Amendments to the Tax Code of Ukraine | KPMG | UA

Amendments to the Tax Code of Ukraine

Amendments to the Tax Code of Ukraine

On 1 January 2018 the Law of Ukraine No. 245-VIII dated 7 December 2017 "On Amendments to the Tax Code of Ukraine and Certain Laws of Ukraine on Securing Balance of Budget Proceeds in 2018" came into force.

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Major developments effective from 1 January 2018 are as follows:

Tax administration, general provisions

1. New criteria for "large taxpayers": (i) the revenue for the last four quarters exceeds EUR 50m or (ii) the total amount of taxes, duties, and charges paid to the budget exceeds EUR 1m for a reporting period, provided the sum of such taxes, levies and charges excluding customs charges exceeds EUR 500k.

2. The list of exclusions from royalty for tax purposes is expanded to include the following items:

  • Payments for the transfer of the right to distribute copies of software without the right to reproduce the software, or if the right to reproduce such copies is limited to the end user 
  • Payments for the purchase of copies of intellectual property objects that are intended for resale.

Value-added tax

1. The Cabinet of Ministers of Ukraine should issue regulations on the procedure and grounds for suspension of VAT invoices’ registration. Before the regulations are issued, the mechanism for blocking tax invoices does not apply.

2. Until 1 January 2023 transactions with software products where consideration is not qualified as royalty for tax purposes, are exempt from VAT.

3. For the purposes of temporary VAT exemption of transactions withon software products, the following items are considered as software products:

  • Access to the results of computer programming in the form of operating system, system, application, entertainment and/or training computer program (its components), as well as in the form of Internet sites and/or online services; 
  • Copies of computer programs, their parts, components in material and/or electronic form, including in the form of code (codes) and/or links for downloading a computer program and/or parts thereof, components in the form of code (codes) for activating a computer program or in a different form; 
  • Any changes, updates, applications, add-ons and/or extensions of the functionality of computer programs, the rights to receive such updates, changes, applications, add-ons for a specified period of time.

4. A 7% reduced VAT rate is extended to import and supply of medical products in the customs territory of Ukraine, if such medical products are included in the State Register of Medical Equipment and Medical Products or conform to the requirements of the relevant technical regulations, which is confirmed by the compliance document, and are allowed for placing on the market and/or placing into service and use in Ukraine.

5. Export of the following crops is temporarily exempt from VAT:

  • Soybeans (UKT ZED 1201) from 1 September 2018 to 31 December 2021 
  • Rapeseeds (UKT ZED 1205) from 1 January 2020 until 31 December 2021.

6. Until 31 December 2018 import and supply of vehicles equipped exclusively with electric motors (UKT ZED 8703 90 10 10) in the customs territory of Ukraine is exempt from VAT.

7. Imputation of VAT liabilities in accordance with clause 198.5 of the Tax Code of Ukraine applies only to goods/services, non-current assets that were purchased/manufactured with VAT.

8. Until 1 January 2020 while importing production equipment of the defined codes of UKT ZED, VAT payers are allowed to pay VAT in installments (equal parts) up to 24 calendar months without accruing interest, penalties and penalties. The Cabinet of Ministers of Ukraine is required to issue relevant regulations.

Corporate income tax

1. The deadline for filing the tax return, calculated on a cumulative basis for the year, is extended to 60 days after the end of the reporting year.

2. Effective from 1 January 2018, a bank’s pre-tax financial result is not increased by the amount of the bank’s provisions over the threshold calculated according to the Tax Code of Ukraine (transitional rules apply).

3. Taxpayer should increase their pre-tax financial result by 30% of the value of goods, works and services purchased from:

  • Non-residents whose legal form is on the governmental list of non-residents who do not pay corporate income tax 
  • Non-residents who are not resident in the state of registration.

4. When paying interest on a syndicated loan, the borrower should apply the tax rate of the DTT with the residency jurisdiction of the participant of a syndicate of creditors proportionally to the participant's share in the loan agreement, provided that such participant is the beneficiary owner of the income, irrespective of whether the payment carried out through an agent or directly.

5. The taxpayer may reduce CIT payable for the tax (reporting) period with the amount of the excise tax paid in the tax (reporting) period on heavy distillates (gasoil) used for dump cars with a load capacity of more than 75 tons and diesel-electric locomotives. If the amount of the paid excise tax exceeds the amount CIT payable, the amount of such excess does not carried forward.

6. The taxpayer may reduce pre-tax financial result on the amount of income derived from transactions with:

  • gas (methane) of coal deposits (realization, processing, combustion) and/or 
  • the derived raw material of gas (methane) of coal deposits, including gas-air mixture containing gas (methane), which does not meet the quality requirements for natural gas intended for transportation, industrial and individual consumption.

This tax relief is available until 1 January 2020. The taxpayer should direct the released funds on re-equipment of the material and technical base and introduction of the latest technologies. In the absence of the targeted use of released funds, the taxpayer is required to increase the pre-tax financial result on the amount of income that previously reduced the pre-tax financial result as a tax relief.

Personal income tax

1. In real estate transactions, the estimated value of real estate for the purposes of PIT is determined based on assessment reports, which are registered in the Unified base of assessment reports.

2. An employee is PIT exempt on the value of the certain trips provided by the employer to the employee or his certain family members provided that:

  • The employer is a CIT payer 
  • A trip is provided free of charge/at discount once a year 
  • The trip’s value/provided discount does not exceed 5 minimum wages (as of 1 January of the reporting year).

Unified tax

1. Unified tax payers do not pay advance CIT upon dividend distribution.

2. Dividends received from unified tax payers do not reduce the pre-tax financial result.

3. Unified tax payers withhold WHT while distributing Ukraine-sourced income to the non-resident.

Other taxes

1. The rates of environmental tax and certain rent payments have been increased.

2. A more than 5-fold increase in the excise tax on cigarettes by 2025 is foreseen. At the same time, the share of excise tax in the average weighted retail price should be at least 60%.

If you require additional advice on the above issues, please contact Andriy Kriakushyn on:
+38 044 490 5507

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