On 30 November 2021 the Verkhovna Rada of Ukraine adopted in the second reading the draft law of Ukraine No. 5600 “On Amendments to the Tax Code of Ukraine and certain legislative acts of Ukraine to ensure balanced budget revenues” (further – “Draft Law No. 5600”). The final wording of the Draft Law is not available yet. Still, our experts were following the voting on amendments to the Draft Law and below we list some of the anticipated changes.
Among the main changes prescribed by Draft Law No. 5600, we would like to outline the following.
With respect to corporate profit tax:
- Large taxpayers may transfer to their current tax return only up to 50% of accumulated tax losses from previous reporting (tax) years (para. 140.4.4)
- The financial result before taxation should be increased by the amount of irrevocable financial aid provided to taxpayers – related parties (if the recipient of the irrevocable financial aid declares a negative value for the object of taxation for the tax (reporting) year preceding the year in which this irrevocable financial aid was provided, provided that such aid was included in the cost (para. 140.5.10).
With respect to VAT:
- The supply of tobacco products, tobacco, industrial tobacco substitutes, liquids used in electronic cigarettes, except for their first supply and import are exempted from VAT taxation (para. 197.27). The VAT base for such supply and import is the maximum retail price of such goods net of VAT (para. 189.18)
- Adjustment calculations to the VAT invoice cannot be registered after 1095 days from the date of issuing of such VAT invoice (para. 192.1)
- Transactions with banking metals are no longer considered as not subject to VAT (para. 196.1.4). At the same time, supply of the investment gold and related services are exempted from VAT taxation (para.197.26)
- A VAT payer has the right to report input VAT based on VAT invoices/adjustment calculations within 365 days from the date of their issuing (instead of 1095 days before). If the registration of a VAT invoice/adjustment calculation is suspended, the limitation period is suspended as well (para. 198.6)
- The VAT exemption on the supply of waste and scrap of ferrous and non-ferrous metals was extended until 01.01.2027 (para. 23 of subsection 2). Starting from 2022 such supplies are taken into account for VAT pro-rating purposes (para. 199.6)
- The possibility to pay VAT in installments (within up to 24 months) upon import of listed goods is extended until 01.01.2025 (para. 65 of subsection 2).
With respect to excise:
- The payment of retail excise tax on the sale of tobacco products, tobacco and manufactured tobacco substitute liquids used in electronic cigarettes is transferred to producers and importers (para. 213.1.14). The tax base is the maximum retail price of such goods with VAT and general excise tax (para.214.1.5)
- Tobacco fermentation plants have to begin reporting on the import, production and supply of tobacco raw materials (para. 213.3.13)
- Spoiled, lost, destroyed excisable goods are considered as sold to final consumers (with certain exceptions) (para. 14.1.212)
- The procedure for the suspension of licenses for the production and circulation of excisable goods is abolished. The list of reasons for license cancellation is extended.
- A minimal tax burden is introduced for agricultural producers on land plots, for which normative monetary evaluation has been done (para. 14.1.1142, art. 38-1)
- Certain elements of the calculation of rent payment for subsoil use for the extraction of natural resources are amended (art. 252)
- Rent payment rates are increased, in particular, for subsoil use (not related to extraction), for use of radiofrequency resources of Ukraine, for special usage of water and forest resources etc.
- Transitional provisions introduce, in particular, comprehensive tax benefits for manufacturing enterprises located in a certain area, created after 01.01.2022 and meet a number of criteria (income, number of employees, etc.).
We stress that the above list of amendments is neither full nor detailed. We will comment on other significant amendments in the upcoming messages.
The law should enter into force on 01.01.2022 (except for certain provisions), provided it is signed by the President of Ukraine.
We will monitor the developments on Draft Law No. 5600.