Tax Legislation Changes

This spring, due to the global pandemic, certain negative changes are taking place in all business processes of Ukraine. Quarantine measures directly affect the economy, banking environment, financial audits, the quality of accounting services, and other financial matters. The government is attempting development of business ideas that support the financial sector, optimization of expenditures without having to sell the business. A new law of Ukraine has now been adopted, which will help simplify certain clauses of the Tax Code in order to protect the entrepreneurship rights. The primary importance of such amendments is for accountants, management personnel, outsourcing companies, company lawyers.

Tax Legislation Changes

The Law of Ukraine “On Amending Certain Legislative Acts Aimed at Ensuring Additional Social and Economic Guarantees in Connection with the Spread of Coronavirus Disease (COVID-2019),” adopted on 30.03.2020, was published on 02.04.2020. We shall explore the innovations here and which changes it brings to the business environment.

1. Private Entrepreneur Revenue limits increase

 Revenue for private entrepreneurs under fixed tax system per annum is now limited to :

• 1 group for 1 million UAH;
• 2 group for 5 million UAH;
• 3 group for 7 million UAH.

2. Verkhovna Rada of Ukraine admitted that it was too generous to taxpayers, and took away half of the previously granted benefits for land and real estate taxes

Changes have been made to previously made paragraphs 524-525 and they took away from the business the previously granted exemption from paying land fees and real estate taxes for April 2020.From now on, such exemption is valid only in March 2020. At the same time, for the right to claim such exemption you should refer to the Tax Code of Ukraine by submitting detailed calculation.

 For those taxpayers who rushed to trust the generosity of the state and have already submitted clarifying calculations, the obligation is to submit updated calculations by 30.04.2020 and add charges for April 2020 without applying penalties.

3. Tax inspections are limited by 31.05.2020

 State Tax Service is allowed to perform the following tax audits:

• Verification of the declared Value Added Tax return reimbursements, in accordance with paragraph 78.1.8 of the Tax Code of Ukraine;
• The addressed inspections regarding violation of the legislation requirements regarding:
• Accounting, licensing, production, storage and transportation of fuel, ethyl alcohol, alcoholic beverages and tobacco products;
• Targeted use of fuel and ethyl alcohol by taxpayers;
• Excise warehouse equipment with flow meters and / or level meters;
• Implementation of the functions defined by law in the production and circulation of ethyl alcohol, alcoholic beverages and tobacco products, fuel from the bases specified in paragraphs 80.2.2, 80.2.3 and 80.2.5 of clause 80.2. Article 80 of the Tax Code.

A desk audit of the tax return (except for the value added tax return) for the reporting (tax) periods thoughout March - May 2020, or for clarifying settlements (except for clarifying calculations for the value added tax), that were submitted by taxpayers during March-May 2020 years, can only be performed within 60 calendar days following the last day of the deadline for submission, and if such documents were submitted later, after the day of their actual submission.

4. Local governments have the right to reduce fixed tax rates in 2020

 Municipal governments have the right grant the request of private entrepreneur and reduce fixed tax rates; such decisions will enter into force on the date specified in such decisions. The requirements of clause 12.3.4 of the Tax Code of Ukraine shall not apply to such decisions.

5. The deadlines for the administrative appeal are stopped; individual tax consultations from tax authorities, and presentation of documents and explanations to the requests of the State Tax Inspectorate are on suspense

The following terms shall be suspended without consequences for the taxpayer until 31.05.2020:

• Administrative appeals under article of 56 Tax Code regarding cases on hearing as of 18.03.2020;
• Tax consultations provided by the controlling authorities in compliance to the clauses 52-53 of the Tax Code of Ukraine;
• Deadlines for submitting documents at the request of regulatory authorities according to article 78 of the Tax Code of Ukraine (except for requests from regulatory authorities regarding the compliance of declaring value added tax return, which was claimed for reimbursement from the budget and / or negative figure of value added tax).

The prescriptive limit count resumes from the date before the date of suspension and onwards after 01.06.2020

6. Certain product groups are exempt from Value added tax (VAT).

 Temporarily, within the period ending the last day of the month when the quarantine is ended, all transactions for import to the territory of Ukraine and / or transactions of supply on the territory of Ukraine of goods (including medicines, medical devices and / or medical equipment), necessary for implementation of actions aimed towards prevention of initiation and spreading, localization and liquidation of outbreaks, epidemy, and pandemy of coronavirus infection (COVID-19), with a list published by the Cabinet of Ministers of Ukraine. Quarantine was established by the Cabinet of Ministers of Ukraine in order to prevent spreading the coronavirus infection (COVID-19).

All transaction exempt in accordance with this the provisions of paragraph 198.5 of article 198 of Tax Code and the provisions of article 199 of this Code shall not apply to such transactions.

The provisions of this paragraph apply to transactions that have been completed since 17.03.2020.

7. Assistance to prevent the spread of COVID-19 will be tax deductible without restrictions

Expenses for medicines, provision of medical care to patients, purchase of disinfectants and antiseptics, medical equipment, individual means protection, medical products for screening patients, supplies for medical care, medical products, laboratory equipment, supplies, reagents for laboratory tests; medical devices, laboratory equipment, tests for infectious diseases, , etc., personal hygiene products, food and / or goods according to the list determined by the Cabinet of Ministers of Ukraine – shall be tax deductible.

The clause 140.5.9 of clause 140.5 Article 140 of Tax Code shall not apply to such goods  transferred to non-profit and / or charity organizations, and / or the central executive body that implements state policy in the field of healthcare, and / or other central executive authorities that implement state policy in the areas of sanitary and epidemiological welfare of the population, quality control and safety of medicines, combating HIV / AIDS and other socially dangerous diseases.

Such exemption applies during the quarantine, which is established by the Cabinet of Ministers of Ukraine throughout Ukraine in order to prevent the spread of coronavirus disease in Ukraine (COVID-19).

8. Fines for reporting deadlines and payments will not be applied for May 2020

Fines within the periods of quarantine were revoked until 31.05.2020 by amendments to paragraph 9¹¹ of section VIII "Final and transitional provisions of the" Law of Ukraine "On the collection and accounting of a single contribution to compulsory state social insurance".

Also on 31.05.2020:

• All inspections on social security tax, which twere not completed before 18.03.2020 were stopped;
• All hearings that were not finished on 18.03.2020 and were received or will be received before 31.05.2020 are stopped.

Now business must focus on overcoming compelled problems and get familiarized with increased financial rights. We also strongly recommend that you gain awareness on these 8 points and share the link with colleagues to simplify the internal control system of your company, make changes to the accounting calendar, analyze future taxes and change investment policies.

Yours faithfully,

ACCOUNT Consulting group team