Mazars team made for you a list of recent Tax and Legal updates in Ukraine.
The EU approves one-year suspension of duties and quotas on imports from Ukraine
To support Ukrainian exporters, the EU Council has temporarily lifted import duties and quotas on imports from Ukraine to all EU countries.
This trade liberalization entered into force on June 4, 2022, and will last for one year, until June 5, 2023.
The mentioned trade concessions apply under the Association Agreement between the EU and Ukraine, and will suspend, in particular:
- import duty on industrial products,
- input prices for vegetables and fruits,
- tariff-rate quotas for agricultural products,
- the collection of anti-dumping duties on imports originating in Ukraine,
- the application of the common rules for imports with respect to imports originating in Ukraine.
In response to this liberalization, Ukraine undertakes to adhere to European rules of origin and the procedures provided for in the Association Agreement, to evade restrictions on imports from the EU, and to respect European legal principles and freedoms.
Regulatory decisions of the National Bank of Ukraine
Prolonged deadline for settlements on export-import operations
To expand the international trade opportunities for Ukrainian businesses, the NBU has prolonged the deadline for payments for export-import transactions from 90 to 120 calendar days.
The new requirements apply from June 8, 2020, for operations carried out starting from April 5, 2022.
Increased interest rate
The NBU Board decided to increase the interest rate from 10% to 25%, starting from June 3, 2022.
According to the regulator, this decision contributes to the attractiveness of hryvnia assets, reduces pressure on international reserves and prevents devaluation of income and savings of citizens.
Tax-wise, the increase of interest rate rockets up the late payment penalty interest rate which equals 120% of the NBU interest rate.
Abolished restrictions on setting the exchange rate and decreased limit on cash withdrawals
The NBU lifted restrictions on setting the exchange rate to sell cash in foreign currency. Before May 21, 2022, the 10% deviation of the exchange rate from the official rate was allowed.
The NBU temporarily reduced from 100 thousand to 50 thousand UAH (equivalent) monthly limit for cash withdrawals abroad. This decision was made to prevent the outflow of capital and applies to withdrawal of cash from hryvnia accounts opened with Ukrainian banks.
We provided details on operation of the banking system under the martial law in our tax news as of March 26, 2022.
Control over transfer pricing during the martial law
In our review of tax news as of May 19, 2022, we considered the main provisions of the draft Law of Ukraine No. 7360, which became the Law of Ukraine No. 2260-IX27 and entered into force on May 27, 2022.
In particular, this Law amended the provisions of the Tax Code regarding taxpayers’ financial liability for late payment of taxes and levies, resumed certain in-house and documentary tax audits, etc. Below, we summarized respective amendments applicable to TP regulations.
Submission of reports on controlled transactions and taxpayers’ liability for violations of tax legislation
There were no changes in the types of reporting and deadlines for their submission.
For the duration of the martial law, temporary regulations for the collection of taxes and levies apply depending on a taxpayer’s circumstances, i.e. possibility of timely payment of taxes and levies. Thus, under certain conditions, taxpayers may not be held liable for late payment of taxes and levies. The basic rules are summarized in the table below:
The taxpayer’s ability to timely fulfil obligation on payment of taxes and levies should be determined under the Procedure, which is pending approval by the Ministry of Finance of Ukraine.
Transfer pricing audits
As outlined in our review of tax news as of May 19, 2022, certain tax audits have resumed. But this resumption does not apply to TP audits.
TP audits have been postponed till termination of the martial law, which also suspends:
- ongoing audits,
- deadlines for submitting objections to the conclusions of tax audits,
- deadlines for ongoing tax audits aimed at examining compliance with the “arm’s length” principle.
For understanding of TP control, it is worth reminding that the limitation period (2555 days) for TP control remains suspended as of March 18, 2020, due to the quarantine moratorium and subsequent restrictions imposed by the martial law. Currently, the quarantine moratorium has been extended till August 31, 2022, and the martial law - till August 23, 2022.
Determination of the "value" criteria if a taxpayer applied a simplified taxation system
The introduction of a unified tax was considered in our review of tax news as of April 12, 2022. You may remember that as of April 5, 2022, the Law of Ukraine No. 2142-IX allowed certain taxpayers to switch to a simplified taxation system with a unified tax rate of 2% of revenue.
Currently, the State Tax Service of Ukraine has clarified the rules for determining the "value" criteria for companies that have taken advantage of this opportunity:
- calculation of the amount of annual income (value threshold of UAH 150 million) should include income from any activity within the entire reporting year, inclusive of the period when a company applied a unified tax at the rate of 2% of revenue,
- calculation of the amount of transactions with each counterparty (value threshold of UAH 10 million) should not include transactions from the period when a company applied a unified tax, but only if these transactions did not affect the CPT object tax.
The Government expanded the list of Сritical Import
Resolution of the Cabinet of Ministers of Ukraine as of June 7, 2022 No. 673 updated the List of Critical Import. Some carbon steel and polymer materials have been excluded from the list and several new goods and services have been added, including:
- legal services, auditing and tax consulting. Services in the field of intellectual property rights. Document and reporting services, consulting services. Engineering services etc.
- IT services (cloud services, services of foreign data centers, etc.);
- electronic communication services;
- Internet platform subscriptions, and access to other programs;
- other information services;
- product certification services;
- services for transportation of goods, services for storage, protection of goods and other freight forwarding services, commission fee, compensation of other expenses to non-residents related to the movement of goods imported into or exported from Ukraine;
- services of wholesale intermediate agents;
- drug development services;
- bees, whey, butter, tomatoes, pasta; dental wax; windows, balcony doors and their frames and trim, wood products, building blocks and bricks, etc.
The full list of critical import goods and services is determined in the Resolution of the Cabinet of Ministers of Ukraine No. 153 as of February 24, 2022 (as amended).
Kindly note that currently there are allowed cross-border payments for goods and services which are included in the List of Critical Import.