TAX ALERT 05.10.2023 | Digest of top tax news

Amendments to the moratorium on tax audits: the Law was adopted

On 09.11.2023, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Cancellation of the Moratorium on Tax Audits” (Draft Law No. 10016-d).

The text of the draft law for the second reading suggests amendments to the terms of the moratorium on documentary scheduled and unscheduled tax audits, as well as actual tax audits during martial law. In particular, it is envisaged that starting from 01.12.2023, the moratorium on tax audits will apply to: 

• documentary inspections of single tax payers of groups 1 and 2 (except for some inspections) – until 01.12.2024;
• documentary inspections of taxpayers whose tax address as of the date of the beginning of the temporary occupation / hostilities / possible hostilities is in the relevant territories – until the last day of the month in which the temporary occupation / hostilities / possibility of hostilities is terminated, and in case of change of location to another territory of Ukraine – until the date of state registration of the relevant change. 

However, this moratorium will not apply to certain documentary unscheduled audits of these taxpayers;

• actual inspections at the location of taxable objects or tax-related objects that, as of the date of the beginning of the temporary occupation / active hostilities / possible hostilities, were located in the respective territories – until the date of the end of the temporary occupation / hostilities / possible hostilities.

However, such a moratorium on conducting actual inspections in terms of the location of the relevant facilities in the territories of possible hostilities will not apply to taxpayers engaged in the production/sale of excisable goods, gambling, purchase/sale of foreign currency, or conducting business activities without state registration as a business entity.

Also, the list of taxpayers that may be included in the schedule of documentary scheduled audits for 2023 and 2024 from 01.12.2023 to 31.12.2024 inclusive has been expanded.

The Law is currently being prepared for signature. Therefore, it will be possible to talk about the final changes to tax audits during martial law only after the official text is published.

Alternative tax changes for the export of agricultural products

On 03.11.2023 and 06.11.2023, the Verkhovna Rada of Ukraine registered the Draft Laws “On Amendments to the Tax Code of Ukraine and Certain Other Laws of Ukraine on Improving the Conduct of Foreign Economic Operations for the Export of Certain Goods” No. 10168-1, No. 10168-2, No. 10168-3. 

These draft laws are alternative to the draft law No. 10168 of 20.10.2023, which we discussed here. 

Thus, Draft Law No. 10168-1 proposes:

• to exclude from the Tax Code of Ukraine the provisions that, for the duration of martial law, determine the specifics of VAT taxation of exports of goods subject to the export security regime, 
• Instead of the export security regime, introduce a special export procedure in the form of preliminary export deposits.

Draft Law No. 10168-2 provides, among other things:

• similar to the above-mentioned draft law, the exclusion from the Tax Code of Ukraine of the provisions that determine the specifics of VAT taxation of exports of goods subject to the export security regime during martial law;
• for the period of martial law, exports of certain goods (certain grain crops, soya beans, rapeseed or kohlseed, sunflower seeds, oil, including soya, sunflower, safflower, cottonseed, and oilcake) are to be carried out exclusively by VAT payers;
• preparation and registration of a separate tax invoice by the VAT payer for each such product in the Unified Register of Tax Invoices (the “URTI”) before the day of submission of the customs declaration. If no customs declaration is filed within 30 days from the date of registration of the tax invoice, the registration of such tax invoice will be cancelled;
• the tax base for such transactions will be the contractual value of the goods, but not less than the average of international stock exchange quotations for the above-mentioned goods for each 10th calendar day of the month. 

Draft Law No. 10168-3 proposes, inter alia, to establish the specifics of registration of tax invoices/adjustment calculations for export/re-export operations under the customs regime of export/re-export of certain agricultural goods, in particular, grain crops, soya beans, rapeseed or kohlseed, sunflower seeds, and oil in the URTI.

Update on excise taxation of transactions with oil, gas condensate and solvents

On 06.11.2023, the Verkhovna Rada of Ukraine registered Draft Law No. 10215 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on the Introduction of a System for Controlling the Turnover of Oil, Gas Condensate and Solvents”.

The draft law, among other things, proposes:

• to establish that the object of excise taxation is transactions on the sale of oil and/or gas condensate in marketable condition to persons who are not registered as excise tax payers on the sale of fuel;
• to provide that the excise tax rate for organic solvents and diluents (commodity code 3814 00 90 19, 3814 00 90 90) shall be EUR 245.50 per 1000 litres, and for natural gas condensate (UKT FEA code 2709 00 10 00) and other oil and oil products derived from bituminous rocks (minerals), crude in marketable condition (UKT FEA code 2709 00 90 00), a zero rate is applied. 

At the same time, in the case of sale of oil and gas condensate in marketable condition to persons not registered as excise tax payers on the sale of fuel, their damage, destruction, loss (except as provided for by the Tax Code of Ukraine), the excise tax rate of EUR 213.50 per 1,000 litres will apply. 

The Law also provides for the establishment of certain obligations for business entities that carry out operations with the said solvents and diluents, oil and/or gas condensate, related, in particular, to the registration of excise warehouses in the system of electronic administration of sales of fuel and ethyl alcohol, preparation of excise invoices, and registration of business entities as excise tax payers. 

New VAT and excise tax exemptions for transactions with vehicles for the defence needs of Ukraine 

On 07.11.2023, the Verkhovna Rada of Ukraine registered Draft Law No. 10220 “On Amendments to Subsection 10 of Section XX “Transitional Provisions” of the Tax Code of Ukraine on Providing the Needs of Security and Defence Forces with Vehicles”.

The draft law proposes a temporary ban until 31 December 2024:

• to exempt from VAT transactions on importation into the customs territory of Ukraine of certain vehicles (except for those subject to transport tax) imported into the customs territory of Ukraine by enterprises, institutions and organisations established by local self-government bodies and paid for at the expense of local budgets for their further free transfer to the Armed Forces of Ukraine and other military formations for the purposes of state defence;
• to exempt from excise tax the operations on importation into the customs territory of Ukraine and sale in the customs territory of Ukraine of the above vehicles.

It is also envisaged that the vehicles must be transferred to the recipients no later than 45 calendar days from the date of completion of their customs clearance on the basis of acceptance certificates/documents. These documents must be transferred to the customs authority that carried out the customs clearance of the vehicles within 30 days from the date of execution of such documents. 

In case of violation of this period or misuse of vehicles, the taxpayer is obliged to pay the amount of VAT and excise tax that should have been paid when importing such vehicles into the customs territory of Ukraine, as well as pay a penalty.

A separate Draft Law No. 10219 dated 07.11.2023 provides for the exemption of the above vehicles from import duty.

Taxation of transactions with virtual assets: a draft law has been registered

On 07.11.2023, the Verkhovna Rada of Ukraine registered Draft Law No. 10225 “On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine Regarding the Regulation of the Turnover of Virtual Assets in Ukraine”.

The draft law provides for the establishment of a mechanism for taxation of transactions with virtual assets. In particular, it is proposed to:

• establish the procedure for corporate income taxation of profits of legal entities from transactions with virtual assets and introduce separate accounting of the financial result from transactions with virtual assets and rules for adjusting such financial result;
• establish the procedure for personal income taxation of investment income of individuals from transactions with virtual assets. Thus, the total annual income subject to personal income tax will include the positive value of the total financial result (annual investment income) of transactions on the sale of virtual assets for the reporting (tax) year;
• provide that transactions with:
• issue (creation), putting into circulation and withdrawal from circulation, exchange, sale and other alienation of virtual assets, except for virtual assets defined by individual characteristics;
  • provision of services related to the turnover of virtual assets, namely: exchange of virtual assets for cash, for other virtual assets, transfer of virtual assets on behalf of the client;
• to establish that business entities that carry out transactions with virtual assets cannot be single tax payers of groups 1 to 3.

Amendments to the Procedure for Suspension of TI/SA Registration: Resolution of the Cabinet of Ministers of Ukraine

On 07.11.2023, the Cabinet of Ministers of Ukraine adopted Resolution No. 1154 “On Amendments to the Procedures Approved by Resolution of the Cabinet of Ministers of Ukraine No. 1165 dated 11.12.2019”, which will come into force on 09.12.2023.

Thus, the Resolution, inter alia, amends one of the conditions for unconditional registration of a tax invoice / adjustment calculation (TI / AC), namely, it provides that the total amount of VAT on goods (works, services) produced in Ukraine paid in the last 12 calendar months preceding the month in which the TI / AC was accepted for registration in the Unified Register of Tax Invoices by the taxpayer and its separate subdivisions exceeds UAH 10 million (instead of UAH 1 million, as currently).

The Law also amends some of the indicators used to determine a VAT payer’s positive tax history and adds new indicators of a VAT payer’s positive tax history.

The State Tax Service has once again updated the schedule of documentary tax audits

On 06.11.2023, an updated schedule of documentary scheduled audits of taxpayers for 2023 was published on the website of the State Tax Service of Ukraine.

Thus, amendments have been made to Sections I “Documentary Scheduled Audits of Taxpayers – Legal Entities”, II “Documentary Scheduled Audits of Financial Institutions, Permanent Establishments and Representative Offices of Non-Residents” and III “Documentary Scheduled Audits of Individuals” of the schedule.

We remind you that temporarily, for the period from 01.08.2023 until the termination of martial law, changes to the schedule may be made on a monthly basis, taking into account force majeure, force majeure, and the presence/absence of safe conditions for inspections.

As of today, only taxpayers engaged in the production and/or sale of excisable goods, in the organisation and conduct of gambling in Ukraine (gambling business), and in the provision of financial and payment services may be included in the schedule. 

The updated schedule shall be published no later than the last day of the month in which such updated schedule was approved.

Currently, documentary scheduled audits, which are permitted, may begin no earlier than 30 calendar days following the date of publication of the updated schedule, provided that a copy of the order to conduct the audit and a written notice stating the date of the audit start are sent (delivered) to the taxpayers (their representatives) no later than 10 calendar days before the date of the audit.

Overview of key legal positions of the Supreme Court on taxation and public financial policy

On 15.11.2023, the Supreme Court published an overview of key legal positions on taxation and public financial policy for the period from 2018 to July 2023.

The review provides, inter alia, court practice on international taxation, the procedure for taxation of personal income, the procedure for VAT, excise and other taxes, and the exercise of the competence of the tax authority.