TAX ALERT 24.10.2024 | Digest of the main tax news

A Law on taxation features during martial law has been passed

On October 10, 2024, the Verkhovna Rada of Ukraine adopted in the second reading draft law No. 11416-d “On Amendments to the Tax Code of Ukraine Regarding Taxation Features During Martial Law”.
The law was submitted to the President of Ukraine for signing on October 15, 2024, and according to the version signed by the Chairman of the Verkhovna Rada, the following key changes are introduced:

• Increase in the military levy rate for individuals to 5% and the introduction of mandatory payment for individual entrepreneurs under the simplified tax system for groups 1, 2, and 4 at a rate of 10% of the minimum wage (currently UAH 710), and for group 3 taxpayers in the amount of 1% of their income.
• Introduction of a monthly advance payment on corporate income tax for taxpayers engaged in retail fuel sales. New rules for calculating the advance income tax payment are introduced for individual entrepreneurs operating under the general taxation system in this industry.
• A 25% income tax rate for all financial institutions (except insurers), including income from controlled foreign companies and dividends. However, banks will have a base corporate income tax rate of 50% for 2024.
• Change in the reporting deadlines for personal income tax, unified social tax, and military levy from quarterly to monthly.
• Increase in the advance corporate tax payment for companies involved in currency exchange operations, based on the official exchange rate of the National Bank of Ukraine on the first day of the first month of the calendar quarter, as follows:
  • In localities with a population over 50,000 (excluding Kyiv) – equivalent to 600 euros per exchange point;
  • In Kyiv – 700 euros per exchange point;
  • In other localities – 200 euros per exchange point.
• Introduction of a minimum actual price for extracted minerals for calculating the rent payment:
  • $6.5 per ton for goods under code 2517 of the Ukrainian Classification of Goods for Foreign Economic Activity (gravel, crushed stone, etc.);
  • $5 per ton for goods under code 2505 (sands);
  • $300 per ton for goods under code 2507 (kaolin and other clays). These prices will be converted into hryvnias based on the exchange rate of the National Bank of Ukraine on the first day of the month following the reporting period.
• Exemption from taxation on cashback received under the “Made in Ukraine” program for 2024 and 2025.
• Exemption from taxation on foreign aid received from 2022 until December 31 of the year in which martial law ends, for individuals and their immediate family members who suffered due to russia’s armed aggression and were granted temporary protection in a foreign country.

A Law on the introduction of guaranteed excise tax obligations has been passed

On October 9, 2024, the Verkhovna Rada of Ukraine adopted draft law No. 12038-1 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding the Specifics of Excise Taxation on Ethanol and Bioethanol,” which is a revised version of draft law No. 12038, discussed in a previous Tax Alert.

The law was submitted to the President of Ukraine for signing on October 15, 2024.
The law introduces a guaranteed excise tax obligation for producers of ethanol and bioethanol. This obligation must be considered when calculating excise tax for the respective tax period and will be calculated based on a formula set by law.

This guaranteed tax obligation will remain effective until Ukraine attains full membership in the European Union, but no later than January 1, 2030.

If the law is published this month, the first reporting period for calculating the guaranteed tax obligation will be March 2025.

The rules for taxpayers with a high level of voluntary tax compliance have come into effect

On October 1, 2024, the Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding the Peculiarities of Tax Administration During Martial Law for Taxpayers with a High Level of Voluntary Compliance with Tax Legislation,” dated June 18, 2024, No. 3813-IX, came into force in the part that introduces the functioning of the “White Business Club”.

These provisions define the specifics of tax administration for legal entities and individual entrepreneurs with a high level of voluntary compliance with tax legislation and establish the requirements for their application.

Although the changes have legally come into force, the actual implementation of the “White Business Club” will begin after the formation, approval, and publication of the list of its participants. The State Tax Service of Ukraine may publish this list on its official website in December this year.

Suggested changes to the deadline for providing explanations and additional documents in case of suspension of tax invoice registration or adjustment calculations

On October 1, 2024, the State Tax Service of Ukraine published a draft order of the Ministry of Finance of Ukraine “On Amendments to Paragraph 6 of the Procedure for Making Decisions on the Registration/Refusal of Registration of Tax Invoices/Adjustment Calculations in the Unified Register of Tax Invoices.”

The order was developed to ensure the possibility for taxpayers to submit explanations and copies of documents for adjustment calculations (AC) whose registration has been suspended if such ACs were drawn up for tax invoices (TIs) on operations conducted more than 365 days before the date of adjustment of quantitative and cost indicators.

The suggested changes provide the right for taxpayers to submit additional documents and explanations to the controlling authority within 365 calendar days following the date of the TI/AC. It should be noted that under the current regulations, the 365-day period starts from the date of the tax obligation reflected in the TI/AC.