Wednesday, January 17, 2018

Tax Amendments under New Year Tree of 2018

Co-authored by Anton Havryk

The end of 2017 has not been an exception in terms of brining amendments to the tax legislation to be in effect from the beginning of 2018.

In the continuation of the “good” long-standing tradition  just few days before the New Year’s Eve, the President of Ukraine signed the Law of Ukraine "On Amendments to the Tax Code of Ukraine and Certain Statutory Instruments of Ukraine on Ensuring the Balanced State Revenues in 2018".  The Law was officially published on 30 December 2018.

The Law provides for a large number of changes to the tax legislation. Below is a very brief summary of the most important of these changes.

VAT - the suspension of registration of VAT invoices. Quite a major reform is being accomplished in the area of the suspension of the registration of VAT invoices. In short, the essence of the reform can be boiled down to as follows.

The system of the suspension of the registration of VAT invoices stopped its functioning following the entry into force of the Law. The system will resume its operation after the approval by the Cabinet of Ministers of Ukraine of a new procedure governing the suspension of the registration of VAT invoices. The Cabinet of Ministers of Ukraine is supposed to adopt the new procedure by 1 March 2018. However, there are some doubts whether the Cabinet of Ministers of Ukraine will be able to do it on time.

Rather favorable transitional provisions are envisaged for VAT invoices the registration of which has been already suspended, but the decision to decline their registration has not been issued yet by the tax authorities.De pending on the date (before or after December 1, 2017) at which the taxable person provided explanations/documents for the restoration of the registration, the registration can be either completely automatic or must be carry out after the expiry of five business days set aside for the consideration of such explanations/ documents.

VAT - the abolishment of VAT refund on the exportation of oilseeds.  The exportation of soybeans will be exempt from VAT from 1 September 2018 to 31 December 2021. The exportation of yellow rocket seeds and rapeseeds will be exempt from VAT from 1 January 2020 to 31 December 2021.

The above VAT exemptions will result in the abolishment of VAT refund on  exportation of the aforesaid oilseeds.

It is worthy of note that initionaly the draft law provided for VAT exemption (canceling VAT refund) on the exportation of sunflower seeds, rapeseeds and soybeans from 1 March 2018. As far as we understand,  under the increasing pressure of the strong Ukrainian agrarian lobby these provisions have been seriously alleviated at the stage of the adoption of the final wording of the law.

VAT - exemption in case of non-commercial importations of goods into the customs territory of Ukraine (hand luggage, passenger luggage, international mail and express shipments). Special rules have been established to combat abuses related to the use of the aforesaid  VAT exemption on commercial purposes (fairly common practice as of  today).

Restrictions are tied up to the frequency of the departure of persons transporting goods from abroad and the frequency of receiving international shipments. For example, the VAT exemption available for international shipments priced at no more than EUR 150  only works for first three shipments per month. The value of all the three first shipments are cumulated for the purposes of the exemption. The exemption is to be  granted only to the extent that the summed up value of the first three shipments during the calendar month does not exceed of EUR 150.

VAT - exemption for the supply of "electrocars". A VAT exemption is provided for the importation and domestic supplies of automobiles propelled by electric motors. The exception is of a temporary nature to be in force for the entire 2018. We can expect electric cars to fall in price by 20%!

Transfer pricing. Considerable changes to the transfer pricing rules have been made. Of those changes, it is worthwhile to mention the adjustment of the criteria for controlled transactions as well as the introduction of new requirements for the contents of transfer pricing documentation.
Excise tax, environmental tax, rent charge.  The rates of these taxes have been increased.