Changes to the Tax Code of Ukraine Taking Effect on August 1

Following a prolonged delay, the official text of the Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other laws of Ukraine Regarding the Peculiarities of Taxation During Martial Law” (Draft Law No. 8401), signed by the Chairman of the Verkhovna Rada of Ukraine, has been published on the website of the Parliament. Therefore, we are providing the outline of the key provisions of the adopted act.

1. Suspension of the expiration of the terms has been canceled

In the Tax Code of Ukraine, the norm has been excluded according to which, during the legal regime of martial law and a state of emergency introduced in Ukraine, the running of the terms specified by this Code, other legislation, the control of compliance with which is entrusted to the supervisory authorities, shall be suspended, except in the cases provided for this Code.

2. Exceptions to personal income tax have been added

It was established that the total monthly (annual) taxable income of the taxpayer shall not include the amount of income received as compensation for damaged/destroyed immovable property in accordance with the Law of Ukraine “On Compensation for Damage and Destruction of Certain Categories of Immovable Property as a Result of Hostilities Actions, Terrorist Acts, Sabotage Caused by the Armed Aggression of the Russian Federation against Ukraine, and the State Register of Property Damaged and Destroyed as a Result of Hostilities, Terrorist Acts, Sabotage Caused by the Armed Aggression of the Russian Federation against Ukraine”.

3. Cancellation of tax benefits from August 1

It was determined that the following provisions shall be valid only until August 1, 2023:

? natural persons – entrepreneurs – payers of the single tax of the first and second groups have the right not to pay the single tax;

? single tax payers of the third group may be natural persons – entrepreneurs and legal entities – business entities of any organizational and legal form;

? the percentage rate of the single tax for payers of the single tax of the third group, who use the features of taxation established by this paragraph, is set at the rate of 2 percent of income;

? the tax (reporting) period for payers of the single tax of the third group, who use the special features of taxation established by this clause, is equal to a calendar month.

4. The procedure for returning the payer to the taxation system after being on the 2 percent single tax has been determined

4.1. General rules

Payers of the single tax of the third group, who as of July 31, 2023 were using special taxation features (single tax at the rate of 2 percent), from August 1, 2023, are automatically considered to be applying the taxation system on which such taxpayers had stayed before choosing the special taxation features.

4.2. Regarding VAT

? taxpayers whose registration as a value-added tax payer was suspended accordingly and whose rights and obligations established by the provisions of the Tax Code of Ukraine regarding the payment of VAT for goods, non-current assets purchased/produced/imported on the customs territory of Ukraine with value-added tax before the beginning of the application of taxation featureswere automatically restoredfrom August 1, 2023, which had been used (supplied, sold) during the period of application of the taxation features, are obliged to accrue tax liabilities in accordance with 198.5 of Article 198 of this Code no later than October 31, 2023 (“compensating” tax liabilities);

? taxpayers whose registration as a value-added tax payer was suspended and whose rights and obligations established by the provisions of the Tax Code of Ukraine regarding the payment of VAT were automatically restored from August 1, 2023, no later than October 31, 2023, shall include the amount of tax in the tax credit on the added value that had been paid during the import of goods, non-current assets within the terms of special taxation.

4.3. Regarding single tax

? taxpayers who, as of July 31, 2023, used special features of taxation, and before the transition to such features were single tax payers, from August 1, 2023, are automatically considered single tax payers of the single tax group in which they had stayed before the transition to the use of special features of the third group;

? the income received during the period of application of taxation features is not included in the amount of income determined for the corresponding group of single tax payers, as established by 291.4 of Article 291 of the Code (determination of groups of single tax payers and establishment of income criteria);

? in the reporting year 2023, the amount of income for the corresponding group of single tax payers, established by 291.4 of Article 291 of this Code, is determined in proportion to the number of calendar months of the current calendar year, during which the single tax payer did not apply special taxation.

5. Changes related to tax checks

5.1. Unscheduled checks

It is determined that unscheduled documentary checks are carried out exclusively at the request of the taxpayer and/or for the reasons specified in this paragraph, in particular:

? subsections 78.1.1 of the Tax Code of Ukraine (in the part of unscheduled documentary inspections of taxpayers, which resulted in information indicating a violation of tax legislation on issues of taxation of income received by non-residents, with the source of their origin in Ukraine, and/or on issues of taxation of non-residents, which carry out their activities through separate divisions, including permanent representative offices, taxpayers who carry out activities in the field of production and/or sale of excise goods, organization and conduct of gambling in Ukraine (gambling business), taxpayers who provide financial, payment services);

? 78.1.2 of the Tax Code of Ukraine (in the part of transfer pricing control);

? documentary unscheduled inspections of taxpayers, for which tax information was received, which indicates that the taxpayer has violated currency legislation in terms of compliance with the deadlines for receipt of goods for import operations and/or foreign exchange earnings for export operations;

? other grounds defined by this law.

Documentary and factual checks during martial law are carried out under safe conditions.

5.2. Scheduled checks

It was determined that from August 1, 2023 until the termination or abolition of martial law on the territory of Ukraine, the plan-schedule for carrying out documentary scheduled checks may only include:

1) taxpayers who carry out activities in the field of production and/or sale of excise goods;

2) taxpayers who carry out activities in the field of organization and conduct of gambling in Ukraine (gambling business);

3) taxpayers who provide financial and payment services.

6. Regarding the payment of fines calculated as a result of scheduled inspections

It was determined that for the period from August 1, 2023 until the termination or cancellation of martial law, the penal (financial) sanctions (fines) are considered canceled, and the penalty is not charged in the case of:

? payment by the taxpayer within 30 calendar days from the day following the day of receipt of the tax notice-decision, the amount of the tax liability calculated based on the results of documentary checks.

The amount of such paid tax liability is not subject to appeal.

The Law enters into force on August 1, 2023.