Tax updates in Ukraine (08.02.23)

VAT rules 

Updated Procedure for blocking tax invoices

The updated Procedure for blocking the registration of a tax invoice/calculation of adjustment in the Unified Register of Tax Invoices (Procedure for blocking tax invoices) applies as of January 11, 2023.

The Procedure, in particular, provides for the following:

1. one-time automatic registration of tax invoices and adjustment calculations, which were blocked from 14.10.2022 to 11.01.2023. This applies if such invoices and calculations contain transactions for the sale of goods/services with codes from the classifier of product and service, and the codes are displayed in the tables of the taxpayer's data, based on which it was decided to accept such invoices and calculations;

2. additional criteria for unconditional registration of tax invoice/calculation of adjustment. In particular, the following were excluded from monitoring:

   • tax invoices in which the volume of supply does not exceed UAH 5 000;
   • calculation of adjustment in which the absolute value of the amount of adjustment to decrease/increase the amount of compensation does not exceed UAH 5 000.

   At the same time, the volume of operations in the current month, for such tax invoice/calculation of adjustment, registered in the Unified Register of Tax Invoices, taking into account the volume of transactions in the submitted invoices and calculations, should not exceed UAH 500 000;

3. counterparties of that taxpayer, who was excluded from the list of "risky" entities under a decision of a regional commission or a court decision, should be also automatically excluded from the list of “risky” entities (subject to certain other requirements);
4. changes to the criteria for the assignment of “risky” status to a taxpayer regarding his possibility/impossibility to file tax and financial statements;
5. changing certain indicators for determining a positive tax history of a taxpayer, and softening the criteria for the assignment of “risky” status to a transaction, etc.

Summarizing the information, tax invoice/calculation of adjustment blocked from 14.10.2022 to 11.01.2023, due to the riskiness of the operation, will be automatically unblocked and registered, without any action on the part of the taxpayer. Unblocking and registration are possible only if the tax invoice/calculation of adjustment simultaneously meets the specified conditions.

In general, the updated Procedure for blocking tax invoices established positive trends for taxpayers.

Corporate Profit Tax

Application of fines

Self-penalties (3% and 5%) for correcting errors in reporting are not applied for reporting periods during martial law. At the same time, penalties for non-submission/late submission of reports, and incomplete declaration of transactions, still apply (without changes).

Also, during the martial law (and 3 months after its termination/cancellation), taxpayers who are required to publish financial statements together with an audit report, are released from responsibility for non-submission/late submission of financial statements, as well as adjusting the indicators of the tax return in connection with such financial reporting.

Reports on Controlled Foreign Companies should be submitted for the first time for 2022 together with reporting for 2023. Moreover, fines for reports for 2022 and 2023 do not apply.

The updated form of the CPT Return

Starting from 2023, taxpayers should use an updated form of the CPT Return, approved by the Ministry of Finance. The changes are minor and relate mainly to the introduction of a new appendix and lines for residents of Diya.City. In addition, further changes to the form of CPT return are planned, including a new version of the Annex related to transfer pricing.

The Procedure for establishing the compliance of the conditions of the controlled transaction with the "arm’s length" principle, for controlled transactions with commodities

The Procedure for establishing "arm’s length" price for controlled transactions with commodities, came into force on January 1, 2023. Together with the Procedure, additional Procedures dedicated to the export and import of certain groups of commodities came into effect. The additional Procedures establish rules for such commodities as grain, oil crops and their processing products, iron ore, power-generating and coking coal, liquefied hydrocarbon gases, cast iron, ferrous metal scrap and metal products from ferrous metals, and ferroalloys.

The Procedure fixed the priority of the comparable uncontrolled price method, as well as cases when it is possible to use other methods. In addition, the Procedure contains specifics of the application of comparability adjustments, quotation prices and other instructions.

Increase in excise tax

Since January 1, 2023, the excise tax increased as follows:

• by 20%, specific excise tax rates and the minimum excise tax liability on tobacco products;
• up to UAH 10,000 per liter, the excise tax on liquids used in electronic cigarettes.

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