TAX ALERT 05.10.2023 | Digest of top tax news

Draft laws on extension of import of drones and some other goods without VAT and import duty

On September 20, 2023, the draft law was registered in the Parliament of Ukraine:

• Draft Law No. 10078 “On Amendments to Clause 92 of Subsection 2 of Section XX “Transitional Provisions” of the Tax Code of Ukraine regarding the exemption from value added tax on imports of unmanned aerial vehicles and certain other goods for the period of martial law”;
• Draft Law No. 10079 “On Amendments to Clauses 9-24 of Section XXI “Final and Transitional Provisions” of the Customs Code of Ukraine regarding the exemption from import duty on unmanned aerial vehicles and certain other goods for the period of martial law”.

These draft laws propose to extend the exemption for the entire period of martial law:

• from VAT taxation of operations on importation of unmanned aerial vehicles, optical and collimator sights, night vision sights or thermal imaging sights, thermal imaging binoculars, monoculars and binoculars, non-visual devices, rangefinders, portable radio stations, etc. classified in the relevant subcategories of the Ukrainian Classification of Goods for Foreign Economic Activity
• exemption from import duty on the said goods.

We remind you that this exemption is currently valid until 01.01.2024.

Peculiarities of taxation of banks: a draft law has been registered

On 29.09.2023, the Verkhovna Rada of Ukraine registered Draft Law No. 9656-d “On Amendments to Subsection 4 of Section XX “Transitional Provisions” of the Tax Code of Ukraine regarding the specifics of taxation of banks”. 

The Draft Law proposes to apply the corporate income tax rate of 36% to the object of taxation in the form of profit determined according to the rules established by the Tax Code of Ukraine and advance income tax payments accrued and paid upon payment of dividends for the tax (reporting) periods from 01.01.2024 to 31.12.2025.

At the same time, it is assumed that, based on the results of tax (reporting) periods from 01.01.2024 to 31.12.2025, banks will not reduce their financial result before tax by the amount of the negative value of the taxable object of previous tax (reporting) years and will not apply the relevant provisions provided for by the Tax Code of Ukraine. 

The amount of negative taxable profit of previous tax (reporting) years, including those received from 01.01.2024 to 31.12.2025, will reduce the financial result before taxation of future tax (reporting) periods starting from 01.01.2026.

Earlier, the Verkhovna Rada of Ukraine registered Draft Law No. 9656 and alternative draft laws that proposed peculiarities of taxation of net interest income of banks. We have described them in more detail here and here.

Amendments to the procedure for making decisions on registration/refusal to register tax invoices/adjustment calculations came into force

On 30.09.2023, the Order of the Ministry of Finance of Ukraine dated 14.07.2023 No. 394 “On Approval of Amendments to the Procedure for Making Decisions on Registration/Rejection of Tax Invoices / Adjustment Calculations in the Unified Register of Tax Invoices” (“Procedure”) came into force.

The Order, inter alia, amended paragraph 5 of the Procedure, in particular, with the following provisions: 

• if the receipt to the tax invoice/adjustment calculation (TI/AC) contains a product/service code according to the Ukrainian Classification of Goods for Foreign Economic Activity / conditional product code / State Classifier of Products and Services, the transaction under which became the basis for suspension of TI/AC registration, the taxpayer has the right to submit written explanations and copies of documents only for such transaction;
• the recipient (buyer) has the right to initiate the submission of written explanations and copies of documents to the AC, which provide for the reduction of the amount of compensation for the cost of goods/services to their supplier, for the following purposes:
  • the recipient (buyer) sends such explanations and copies of documents to the supplier (seller) via the electronic cabinet in electronic form with a qualified electronic signature;
  • the supplier (seller) submits such explanations and copies of documents with a qualified electronic signature to the supervisory authority;
  • the recipient (buyer) receives information in the electronic cabinet regarding the date of submission of explanations and copies of documents by the supplier (seller) and the result of consideration of such explanations and copies of documents by the regional level commission.

Amendments to the application form for the simplified taxation system: draft order was published

On September 18, 2023, the website of the State Tax Service of Ukraine published a draft order of the Ministry of Finance of Ukraine “On Amendments to the Order of the Ministry of Finance of Ukraine dated July 16, 2019 No. 308”. 

The said draft order, among other things, proposes to supplement clause 5.5 of the application form for the application of the simplified taxation system with a provision stating that a single taxpayer may refuse the simplified taxation system in case of acquiring the status of a resident of Diia City.

As a reminder, the Tax Code of Ukraine stipulates that if a single taxpayer becomes a resident of Diia City, it is obliged to switch to paying other taxes and fees from the first day of the month following the tax (reporting) quarter in which the taxpayer became a resident of Diia City. 

However, the current application form for applying the simplified taxation system does not provide for such a basis for refusing the simplified taxation system.

Currently, comments and suggestions are accepted within one month from the date of publication of the draft order.

Peculiarities of VAT taxation of transactions for the supply of goods for which preferential taxation conditions were in force during the quarantine period: clarification of the State Tax Service

The State Tax Service of Ukraine has posted on its publicly available information and reference resource clarifications on the peculiarities of VAT taxation of transactions for the supply of goods approved by Resolution of the Cabinet of Ministers of Ukraine No. 224 dated 20.03.2020, which was terminated on 01.07.2023, if partial prepayment for goods is received before that date and the goods are shipped after that date.

As a reminder, for the period of the COVID-19 quarantine, which was in effect until 30.06.2023, the following transactions were exempt from VAT: importation into the customs territory of Ukraine and/or supply of goods, the list of which is approved by the above-mentioned resolution of the Cabinet of Ministers of Ukraine (the “List”), in the customs territory of Ukraine. 

Thus, as of 01.07.2023, due to the end of the quarantine, this provision is no longer valid. 

In the clarification, the State Tax Service of Ukraine notes that if a taxpayer received a partial prepayment for goods included in the List before 01.07.2023, then no VAT liabilities are charged on the amount of such prepayment as of the date of receipt of funds. 

If the actual shipment of goods is carried out starting from 01.07.2023 within the limits of such received partial prepayment, the taxpayer does not incur any VAT consequences. 

At the same time, in case of shipment of goods in excess of the amount of partial prepayment received, VAT tax liabilities are accrued for the amount of unpaid part of the shipped goods.