TAX ALERT 17.09.2024 | Digest of key tax news

The updated version of the draft law on peculiarities of taxation during martial law is published

On September 16, 2024, an updated version of Draft Law No. 11416-d “On amendments to the Tax Code of Ukraine on peculiarities of taxation during the period of martial law” was published on the official website of the Verkhovna Rada of Ukraine.

As a reminder, on September 3, 2024, the draft law was sent for a repeat first reading based on the results of the voting.

The draft law has not undergone any fundamental changes. It mainly concerns previously proposed innovations, such as:

• Expanding the range of taxpayers who pay income tax at the rate of 25% (for all financial institutions except insurers). For banks, the basic income tax rate for 2024 is set at 50%.
• Introducing a monthly advance payment of income tax for taxpayers engaged in retail fuel sales.
• Increasing the military levy rate for individuals to 5%.
• Establishing the obligation to pay the military levy for individual entrepreneurs on the simplified tax system (groups 1, 2, 4) at the rate of 10% of the minimum wage for the period from October 1, 2024, until the end of the year in which martial law ends. For third-group taxpayers, the rate will be 1% of income.
• Changing the reporting period for personal income tax, unified social tax, and military levy from quarterly to monthly.

On September 06, 2024, alternative draft laws to Draft Law No. 11416-d were also registered:

• No. 11416-d-1  “On amendments to the Tax Code of Ukraine on peculiarities of taxation during the period of martial law and the targeted use of accumulated revenues of the State Budget of Ukraine”.
• No. 11416-d-2 “On amendments to the Tax Code of Ukraine on peculiarities of taxation during the period of martial law with due consideration of the needs of the national economy”.

These proposals differ significantly from Draft Law No. 11416-d, as they do not include provisions on tax increases but focus on tax administration issues.

The law on increasing the excise tax came into force

On September 01, 2024, the Law of Ukraine No. 3878-IX “On amendments to the Tax Code of Ukraine on the implementation of the provisions of the European Union law on excise tax” came into force, except for the provisions related to the excise tax on cigarettes and wines with fermented beverages, with and without the addition of ethyl alcohol.

The law was adopted to implement the Association Agreement between Ukraine and the European Union. It sets forth a gradual increase in excise taxes until 2028. As of September 1, 2024:

• The excise tax rate on gasoline increased by nearly 14%, to €242.60 per 1000 liters.
• The excise tax rate on liquefied gas tripled, to €148 per 1000 liters.

Amendments to the procedure for filing and submitting complaints by taxpayers came into force

As of September 5, 2024, the Order of the Ministry of Finance of Ukraine dated July 30, 2024, No. 375 “On approval of amendments to the Procedure for filing and submitting complaints by taxpayers and other persons and their consideration by supervisory authorities” came into effect.

The updated Procedure grants taxpayers the right to participate in the consideration of complaints via videoconference. To provide oral explanations in this mode, the individual must declare their intent in the filed complaint. The tax authority will then send a notice of consideration of the complaint materials via videoconference to the taxpayer’s electronic cabinet or, if the complaint is filed by a non-resident providing electronic services in Ukraine, through a special portal solution and email.

This right was introduced by the Law of Ukraine “On amendments to the Tax Code of Ukraine and other laws of Ukraine on improving online communication with taxpayers and clarifying certain legislative provisions,” which came into force on March 16, 2024. These amendments to the Procedure aim to align the complaint review process with this Law.

New forms of tax invoices and VAT reporting

On September 4, 2024, the Ministry of Finance of Ukraine published its Order dated August 9, 2024, No. 400 “On amendments to certain regulatory acts of the Ministry of Finance of Ukraine” and Order dated August 28, 2024, No. 418 “On amendments to the Order of the Ministry of Finance of Ukraine dated August 9, 2024, No. 400”.

Order No. 400 updates the following forms:

• Tax invoice and adjustment calculation.
• VAT returns.
• Corrective calculation of VAT liabilities for self-identified errors.
• Calculation of VAT liabilities on services provided by non-residents, including their permanent establishments not registered as taxpayers within the customs territory of Ukraine.

Order No. 418 proposes additional adjustments to the annexes of the VAT return.

These updates are aimed at preparing for the new export security regime and aligning these forms with the Law of Ukraine No. 3706-IX, dated May 9, 2024, “On amendments to the Tax Code of Ukraine and other laws of Ukraine on peculiarities of export of certain types of goods during the period of martial law”.

The changes to tax invoices and adjustment calculations introduce new fields that exporters will have to fill in, including the date and number of the customs declaration, the export contract, and a checkbox for forward contracts.

If these orders are officially published this month, the updates will take effect on October 1, 2024.