Overview of tax changes: August 2023
On 1 August 2023, the Law on amendments to the Tax Code of Ukraine and other laws of Ukraine on peculiarities of taxation during martial law No. 3219-IX dated 30 June 2023 (hereinafter – Law 3219) entered into force.
Law 3219 implies amendments to the preferential regime for taxpayers, which was introduced during COVID-19 and prolonged for the duration of martial law. The main innovations of Law 3219 are:
- almost all the deadlines stipulated by the Tax Code, including those that have been suspended since March 2020, are renewed;
- the right of the regulatory authorities to conduct scheduled inspections of taxpayers engaged in business activities with excisable goods in the field of gambling and financial/payment services is restored;
- the right of the regulatory authorities to conduct documentary unscheduled inspections of taxpayers during martial law is extended;
- additional rules were introduced for imposing liability on taxpayers;
- the 2% turnover tax for business was abolished.
Further details about these changes are described below.
1. Renewal of deadlines stipulated by the Tax Code
The amendments implemented to the Tax Code by Law 3219 have re-introduced almost all the deadlines suspended during martial law.
This also applies to the term given to respond to the inquiry of a tax authority within 15 business days. Therefore, taxpayers should ensure that the responses and clarifications to the inquiries received from tax authorities during martial law have been duly submitted.
The statute of limitations for tax audits, as well as the periods for storing primary documents, will be renewed exclusively for taxpayers subject to documentary scheduled audits, as described below.
2. Tax audits
Documentary tax audits: Law 3219 restores scheduled tax audits for taxpayers that (1) produce and sell excisable goods, (2) operate in the gambling market, and (3) provide financial and payment services. The schedule of inspections regarding such taxpayers will be approved monthly.
Considering the previously suspended statute of limitations (following the transitional provisions introduced during the COVID-19 pandemic), the regulatory authority will have the right to audit taxpayers’ business activity from 2017 onwards.
Documentary unscheduled inspections: The amendments also extended the list of grounds on which unscheduled tax audits may be conducted. For example, audits conducted on the grounds of the taxpayer’s failure to respond to the written inquiry of the regulatory authority or based on the information indicating violations of currency, tax and other laws have been resumed.
3. Liability of taxpayers
The newly adopted Law 3219 amended the procedure for imposing the liability on taxpayers from 1 August 2023 until the termination of martial law, namely:
- fines and penalties upon additional tax liabilities accrued due to tax audits are not applied if the latter are paid within 30 calendar days. At the same time, the deadlines for the reconciliation of such liabilities have also been extended for the same period;
- fines and penalties cannot be applied to the amounts of errors that have been corrected by the taxpayer and resulted in an understatement of tax liabilities following clause 50 of the Tax Code;
- measures to recover the outstanding tax liabilities cannot be applied to the taxpayers whose tax address:
– as of the date of the beginning of the temporary occupation, is located in the territories of Ukraine temporarily occupied by the russian federation (until the last day of the month in which the temporary occupation ended or until the date of state registration of the change of location to another territory of Ukraine);
– as of the date of the beginning of hostilities, is located in the territory where hostilities take place (until the last day of the month in which hostilities in the respective territories ceased or until the date of state registration of the change of location to another territory of Ukraine);
– as of the date of the beginning of possible hostilities, is located in the territory of possible hostilities (until the last day of the month in which the possibility of hostilities in the respective territories ceased or until the date of state registration of the change of location to another territory of Ukraine).
4. Abolition of the 2 per cent turnover tax for business
Starting from 1 August 2023, all taxpayers that enjoyed the 2% taxation system will automatically be deemed to apply the taxation system that such taxpayers were subject to before switching to a 2 per cent tax treatment.
If the taxpayer has chosen the 2% taxation system from the date of state registration, then from 1 August 2023, the latter is automatically considered a Group 3 unified taxpayer.
In addition to returning to the previous taxation system, such abolition entails renewing VAT payer registration.
We will describe the peculiarities of the administration and taxation of taxpayers following the automatic return from the “2 per cent taxation” in the next newsletter.
