New Changes on the Return of the Pre-War State of the Taxation System

On its meeting on February 20, 2023, Verkhovna Rada of Ukraine Committee on Issues of Finance, Tax and Customs Policy recommended to accept in the first reading the Draft Law of Ukraine on the introduction of amendments to the Tax Code of Ukraine and others laws of Ukraine on the features of taxation in the period of martial law (No. 8401).

According to the explanatory note, the Draft Law was developed for the purpose of implementation in Ukraine of the obligations within the framework of the Memorandum on Economic and Financial Policy of December 8, 2022. Implementation relevant beacons of the Memorandum will open the way to the full-fledged cooperation with the Fund (Upper – Credit Tranche), with the involvement of corresponding financing already this year.

The Draft Law proposes to make changes to the Tax Code of Ukraine, laws of Ukraine “On Collection and Accounting of Single Contribution to Compulsory State Social Insurance” and “On Use of Cash Registers in the Field of Trade, Public Catering and Services” regarding the implementation of no later than July 1, 2023:

? stopping carrying out documentary checks.

For the period of martial law, there is a legally established possibility of carrying out only cameral, actual checks and some types of documentary unplanned checks.

? a possibility for individual entrepreneurs and legal persons to be payers of a single tax of the III group by using a single rate tax in the amount of 2% from the amount of income.

It is expected to establish that the payers of the single tax of the third group which used the features of taxation established by this clause, from July 1, 2023, will lose the right to use features of the taxation provided for by this clause, and are automatically considered as such which apply the taxation system which such payers used prior to the choice of the features of taxation provided for this clause.

? stopping time periods (time limits for submitting tax returns, time limits for audits, time limits for obtaining tax information by controlling bodies, time limits for administrative and appeal procedures, time limits for providing individual tax consultations, etc.);

Thus, sub-clause 69.9 of clause 69 of sub-section 10 of chapter XX “Transitional Provisions” of the TCU stipulates that the following time limits shall be stopped for taxpayers and regulatory bodies:

–  the terms specified by tax legislation and other legislation, compliance control of whose is entrusted to the controlling bodies, except for: compliance of the terms of registration of tax invoices, calculations adjustments to them in the United Register of Tax Invoices, submission of reporting and/ or documents (notifications), including those provided for by Articles 39 and 39-2, Clause 46.2 of Article 46 of the Code, payment of taxes and fees by taxpayers;

–  the terms for carrying out cameral inspections, registration of their results in the order specified by Article 86 of the Code, submission of tax complaints about the tax decision-notification according to the results of the cameral inspection, adoption of the decision based on the result of its consideration, accrual of a fine;

–  the terms for carrying out factual and documentary unscheduled checks, registration of their results in the order specified by Article 86 of this Code, submission of tax complaints about the tax decision-notification, decision on the application of financial sanctions based on the results of the documentary unscheduled checks or actual verification and acceptance decisions based on the results of their review, administrative confiscation of property based on documentary results of unscheduled checks or actual checks;

–  the terms of implementation of measures of repayment of tax debt taxes by taxpayers  – economic subjects , which have the possibility to perform tax responsibilities on time, as provided for Articles 59-60, 87-101 of this Code, and/or definition of monetary obligations according to Article 116 of this Code;

–  the terms of submission and consideration of complaints against the decision to refuse registration of a tax invoice/calculation adjustment in the United Register of Tax Invoices, provided for by subsection 56.23.3 of clause 56.23 of Article 56 of this Code;

? norms regarding non-application of liability (fines, sanctions) for violations of the requirements of tax legislation; violation of the correctness of accrual, calculation and payment of a single social contribution; violation of the procedure for using the cash registers/software cash registers.

The Draft Law also provides for:

? cancellation/no accrual of penal (financial) sanctions (fines) and accrued penalties according to the tax decision-niotification, provided the payment by the taxpayer of taxes on the amount of the tax obligation (principal payment) calculated based on the results of documentary checks which were restored or commenced on or after July 1, 2023 and completed by the date of termination or abolition of martial law, state of emergency in the territory of Ukraine, within 30 calendar days from the day following the day of receipt of the tax decision-niotification. At the same time, the amount of paid tax is not subject to appeal;

? settlement of the question of taxation with income tax of enterprises of “transitional” transactions for the shipment (provision) of goods (works, services), which were started in the period of payment of the single tax and completed in the period of payment of income tax of enterprises, for the purpose of elimination of double taxation of such transactions with these taxes;

? renewal of the ban on work of software registrars in offline mode without an issued range of fiscal numbers;

? change of the definition of attribution to the tax credit of sums of VAT of transactions on the supply services by a non-resident in the customs territory of Ukraine.

According to the wording of clause 198.2 of Article 198 of the TCU as proposed by the Draft Law, the date of transfer of tax amounts for the tax credit for the transactions involving the supply of services by a non-resident in the customs territory of Ukraine is the date of submission of the tax return on value-added tax for the previous reporting (tax) period, according to which the recipient of services accrued tax liabilities for such transactions. If a positive value of the amount calculated in accordance with clause 200.1 of Article 200 of this Code has arisen from such a declaration, the amount of tax for such transactions shall be included in the tax credit only after the payment (transfer) to the budget of the amount of tax specified in such a declaration.

That is, instead of the date of a tax invoice for such operations, the Draft Law provides for the date of submission/payment under the VAT tax declaration according to which tax obligations under such operations have been accrued.

As for the new changes to the inspection procedure, they are provided for in paragraph 69.33 of clause 69 of subsection 10 of Chapter XX “Transitional Provisions” of the TCU. Thus, documentary and actual checks during martial law are carried out if during such checks there are safe conditions for:

–  access, admission to territories, premises and other property used for conducting economic activities and/or which are objects of taxation, or are used to receive income (profit), or are related to other objects of taxation by such taxpayers;

–  access, admission to documents, certificates on financial and economic activity, received income, expenses of taxpayers and other information related to the calculation and payment of taxes, fees, payments, on compliance with the requirements of the law, the implementation of control of which is entrusted to the controlling bodies, as well as financial and statistical reporting in the manner and on the grounds determined by law;

–  carrying out an inventory of fixed assets, tangible assets, funds, withdrawal of residual assets of tangible assets, cash.

In the absence of such conditions for the safe conduct of checks, documentary checks that have been started but cannot be completed due to such a lack of conditions for their safe conduct may be stopped by the decision of the head (their deputy or an authorized person) of the controlling body until the obstacles to their implementation are eliminated. Such a decision is formalized by an order, a copy of which is sent to the taxpayer’s electronic account with simultaneous sending to the taxpayer’s email address(es) of a copy of such order and information about the date and time it was sent to the electronic account (displayed in the electronic account). Such suspension interrupts the course of the inspection period.

Documentary checks that were started and not completed by February 24, 2022, are renewed for the unused period. At the same time, the running of the statute of limitations provided for in Article 102 of this Code shall be suspended for the period until the completion of the renewed inspections and/or the termination of the circumstances specified in this subsection, and/or the removal of obstacles to conducting such inspections.

In the case of payment by the taxpayer within 30 calendar days from the day following the date of receipt of the tax decision-notification, the amount of the tax liability calculated based on the results of documentary checks that were resumed or started from July 1, 2023 and completed before the date of termination or cancellation of martial law, state of emergency on the territory of Ukraine, punitive (financial) sanctions (fines) calculated based on the amount of such tax liability are cancelled, and interest is not charged. The amount of the tax liability paid in accordance with the procedure provided for in this paragraph is not subject to appeal.

It is worth noting that with a high probability this Draft Law will be adopted in the first and second readings by the Verkhovna Rada of Ukraine, because its adoption is a requirement for further financing of Ukraine by the IMF. Unfortunately, it is hardly possible to say that it will bring at least some positive changes for business.On its meeting on February 20, 2023, Verkhovna Rada of Ukraine Committee on Issues of Finance, Tax and Customs Policy recommended to accept in the first reading the Draft Law of Ukraine on the introduction of amendments to the Tax Code of Ukraine and others laws of Ukraine on the features of taxation in the period of martial law (No. 8401).

According to the explanatory note, the Draft Law was developed for the purpose of implementation in Ukraine of the obligations within the framework of the Memorandum on Economic and Financial Policy of December 8, 2022. Implementation relevant beacons of the Memorandum will open the way to the full-fledged cooperation with the Fund (Upper – Credit Tranche), with the involvement of corresponding financing already this year.

The Draft Law proposes to make changes to the Tax Code of Ukraine, laws of Ukraine “On Collection and Accounting of Single Contribution to Compulsory State Social Insurance” and “On Use of Cash Registers in the Field of Trade, Public Catering and Services” regarding the implementation of no later than July 1, 2023:

? stopping carrying out documentary checks.

For the period of martial law, there is a legally established possibility of carrying out only cameral, actual checks and some types of documentary unplanned checks.

? a possibility for individual entrepreneurs and legal persons to be payers of a single tax of the III group by using a single rate tax in the amount of 2% from the amount of income.

It is expected to establish that the payers of the single tax of the third group which used the features of taxation established by this clause, from July 1, 2023, will lose the right to use features of the taxation provided for by this clause, and are automatically considered as such which apply the taxation system which such payers used prior to the choice of the features of taxation provided for this clause.

? stopping time periods (time limits for submitting tax returns, time limits for audits, time limits for obtaining tax information by controlling bodies, time limits for administrative and appeal procedures, time limits for providing individual tax consultations, etc.);

Thus, sub-clause 69.9 of clause 69 of sub-section 10 of chapter XX “Transitional Provisions” of the TCU stipulates that the following time limits shall be stopped for taxpayers and regulatory bodies:

–  the terms specified by tax legislation and other legislation, compliance control of whose is entrusted to the controlling bodies, except for: compliance of the terms of registration of tax invoices, calculations adjustments to them in the United Register of Tax Invoices, submission of reporting and/ or documents (notifications), including those provided for by Articles 39 and 39-2, Clause 46.2 of Article 46 of the Code, payment of taxes and fees by taxpayers;

–  the terms for carrying out cameral inspections, registration of their results in the order specified by Article 86 of the Code, submission of tax complaints about the tax decision-notification according to the results of the cameral inspection, adoption of the decision based on the result of its consideration, accrual of a fine;

–  the terms for carrying out factual and documentary unscheduled checks, registration of their results in the order specified by Article 86 of this Code, submission of tax complaints about the tax decision-notification, decision on the application of financial sanctions based on the results of the documentary unscheduled checks or actual verification and acceptance decisions based on the results of their review, administrative confiscation of property based on documentary results of unscheduled checks or actual checks;

–  the terms of implementation of measures of repayment of tax debt taxes by taxpayers  – economic subjects , which have the possibility to perform tax responsibilities on time, as provided for Articles 59-60, 87-101 of this Code, and/or definition of monetary obligations according to Article 116 of this Code;

–  the terms of submission and consideration of complaints against the decision to refuse registration of a tax invoice/calculation adjustment in the United Register of Tax Invoices, provided for by subsection 56.23.3 of clause 56.23 of Article 56 of this Code;

? norms regarding non-application of liability (fines, sanctions) for violations of the requirements of tax legislation; violation of the correctness of accrual, calculation and payment of a single social contribution; violation of the procedure for using the cash registers/software cash registers.

The Draft Law also provides for:

? cancellation/no accrual of penal (financial) sanctions (fines) and accrued penalties according to the tax decision-niotification, provided the payment by the taxpayer of taxes on the amount of the tax obligation (principal payment) calculated based on the results of documentary checks which were restored or commenced on or after July 1, 2023 and completed by the date of termination or abolition of martial law, state of emergency in the territory of Ukraine, within 30 calendar days from the day following the day of receipt of the tax decision-niotification. At the same time, the amount of paid tax is not subject to appeal;

? settlement of the question of taxation with income tax of enterprises of “transitional” transactions for the shipment (provision) of goods (works, services), which were started in the period of payment of the single tax and completed in the period of payment of income tax of enterprises, for the purpose of elimination of double taxation of such transactions with these taxes;

? renewal of the ban on work of software registrars in offline mode without an issued range of fiscal numbers;

? change of the definition of attribution to the tax credit of sums of VAT of transactions on the supply services by a non-resident in the customs territory of Ukraine.

According to the wording of clause 198.2 of Article 198 of the TCU as proposed by the Draft Law, the date of transfer of tax amounts for the tax credit for the transactions involving the supply of services by a non-resident in the customs territory of Ukraine is the date of submission of the tax return on value-added tax for the previous reporting (tax) period, according to which the recipient of services accrued tax liabilities for such transactions. If a positive value of the amount calculated in accordance with clause 200.1 of Article 200 of this Code has arisen from such a declaration, the amount of tax for such transactions shall be included in the tax credit only after the payment (transfer) to the budget of the amount of tax specified in such a declaration.

That is, instead of the date of a tax invoice for such operations, the Draft Law provides for the date of submission/payment under the VAT tax declaration according to which tax obligations under such operations have been accrued.

As for the new changes to the inspection procedure, they are provided for in paragraph 69.33 of clause 69 of subsection 10 of Chapter XX “Transitional Provisions” of the TCU. Thus, documentary and actual checks during martial law are carried out if during such checks there are safe conditions for:

–  access, admission to territories, premises and other property used for conducting economic activities and/or which are objects of taxation, or are used to receive income (profit), or are related to other objects of taxation by such taxpayers;

–  access, admission to documents, certificates on financial and economic activity, received income, expenses of taxpayers and other information related to the calculation and payment of taxes, fees, payments, on compliance with the requirements of the law, the implementation of control of which is entrusted to the controlling bodies, as well as financial and statistical reporting in the manner and on the grounds determined by law;

–  carrying out an inventory of fixed assets, tangible assets, funds, withdrawal of residual assets of tangible assets, cash.

In the absence of such conditions for the safe conduct of checks, documentary checks that have been started but cannot be completed due to such a lack of conditions for their safe conduct may be stopped by the decision of the head (their deputy or an authorized person) of the controlling body until the obstacles to their implementation are eliminated. Such a decision is formalized by an order, a copy of which is sent to the taxpayer’s electronic account with simultaneous sending to the taxpayer’s email address(es) of a copy of such order and information about the date and time it was sent to the electronic account (displayed in the electronic account). Such suspension interrupts the course of the inspection period.

Documentary checks that were started and not completed by February 24, 2022, are renewed for the unused period. At the same time, the running of the statute of limitations provided for in Article 102 of this Code shall be suspended for the period until the completion of the renewed inspections and/or the termination of the circumstances specified in this subsection, and/or the removal of obstacles to conducting such inspections.

In the case of payment by the taxpayer within 30 calendar days from the day following the date of receipt of the tax decision-notification, the amount of the tax liability calculated based on the results of documentary checks that were resumed or started from July 1, 2023 and completed before the date of termination or cancellation of martial law, state of emergency on the territory of Ukraine, punitive (financial) sanctions (fines) calculated based on the amount of such tax liability are cancelled, and interest is not charged. The amount of the tax liability paid in accordance with the procedure provided for in this paragraph is not subject to appeal.

It is worth noting that with a high probability this Draft Law will be adopted in the first and second readings by the Verkhovna Rada of Ukraine, because its adoption is a requirement for further financing of Ukraine by the IMF. Unfortunately, it is hardly possible to say that it will bring at least some positive changes for business.