Unexpected Changes to the Tax Code: News for VAT Payers

On December 6, 2017, the Ministry of Finance of Ukraine announced its decision adopted jointly with the Committee on Taxation and Customs Policy to temporarily suspend the work of the VAT risk system.

On the next day, on December 7, the Verkhovna Rada adopted the new Law of Ukraine “On Amendments to the Tax Code of Ukraine to Ensure the Balance of Budgetary Revenues in 2018” (hereinafter referred to as “the Law”), which, in addition to increasing the excise tax, significantly changed the situation with the termination of tax invoice (TI) and settlement adjustment (SA) registration.

This Law is yet to be signed by the President of Ukraine and, therefore, to date, its final text has not been published; however, from the amendments made it is clear that:

1) Paragraph 74.2 of Article 74 of the Tax Code of Ukraine (hereinafter referred to as “the TCU”) was removed; according to this paragraph, the Unified Register of Tax Invoices (URTI) ensures continuous automated monitoring of compliance of TI/SA with the criteria for assessing the level of risk sufficient to terminate the registration of such TI/SA;

2) Criteria for assessing the level of risk sufficient to terminate the registration of tax invoices will be established by the Cabinet of Ministers of Ukraine, but not by the Ministry of Finance of Ukraine. Within two months after the entry into force of the Law, the Cabinet of Ministers of Ukraine will have to elaborate the appropriate procedure for terminating the TI/SA registration in the URTI in line with Paragraph 201.16 of the TCU;

3) Tax invoices/settlement adjustments, the registration thereof in the URTI has been terminated in accordance with Paragraph 201.16 of the TCU, must be registered as from January 2, 2018, except for:

• TI/SA, for which no explanations and documents were submitted as of December 01, 2017;
• TI/SA, for which the decision to deny registration have been made, and as of December 01, 2017, no procedure for administrative or judicial appeal was initiated;

4) TI/SA, registration thereof has been terminated as from December 01, 2017, before the entry into force of this Law and for which the taxpayer submitted explanations and copies of documents, shall be registered in the manner, which was in force prior to the entry into force of this Law;

5) If the decision on the registration or denial to register the TI/SA is not rendered and/or sent to the taxpayer within 5 working days, the registration of such tax invoices shall be conducted on the next working day following the deadline for the consideration of the taxpayer’s explanations and documents (this norm was previously proposed by the Ministry of Finance of Ukraine).

The abovementioned provisions will come into force on the day following the day of the publication of this Law. However, in our opinion, it is too early to stop the administrative or judicial appeals against the existing decisions on TI. Firstly, the final text of the Law has not been made public yet. Also, it is still unclear, what will be the fate of invoices, on which decisions to deny registrations were made in December. Such invoices have to be registered in the manner presently in force. In other words, actually, the fate of such invoices may be decided on for months, until the State Fiscal Service (SFS) finds some time to consider enterprises’ complaints, or the judicial consideration comes to an end, which, as from December 15, 2017, will correspond to the new procedure codes.

Therefore, we advise you not to stop the procedure of administrative or judicial appeal of the already made decisions about the termination of TI registration and necessarily submit the required flow charts and explanations to the SFS.