On the January 16, 2020 the Parliament of Ukraine adopted draft law No. 1210 “On making amendments to the Tax code of Ukraine with regard to improvement of tax administration, elimination of technical and logical discrepancies in tax legislation” (hereinafter – the Law) in full on the second reading.
The Law is quite a complex document which introduces significant changes in the following main directions of Ukrainian tax legislation: improvement of tax administration; implementation of measures to tackle BEPS; amendments of income limits for a simplified taxation system; review of excise duties and rental payments for natural resource extraction; and tax dispute resolution.
In particular, the following important changes were introduced:
- Implementation of three-tier reporting for transfer pricing purposes
- Extension of the definition of permanent establishment
- Implementation of a “constructive dividend” concept
- Introduction of a “principal purpose test” for application of double taxation treaties
- Change of “thin capitalization” rules
- Introduction of the right for tax authorities to assess the reasonable business purpose of taxpayer transactions
- Introduction of controlled foreign companies (CFC) taxation rules
- Increase of the allowed income limits for the simplified taxation system application by individuals
- Improvement of administrative procedures for tax dispute resolution
It is planned that the law will come into force the day after its publication date, except for certain provisions. It has to be signed by the President beforehand.
The new Law brings many changes to different areas of taxation in Ukraine, however there is no transition period for taxpayers to adapt to the changes. Considering this, it is recommended for taxpayers to get acquainted with the new legislative provisions in advance in order to be well prepared for the changes when they are in force.
How can SCHNEIDER GROUP help?
If you would like more information regarding recent changes to the tax legislation in Ukraine, please do not hesitate to contact us. Tax and legal experts at the Ukrainian office of SCHNEIDER GROUP will be ready to discuss potential risks for your business associated with the new legislation and ways to avoid them.