REFORM OR TAX TERROR: UNDERSTANDING DRAFT LAW NO. 1210
On January 16, 2020, the Verkhovna Rada of Ukraine adopted the Law of Ukraine "On Amendments to the Tax Code of Ukraine regarding the improvement of tax administration and the elimination of technical and logical inconsistencies in tax legislation" (hereinafter - the Law). The people have already dubbed it tax terror, however, is everything really bad in reality? We decided to figure it out. The root cause of the development and adoption of the Law was the introduction of certain steps of the BEPS Action Plan, which is a prerequisite for the liberalization of foreign exchange regulation, and is consistent with Ukraine’s obligations under the Association Agreement with the EU. The law contains quite a few innovations. Of the positive aspects of the Law, the following can be noted:
1. increase in limits for staying on a single tax: for the first group - from 300 thousand UAH. up to 1 million UAH .; for the second group - from 1.5 to 5 million UAH., and for the third group - from 5 to 7 million UAH.;
clarification that the cash method of tax accounting in VAT applies to contractors and subcontractors;
introduction of accelerated depreciation of fixed assets for the period 2020-2030;
established liability for the illegal refusal of taxpayers to provide individual tax advice (disciplinary action);
the spread of the application of the annual reporting period for income tax (reporting only once a year) - for payers whose annual income does not exceed 40 million UAH.;
providing the taxpayer with the opportunity to receive letters, acts of inspections, tax notifications, decisions and other documents from the controlling body using the electronic account and e-mail, if the taxpayer has submitted a corresponding application about it;
a significant expansion of the information that should be contained in the tax notification-decision (and, therefore, a wider field of action for appealing against it);
the introduction of excise taxes on tobacco products for electric heating and liquids, which are used in electronic cigarettes, etc.
Now about the unpleasant, which, quite a lot:
expanding the list and requirements for the content of transfer pricing documentation (indicating information on all persons participating in the supply chain, providing copies of intra-group agreements and information on the location of research centers, etc.);
the introduction of a procedure for automatically registering a non-resident based on the results of a verification report and the possibility of administrative seizure of its assets;
a reduction from 60 to 30 days of the period for the recovery of funds and the sale of property of a taxpayer having a tax debt;
broadening the definition of a reasonable economic reason (business purpose);
determination of the obligation of the taxpayer during the audit to provide explanations and their documentary evidence at the request of the tax authority, as well as the right to the tax authority during the audit to receive explanations from employers and/or their employees and / or persons whose work is used without documentation;
the possibility of conducting an audit if information is received from foreign government bodies;
an increase from 3 to 5 years for the period of verification and issuance of tax notifications-decisions on the payment of personal income tax, military levy in the payment of wages;
2-fold increase in fines for taxpayers for certain violations in the field of tax administration;
introduction of taxation of controlled foreign companies (a legal entity registered in a foreign state, which is controlled by an individual or legal entity - a resident of Ukraine);
introduced "luxury tax" for residential real estate, the total area of which exceeds 300 square meters. m. (for an apartment) and / or 500 square meters. m. (for home) - 25 000 UAH. per year for each such property.
Today it is very difficult to predict exactly how such an extensive law will affect the business climate of our state, however, it can already be stated that the Law will not affect the average Ukrainian, moreover, it will have more positive than negative effects.