Below, I
give 5 the most important, in my opinion, innovations of the Tax Code of Ukraine
in terms of their influence on Ukrainian businesses:
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2. Automatic VAT refund. Automatic VAT refund seems to be the pleasant surprise of the Tax Code of Ukraine. "Automatism” lies in that the VAT refund is provided without a documentary tax audit (based on a cameral tax audit only) and within a shorter time frame. Despite the active opposition of the tax authorities, some taxpayers did manage to obtain VAT refund on “automatic basis" in 2011.
3. Criminal case without issuing a
tax assessment. In the event of a tax-crime the tax assessment is not
issued to the taxpayer until the trial of the criminal case ends. This change
deprived the taxpayers of one of the most efficient ways to fight against groundlessly
instituted tax-crime cases. Before the Tax Code of Ukraine took effect it had
been possible to abolish the tax assessment through administrative court and
then based on the decision of the administrative court to have the resolution
on the institution of the criminal case canceled through the general court.
4. The concept of beneficial
ownership. The introduction of the concept of beneficial
ownership into the Tax Code of Ukraine substantially increased the tax risks of
Ukrainian holdings encompassing non-resident companies and as a result caused quite
a stir among tax advisers. This concept is mainly applied to detect the
possibility to use the tax advantage granted by a double tax treaty (a full
exemption from or a reduced rate of withholding tax). According to the concept
the enjoyment of the benefits of double tax treaties is only possible where the
payment of income is made to a non-resident being a beneficial (actual) owner of
income, rather than an intermediary, agent or nominee.
5. Restricted deductibility of
expenses related to goods (works, services) received from non-residents and unified
tax payers. The Tax Code of Ukraine brought the inconvenient for
business restrictions related the deductibility of consulting, marketing,
advertising and engineering services purchased from non-residents as well as the
complete non-deductibility of the goods (works, services) acquired from individuals-unified
tax payers, safe for IT services. While the non-deductibility of the goods
(works, services) purchased from unified tax payers has been repealed since 1
January 2012, the restrictions pertaining to non-residents remain in force.
Lastly, in 2011
the market was really shocked by the non-deductibility of the previous taxperiods losses incurred prior to 1 January 2011. Nevertheless, the instant “achievement”
should be ascribed not to the Tax Code of Ukraine, but to the tax luminaries of
the State Tax Service of Ukraine who found "the time and inspiration"
for this overly "advanced" interpretation of the Tax Code of Ukraine.
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