of real estate have been modified and a single database of real estate valuation reports is to be created. According to the new rules, the income from sale real estate shall be determined on the basis of the sale price specified in the sale and purchase agreement, but the income cannot be lower than the appraised value of such real estate determined by an authorized appraiser in accordance with the law and registered in a single database of real estate valuation reports. Without registration of the valuation report in the single database such report is invalid and a notary may not certify respective transaction.
  • The cost of taxpayer's recreation, health recovery and treatment, including rehabilitation of disabled, on the territory of Ukraine and/or taxpayer's close family members which is taken over (provided) one time per calendar year free of charge or with a discount by an employer paying corporate income tax is exempt from personal income tax, if the relevant costs (amount of discount) do not exceed 5 times the minimum wage established as at January 1 of respective reporting year (in 2018 this amount equals UAH 18,615).

 

 

Rödl & Partner
Kyiv

Mykoly Pymonenka Street 13
Building 1B, office 31
04050 Kyiv

Phone: +380 (44) 586 23 03
Fax: +380 (44) 586 23 04
E-Mail: kiew‎@‎roedl.com
Website: www.roedl.net/ua