On December 21, 2021, Law No. 1914-XI of November 30, 2021 “On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Concerning Ensuring the Balance of Budget Revenues” (former Draft Law No. 5600) was officially published in Golos Ukrainy No. 244.
The Law will come into force on January 01, 2022, but some norms will come into force on the day following its official publication, and some after a certain time.
The Law has improved the provision of the Tax Code of Ukraine in the part concerning, in particular, general issues of tax administration, corporate income taxes, personal income, value added, excise and environmental taxes, rent, land fees, conditions of stay on the simplified tax system.
- procedural issues related to the right of the supervisory authority to apply to the court for the establishment of a temporary restriction on the right of departure of the head of a legal entity have been resolved, in particular:
- non-payment of the tax debt by the taxpayer within 240 days is established as a basis for applying to the court by the supervisory authority;
- the grounds for lifting such a ban are determined: in addition to paying off the debt, a change in the head of the debtor has been added, or in the event of the start of judicial procedures in bankruptcy cases against such a debtor;
- maintaining a Register of Heads of Debtor Taxpayers is provided for prompt receipt of relevant information by taxpayers;
- the procedure for making a relevant decision by the court is clearly spelled out, including the right to appeal and cassation appeal against such a decision.
The Law provides for the right of the supervisory authority to send requests in case of detection of facts that may indicate a potential violation with justification for such facts, and also restricts the taxpayer’s right not to provide information and documents if such information documents have already been provided to the supervisory authority in the past.
The Law, in order to more effectively administer local taxes, imposes on the supervisory authority the obligation to disclose information to local self-government bodies also about individual debtors (currently, information is disclosed only in relation to legal entities). It is clarified in the relevant legislation that providing information about debtors of individuals to local self-government bodies is not considered dissemination of personal data and disclosure of confidential information.
The supervisory authority has the right to repay the tax debt through collection if there is a state debt to the payer, from the difference between exceeding the amount of the tax debt of such a taxpayer and the amount of the outstanding state obligation to the taxpayer.
Both the taxpayer and the supervisory authority are granted the right to openly record sound, photo, and video recordings during inspections and, accordingly, use such recordings as the basis for concluding the inspection report.
The Law grants payers the right to give permission to the tax authorities to disclose information about themselves to third parties through the account, to the extent determined by the taxpayer. The requirements for tax assessment notice (hereinafter – the TAN) in terms of detailed calculation of the amount of tax liabilities and tax debt.
- the mechanism for writing off losses to large income tax payers has been improved, namely, losses are taken into account until they are fully repaid, but in installments of 50% annually. If the remaining amount of losses is up to 10% of the financial result, such losses are accounted for in full. The first reporting period will be 2022;
- adjustment of the financial result for the amount of non-refundable financial assistance is applied only by those payers who included such assistance in expenses and provided it to a related person who declared losses over the past period;
- profits of poultry producers are exempt from taxation until January 1, 2027. However raising chickens is excluded from the list of poultry;
- it is established that from January 1, 2022 to January 1, 2024, taxpayers-producers of electric energy at the “green” tariff will have the right to determine the tax liability for corporate income tax using the cash method;
- part of the corporate income tax obligations of taxpayers-owners, tenants, users of land plots classified as agricultural land will be a positive value of the difference between the amount of the total minimum tax liability and the total amount of taxes, fees, payments and expenses paid for renting land plots. The total minimum tax liability will be calculated as part of a separate appendix to the tax return;
The Law in part of the minimum tax liability provides that:
- the benefit for exemption from personal income tax of income from the sale of self-grown products depends not on the size of the land plot, but on the amount of income received and is granted when the amount of income does not exceed 12 minimum wages. (In clause 165.1.24, the benefit for the release of income received from 2 hectares has been replaced with a benefit that has a monetary expression of income of 12 minimum wages);
- for individuals who own land plots on the right of ownership or use, the supervisory authority will not charge the minimum tax liability (MTL) for land plots that were located within settlements as of January 01, 2022;
- the procedure for crediting taxes paid as the MTLs is differentiated between agricultural producers and non-agricultural producers;
- to ensure the fairness of calculating MTLs for land plots of state and non-state ownership, only 20% of the rent for land plots belonging to state or municipal ownership is provided for crediting as payment of MTLs (in the first reading, it was proposed to count in full).
The Law has improved the mechanism for calculating MTLs by supervisory authorities for land plots owned by individuals. In particular, an individual is exempt from the MTLs if the supervisory authority has not handed over the TAN within the appropriate terms.
According to the Law, the first period for calculating the MTLs is 2022. That is, the MTLs will be calculated in 2023 for 2022. Transitional provisions are provided for the use of the coefficient in determining the MTLs. In 2022 and 2023, the coefficient was reduced from 0.05 to 0.04.
A mechanism for administering the collection of land tax in terms of the object of taxation, which has already existed since the adoption of the TCU – a land allotment (share), was added, namely, the sources of information based on which the tax can be assessed were expanded, data from the State Register of Property Rights, submission directly by the taxpayer of documents for a land allotment (share) or receipt from local authorities of information about the decision to allocate a land allotment (share) in kind on the ground was added.
Value added tax:
- the deadline for including registered tax invoices in the tax credit has been changed to 365 calendar days;
- clear deadlines (statute of limitations) for registering an adjustment calculation in the Unified Register of Tax Invoices are established – 1095 calendar days from the date of drawing up the tax invoice to which such an adjustment calculation was made;
- temporarily until January 01, 2026, the cash calculation method for electricity supply is introduced;
- the cash method is also extended for the supply of utilities, within which a subscription service fee is charged;
- the UCG FEA codes have been brought into compliance with the new version of the Customs Tariff of Ukraine;
- the second and subsequent deliveries of tobacco products, tobacco and industrial tobacco substitutes, liquids used in electronic cigarettes, for which maximum retail prices are set, which are exempt from VAT;
- VAT instalment benefits for equipment import are extended until January 01, 2025;
- the VAT exemption regime for transactions involving the supply and import of waste and scrap of ferrous and non-ferrous metals, as well as paper and cardboard for recycling is extended for 5 years;
- when delivering waste and scrap of ferrous and non-ferrous metals in the VAT exemption regime, a general procedure for proportional attribution of VAT amounts to the tax credit (adjustment) is introduced;
- it is specified that to calculate the total volume of transactions performed for the mandatory registration by the VAT payer (reaching UAH 1 million), transactions made through the installed special application or application on smartphones, tablets or other digital devices are also taken into account.
Personal income tax:
- taxation of transactions involving the sale of third or more real estate objects at the rate of 18% of net income. However, this rate does not apply to the sale of inherited property;
- at the rate of 0%, the sale of agricultural land directly received by the taxpayer in ownership in the process of land privatization by state collective farm cooperatives, or the privatization of land plots that were used by such a payer, or allocated in kind (on the ground) to the owner of a land allotment (share), as well as such land plots received by the inheritance taxpayer, may be taxed;
- income in the form of social services provided according to the Law of Ukraine “On Social Services” by providers of such services is exempt from personal income tax;
- it is stipulated that the supervisory authority cannot request information from taxpayers contained in the databases to which it has access in order to confirm expenses;
- the right to a tax discount in terms of training and medical expenses is also granted to the guardian, trustee, foster parents, and parents-educators;
- it is stipulated that personal income tax from the sale of electric energy produced from alternative energy sources by generating units is paid to the relevant budget at the location of the units;
- it is stipulated that the cost of purchasing an investment asset is equal to its value declared during a one-time declaration. The right to reduce income from transactions with the third sale of movable/immovable property (which is taxed at 18%) and transactions with property rights (including receiving assets through their repayment) by the amount of the declared value of such assets during the tax amnesty is also granted;
- the expenses of the individual entrepreneur include expenses for payments in favour of collective management organizations, according to Law of Ukraine “On Effective Management of Property Rights of Right Holders in the Field of Copyright and/or Related Rights”;
- the right to include expenses related to medical care in full in the tax discount is also extended for 2021 and 2022.
The list of transactions with excisable goods that are exempt from taxation has been supplemented with the transaction of exporting unused raw materials previously imported in production outside the customs territory of Ukraine, and the UCG FEA codes have been brought into compliance with the new version of the Customs Tariff of Ukraine.
The list of products that are not subject to labelling with excise tax stamps has been expanded – test samples of alcoholic beverages and natural wines, without the addition of alcohol, the strength of which does not exceed 15%.
The deadline for receiving excise tax stamps for imported excisable goods has been reduced from 5 to 3 days. The Law, in order to improve control over the production of ethyl alcohol, provides for the development of a separate procedure that establishes requirements for sealing equipment, equipment, alcohol communications and accessories for accounting for alcohol and products for the production of which the resulting ethyl alcohol is used (including flow meters).
The Law stipulates that all places of production of ethyl alcohol that are subject to sealing must be recorded by a video surveillance system.
The rules of anti-forestalling for tobacco and industrial heated tobacco substitutes (HTP) have been extended, and the provision on the abolition of excise tax benefits for green energy has been excluded.
In terms of environmental taxation, the percentage of annual increases in the environmental tax rate for discharges of pollutants into water bodies was increased and the time limit for reaching the basic rate specified in clauses 245.1 and 245.2 of the TCU was shortened from January 01, 2030 to January 01, 2020 by 10% for discharges of pollutants.
Standards for issuing/revoking licences for the production and turnover of alcohol, alcoholic beverages, tobacco products and liquids used in electronic cigarettes are improved, in particular:
- maintaining the Unified Register of Licensees for the production and turnover of alcohol, alcoholic beverages, tobacco products and liquids used in electronic cigarettes is provided;
- grounds for revocation of a licence for the production of excisable products is expanded;
- automatic notification of the date from which the licence is cancelled is provided if the next payment for the licence is not made;
- it is stipulated that in the event of a change in any information specified in the issued licence, the licensee will be obliged to notify the issuing authority of such changes within 30 days from the day following the day of their occurrence and at the same time liability for violation of such terms is introduced;
- a perpetual licence for the right to produce excisable products is introduced (currently, such a licence is issued for 5 years);
- the possibility for a business entity to submit and obtain a licence in electronic form for the production of excisable products is being introduced;
- the list of permitted containers that can be used for the production of alcoholic beverages is expanded.
The Law introduced differentiation of taxation rates of iron ores depending on the amount of the average actual selling price defined as the average cost of ore according to the index and clarified: rates of rent for the use of underground water in connection with the change in administrative-territorial division; that for utilities provides for the application of a coefficient of 0.3 to the rates of rent exclusively to the volume of water technological standards for the use of drinking water, determined according to the legislation on drinking water, drinking water supply and sanitation.
It is stipulated that the coefficients established by clause 254.4 of the TCU do not apply to the rates of rent for the use of a radio frequency resource of Ukraine for the type of radio communication “cellular radio communication”, for the bandwidth of radio frequencies obtained according to the licence for the use of a radio frequency resource of Ukraine, issued from January 01, 2022 on a competitive or tender basis.
A wide range of tax benefits for companies operating in the mining regions is also provided until 2037.
Simplified taxation system (individuals):
- It is established that individual entrepreneurs who render services for providing access to the Internet belong exclusively to Group 3 of single taxpayers, if they meet the requirements established for such a group;
- the conditions for choosing Group 4 of single taxpayers by an individual entrepreneur are clarified. Such payers must operate on agricultural land and/or water fund lands with an area of at least 0.5 hectares, but no more than 20 hectares in total (today the minimum plot size must be 2 hectares);
- a standard form of accounting for income and expenses is established for single taxpayers of Group 3 (individual entrepreneurs) who are VAT payers;
- the tax liability for owners, tenants, and users of land plots classified as agricultural land will be defined as the positive difference between the amount of the total minimum tax liability and the total amount of taxes, fees, payments, and expenses paid for renting land plots. Individual entrepreneurs will calculate it independently as part of a separate appendix to the single tax return.