Amendments to the Tax Code of Ukraine (Corporate Income Tax)

By Roman Blazhko 

Extending the series of the posts devoted to the amendments made to the Tax Code of Ukraine by the Law No 3609-VI (draft law No 8217), I would like to touch upon the most noticeable of them (at least in my opinion) related to corporate income taxation. Please, bear in mind that in my posts of 29 July 2011 and 18 August 2011 I already outlined the amendments brought by this law with regard to the administration of taxes and VAT.

Hence, corporate income taxation was subjected to the following changes:

- It is cleared up that if the primary document does not specify the useful life of intangible assets, the useful life of the intangible assets is said to be 10 years.

- The problem on the non-deductibility of the expenses related to the acquisition of initially offered securities appears to be solved. Such expenses are recognized in the reporting period when the respective securities are sold by the taxpayer.

- The problem on the non-deductibility of the expenses related to the sale of goods advance payment for which was received before the effective date of Title III ("Corporate Income Tax") of the Tax Code of Ukraine and was included into the gross income under the “first event” rule (see in detail my post of 3 June 2011). The amendments enable to recognize those expenses on the day of the delivery of the goods, as well as to adjust income/expenses once the advance is returned to the buyer.

- The period during which taxpayers are immune from liability for corporate income tax violations was prolonged. The corporate income taxpayers can not be penalized not only over 2 and 3 quarters of 2011, but also over 4 quarter of this year.

Amendments to the Tax Code of Ukraine (VAT)

By Roman Blazhko 

In my post dated 29 July 2011 I already mentioned the amendments introduced by the law of 7 July No 3609-VI (the draft law No 8217) to the Tax Code of Ukraine touching upon the administration of taxes. Below, I am delighted to call your attention to the most significant, at least to my thinking, amendments brought by this law in respect of VAT:

1. The grounds for the voluntary registration of a VAT payer are broadened. An entity is eligible for the voluntary VAT registration if either its share capital or book value of assets (fixed assets, intangible assets and inventory) exceeds UAH 300 thousand.

2. The criteria for automatic VAT refund were varied. The volume of zero-rated transactions of the taxpayer seeking automatic VAT refund in its total volume of supplies was lowered from 50 to 40 per cent. It is also determined that while defining the discrepancies between the taxpayer’s input VAT and its counterparties’ output VAT three preceding reporting periods (one quarter) are taken into account.

3. The procedure for the issuance of VAT invoices was slightly modified. A VAT payer is obliged to specify in the VAT invoice the product code under the customs tariff if the goods supplied are either excisable or have been previously imported into Ukraine. A VAT payer is now permitted to register its VAT invoices in the Unified register of VAT invoices within 20 calendar days following the day of their issuance.

Please note that the law No 3609-VI has been in effect since 6 August 2011.

Draft Law No 8217 signed by the President of Ukraine

By Roman Blazhko

In my posts of 22 and 29 July 2011 I already referred to the draft law No 8217 considerably amending the Tax Code of Ukraine.

On 1 August 2011 the draft law was signed by the President of Ukraine. Generally, the law will be in effect as from the day following the day of its official publication; however, a bulk of its provisions will be effective since 1 January 2012.

Amendments to the Tax Code of Ukraine (Administration of taxes)

In the post dated 22 July 2011 I mentioned the draft law No 8217 (enacted by the Parliament of Ukraine but not signed by the President yet) considerably amending the Tax Code of Ukraine. Here, you can find the information on the chief novelties introduced by the aforesaid draft law in respect of the administration of taxes:

- Improvement in the regulation of tax consultations given by the tax authorities: (i) individual tax consultation must be awarded within 30 calendar days; (b) the possibility to obtain tax consultation in an electronic form; (с) the revival of general tax clarifications (consultations) as a basis for the release of a taxpayer from the responsibility for the breach of tax laws;

- Broadening the grounds on which the information from taxpayers can be required by the tax authorities based on a written request. The draft law lays down the following additional grounds: (a) unreliability of data constrained in tax returns; (b) the receipt by the tax authorities of a complaint against a taxpayer pertaining to its incompliance with VAT invoicing rules; (с) the conduction of cross tax audit;

- Clarifying the grounds on which a taxpayer can bar the tax authorities from exercising its documentary tax audit. According to the draft law, a taxpayer is not only entitled to disallow the tax authorities to proceed with the field documentary tax audit if the tax authorities fail to deliver to such a taxpayer an assignment to carry out the tax audit, but also if they fail to deliver to the taxpayer an order on the appointment of the tax audit and identity cards of the tax officials specified in the said assignment.

- Making clear that in the course of their tax audits big taxpayers  are obliged to submit  in an  electronic form to the tax authorities not all available to them source documents, company accounts, and financial reporting documents,  but only those originally executed in an electronic form;

- Eliminating the tax fines for the overstatement of the negative balance of corporate profit tax and removing the special 75 per cent tax fine for three or more violations of tax laws committed within 1095 days.

As you can see, most of the novelties brought by the draft law No 8217, of course, except for those relating to widening the grounds to demand information from taxpayers, seems to be beneficial for business.