In 2018, Ukrainian tax legislation was subject to a number of changes. Having analyzed the Law of Ukraine No. 2245-VIII “On Amendments to the Tax Code of Ukraine and certain legislative Acts of Ukraine to ensure the balance of budget revenues in 2018”, which came into force on January 1, we decided to consolidate the most significant reforms and summarize. The issue of this blog will be dedicated to it.
Overall changes
Key changes in the general rules of tax law include:
- exclusion from the definition of “bad debt” of indebtedness of natural persons, forgiven by the creditor;
- introduction of a new concept of a “syndicated financial loan”;
- clarification of the definition of “related persons” for TP purposes;
- introduction of the term “new well” in order to regulate the use of preferential rent rates for the extraction of natural gas;
- expansion of the list of payments not considered as royalties for the transfer of the right to distribute IPI without the right for their reproduction;
- clarification of the definition of the weighted average retail price;
- introduction of the obligation for the taxpayers to ensure the storage of the documents for not less than 1,095 days (for documents and information regarding TP – at least 2,555 days) from the date of submission of the relevant tax reporting;
- establishment of responsibility for the officials of the supervisory bodies to the state for causing harm to tax payers (in recourse order).
What has been changed in the taxation system of value added tax?
One of the significant changes concerns the definition of the term “cash method”. If earlier the concept assumed the application of the date of the emergence of the right to a tax credit, but from this year, the date of referring the amount to a tax credit is applied.
The second innovation is the expansion of the scope of application of the 7 % VAT rate on imports to Ukraine and sale of medical products. We remind that before this year, this benefit was applied only to the products from the list approved by the Cabinet. Now the 7% rate applies to all products entered in the State Register of Medical Devices and Medical Products or corresponding to the requirements of the relevant technical regulations, and allowed for sale and use in Ukraine.
Among other things, the Law under consideration clarifies the benefits on the value-added tax for book products. Namely, the sale of Ukrainian children’s book editions of up to 48 pages is completely exempt from tax.
At present, exemption from VAT extends to the supply of software in all forms, including electronic and through download links or activation codes. The exception is when royalty is the fee for software products. At the same time, the concepts of “royalties” and “software products” were corrected.
Another important innovation is provision of the taxpayer with an opportunity to take the payment of VAT in installments for a period not exceeding 24 calendar months, without calculation of interest, penalties and fines, when importing the equipment to Ukraine from the list established by law in the order established by the CMU. The supervisory body will provide installments by January 1, 2020 according to the declarations of the payers. It should be noted that in case of alienation, transfer to lease, sublease or transfer of ownership, use of such equipment, the taxpayer is obliged to pay tax liabilities and penalty.
Corporate tax in 2018
The main reforms in respect of income tax in 2018 were:
- establishment of a 60-day reporting period for filing an annual declaration;
- clarification of the criteria for categorization of an enterprise as a large payer of taxes;
- expansion of the list of non-resident individuals subject to a restriction on the inclusion in the amount of expenditure of an amount not exceeding 30% of the payment;
- provision of the possibility of attributing the amounts paid to non-profitable sports organizations to the expenses, however not more than 8% of taxable profit for the previous reporting year;
- substantial reforming of TP rules (cardinal change in control and reporting procedures, as well as criteria and subjects of control).
New exemption for single tax
Payers of a single profit tax in 2018 are exempt from payment of an advance payment when dividends are paid, while the sum of the dividends received from the payer of single tax is included in the income of the tax payer.
The list of business entities that can not be payers of a single tax of the IV group is also expanded: now they include the producers of chicken meat, as well as edible co-products of domestic chickens and their eggs.
A tax is imposed on the repatriation of the payments of the payers of a single tax in favour of non-residents.
What has been changed in terms of requirements for non-profit organizations?
Since 2018, religious organizations can be excluded from the Register of non-profit organizations in case of violation of:
- requirements for establishment and registration;
- requirements for the use of profit.
In order to enter the Register of non-profit organizations, a religious organization, it is sufficient to fulfill only the requirements for the creation and registration in a manner determined by law.
Local taxes on a new way
Now summary information on the amounts and dates of setting local tax rates, as well as fees and NGOs in the relevant territories can be seen on the official website of the State Fiscal Service.
One of the key changes in the relations of local taxes is the abolition of the responsibility of local tax payers in case they do not receive a notification-decision. In addition, the restriction on the application of the benefit for land tax payment for one type of plot was canceled.
Updated system of taxation of representative offices
The main provisions of the taxation system of representative offices in 2018 can be summarized as follows:
- Economic transactions between a non-resident and his permanent establishment in the territory of Ukraine are recognized as controlled if their volume exceeds 10,000,000 UAH for the corresponding tax (reporting) year (excluding indirect taxes).
- Revenues of non-resident companies operating in the territory of Ukraine through a permanent establishment are taxed on general grounds, while the last ones are equal to the taxpayers operating independently from such non-residents.
- In the event that a non-resident conducts business in Ukraine and abroad and does not determine the profit from his activities through the permanent establishment in Ukraine, the amount of profits subject to taxation in Ukraine is determined on the basis of the drawing up of a separate balance sheet of the financial and economic activities by the non-resident coordinated with the supervisory authority according to the location of the permanent establishment.
- If the profit received by non-residents with a source of origin in the territory of Ukraine can not be determined by direct calculation, taxable profit is defined as the difference between income and expenses by applying a coefficient of 0.7 to the amount of the received income.
