New Year Tax Gifts 2014 ~ U-Tax Blog

Tuesday, December 3, 2013

New Year Tax Gifts 2014

Photo from
http://hdwallpaperszon.com



Co-author Andriy Kuleba
(junior associate of Lavrynovych and Partners Law Firm)


Dear readers, take our warmest wishes for upcoming New Year and Christmas!

Below is a brief account of what will be expected since 1 January 2014 in the area of Ukrainian taxation (so-called New Year Tax Gifts 2014). 
 




Tax Novelties since 1 January 2014

No
After Novelties Take Effect
Before Novelties Take Effect
Possible Consequences
VAT
1
The rate of VAT lowers to 17%*.

*- It is expected by some commentators that the Ukrainian Parliament will change the law so as to avoid the reduction of the current 20% VAT rate in 2014.

The rate of VAT constituted 20%.
Favorable implications. Theoretically, it can cause the prices for VAT taxable goods and services to fall down by 2.5% with the resulting increase of total demand.
2
No requirement on the indication of the details of a customs declaration in the VAT invoice issued with regard to imported goods.
A VAT invoice issued in respect of imported goods must include the details of the relevant customs declaration.
The simplification of the procedure.
3
The supplies of grain crops (wheat, rye, barley, oats, corn, rice, sorgo, buckwheat, panic grass) and industrial crops (seeds of rape and sunflower) become VAT taxable.
Temporary exemption from VAT.
The exporters of the grain will run into a “headache” called “VAT refund”.
4
The supplies and imports of waste and scrap of ferrous and non-ferrous metals and the wood (certain items) become VAT taxable.
Temporary exemption from VAT.
Slightly forgotten problems for the exporters of metallurgical products related to the refund of VAT paid to the suppliers of the scrap and waste metals. It is not a rare occasion that the latter resort to non-transparent chains of supply in which the tax authorities are keen to discover “fake nature” deals.
5
Possibility to file for VAT registration by means of electronic communication (provided that there is an agreement executed between the taxable person and the tax authority on the recognition of the electronic documents).
No such possibility.
The simplification of the VAT registration.
6
The introduction of 5 calendar days term for the carrying out of in-office (cameral) audits of tax returns of VAT taxable persons with positive tax history for the purposes of automatic VAT refund.

To have the positive tax history means to meet a number of criteria over 36 successive months.
In-office (cameral) audits for the purposes of the automatic VAT refund were to be carried out within 20 calendar days.
The acceleration of the VAT refund procedure for the taxable persons having positive tax history.
7
The cessation of the possibility of receiving VAT refund through the issue of financial treasury bills.
VAT refund was possible through the issue of financial treasury bills.
The VAT taxable persons lose the alternative way of VAT refund.
Corporate Income Tax
8
The rate of corporate income tax lowers to 16%*.

*- It is expected by some commentators that the Ukrainian Parliament will change the law so as to avoid the reduction of the current 19% corporate income tax rate in 2014.
The rate of corporate income tax constituted 19%.
Positive implications. Reduced tax burden for enterprises.
Excise Tax
9
The rate of excise tax increases to UAH 32 for 1 liter of 100% spirits.
The rate of excise tax constituted UAH 29 for 1 liter of 100% spirits.
The increase in prices of alcoholic drinks.
10
The specific rate of excise tax for non-filtered cigarettes rises to UAH 77.50 per 1 thousand pieces, and for filtered cigarettes – to UAH 173.20.
The specific rate of excise tax for non-filtered cigarettes constituted UAH 72.70 per 1 thousand pieces, and for filtered cigarettes – UAH 162.60.
The increase in prices of cigarettes.
Administration
11
The introduction of documental unscheduled electronic audits for taxpayers using simplified tax system.

Such audits are carried out exclusively at the instance of the taxpayer with the minor level of tax risk. The audits are called “electronic” considering that the documents for the audits are provided in the electronic form.
No such possibility.
This brings the unique possibility of having your tax calculations audited on a free-of-charge basis. The taxpayer applies to the tax authority and provides it with all required documents for the purposes of such an audit. The tax authority carries out the audit. Should tax irregularities be detected, the notice of assessment is not immediately issued. The taxpayer is given a time during which he is able to made the required adjustments himself (self-correction) without the imposition of 25 (50)% fine. At the same time, this does not exempt him from paying a 3 (5)% fine (for the self-correction of tax mistakes) as well as daily default penalty. If the taxpayer fails to correct the mistakes, the separate tax audit can be carried out with the resulting notice of assessment.
12
The Methodology of the Accounting of Temporary and Permanent Tax Differences comes into force (Accounting Standard “Tax Differences” approved by the order of the Ministry of Finance of Ukraine No. 27 dated 25 January 2011).
No such Methodology.
Additional requirements to the financial statements. Financial statements for accounting periods of 2014 should be prepared with the consideration of tax differences.
13
The applications on the voluntary VAT registration and on the selection of the simplified tax system regime may be filed directly with the Registrar of Companies at the moment of the state registration of a legal entity or a sole proprietor.
No such possibility.
More facile procedure for VAT registration and accession to simplified tax system regime.
Other Issues
14
The actual rates of ecological tax equal to 100% of the rates stipulated by the Tax Code of Ukraine.
The actual rates of ecological tax constituted 75% of the rates stipulated by the Tax Code of Ukraine.
Additional tax burden for ecological tax payers.
15
Renewal of real estate tax for individuals.
The real estate tax has already come into effect for individuals and legal entities. Nevertheless, since August 2013 the application of the tax to individuals has been suspended.
Additional tax burden for individuals holding residential real estate.

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