Kyiv, 5 July 2012 – Law of Ukraine No. 4834-VI, of 24 May 2012, “On amendments to the Tax Code of Ukraine with regard to the improvement of certain tax provisions” (hereinafter, the “Law”), came into effect on 1 July 2012, with some of its provisions expected to come into effect later on. “This Law makes the necessary changes to a number of important tax issues; first of all, there are some important changes related to the transfer of tax losses. Although the new provisions limit the right of taxpayers to transfer losses (allowed under the previous rules), nevertheless, they represent a compromise between the position of taxpayers and tax authorities. Thus, the new provisions will give us hope of resolving a problem that has existed in the country for the past year, resulting in a large number of legal actions”, said Viktoria Chornovol, Partner at Deloitte Ukraine. However, she continues, a number of pressing tax issues still remain, for example, the problem of transactions being recognised as void at the initiative of tax authorities. “I would really like to see these issues being resolved at the legislative level,” she adds.
Below is a brief overview of the major changes to the Tax Code of Ukraine, the most significant impact of which will be on business.
Accounting for tax losses
The Law regulates disputable issues related to accounting for the negative balance of a taxable item, and in particular:
- reaffirms the right of taxpayers to carry forward tax losses from 2010 to 2011, and between periods in 2011,
- allows enterprises whose income in 2011 did not exceed UAH 1 million to carry forward tax losses from 2011 to Q1 2012 without any restrictions
- allows enterprises whose income in 2011 exceeded UAH 1 million to recognise tax losses as an expense in equal parts of 25% during the next four years (2012-2015), starting from H1 2012.
Administration of taxes and duties (mandatory payments):
- the right of tax lien does not apply if the total amount of the tax debt does not exceed twenty untaxed citizens’ minimum incomes;
- the taxpayer is given the opportunity to individually sell a property in order to repay their tax debt, pending agreement with a tax administrator.
- the tax authority is prohibited from charging additional tax liabilities through indirect methods after establishing usual prices.
Value added tax
- restrictions on voluntary registration as a VAT payer are abolished, thus allowing any entity or individual entrepreneur engaged in business activity to register as a VAT payer, irrespective of sales volumes. The VAT registration timeframe was also decreased from 10 to 5 business days;
- adjustments are made to the share of non-current assets used in taxable transactions; also, non-current assets are included when calculating the proportional allocation of tax amounts to tax credit;
- the timeframe for the registration of VAT invoices in the Unified State Register is decreased from 20 to 15 calendar days following the date of issue;
- a paper copy is no longer required when a VAT invoice is completed electronically.
Other changes were introduced to the Tax Code of Ukraine relating to other taxes.