L&M Finance Group


On Tuesday, December 3, the Verkhovna Rada adopted in first reading draft laws No. 1209-1 and No. 1210 on combating the erosion of the tax base and the removal of profits from taxation and deoffshorization of the economy.
Among other things, draft law 1210 provides:
· introduction of the concept of taxation of controlled foreign companies' profit at the level of a person controlling such a company - individual or legal entity;
· clarification of the accounting processes for interest paid on loans, borrowings and other debts;
· clarification of the definition of a permanent establishment, in particular, by eliminating the possibility of avoiding the requirement to register a permanent establishment by splitting up activities in Ukraine;
· introduction of the possibility of registration as tax payers of non-residents operating through a permanent establishment located in Ukraine without registering such an establishment as a tax payer;
· implementation of a three-level structure of documentation for international groups of companies, which includes documentation on transfer pricing, global documentation and a report on country-by-country basis;
· implementation of provisions 8, 9 and 10 of the BEPS Action Plan to control the distribution of functions, risks and intangible assets within a group of companies;
· clarification of the criteria for recognising persons as related and the introduction of penalties proportional to the violation of the law;
· determination of the procedure for the mutual coordination;
· introduction of the concept of taxation paymrnts equal to dividends;
· introduction within the framework of the Tax Code of Ukraine of the principle of the guilty liability of the taxpayer for tax offences;
· determination of the requirements for the correctness of the decision of regulatory authorities on the imposition of fines;
· consolidation of the list of tax violations of regulatory authorities, which, among other things, will include their non-compliance with the registration procedure of payers or violations in the field of reimbursement of value added tax, etc.
In its turn, draft law 1209-1 is aimed at improving tax administration, eliminating inconsistencies in tax legislation and is more technical in nature, although several important changes are worth noting. For example, the law draft provides for amendments to the Law of Ukraine "On the Collection and Accounting of a Single Contribution to Compulsory State Social Insurance" in terms of clarifying the procedure for sending claims for the payment of unpaid sums of a single contribution; amending the amount of penalties; exclusion of the obligation of the supervisory authority to provide information to the Pension Fund regarding the coordination of the results of inspections regarding the calculation of a single contribution
The reaction of state bodies to such actions of the Verkhovna Rada of Ukraine was not long in coming. On the same day, the deputy head of the National Bank of Ukraine Oleg Churiy said that e-limits on investments by individuals abroad could increase from 50 to 100 thousand euros per year in case of adoption of the above drafts.