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• Law No.9661-d introduces changes to the Tax Code of Ukraine

Parliament abolishes royalties for oil, natural gas and gas condensate and introduces material changes to provisions on administration of taxes, VAT and subsoil use payments

On 24 May 2012, the Verkhovna Rada of Ukraine adopted in the second reading and as a whole draft law No.9661-d “On Amending the Tax Code of Ukraine to Improve Certain Taxation Rules” (“the Law”). Shortly the Law will be sent for the President’ signature and will become effective if signed.

The Law enters into force on 1 July 2012, except for the provisions on environmental tax, royalties for oil, natural gas and gas condensate and subsoil use payments. The latter provisions take force on 1 January 2013.

According to the Law, starting 1 January 2013 the royalties for oil, natural gas and gas condensate will be abolished. Instead, the rates for subsoil use payment are increased. Additionally, the Law materially amends the provisions on VAT and other taxes administration.

General Provisions

1. ƒ The Law amends the tax definitions of “hydrocarbonic raw materials,” “curtilage of a building”, “waste disposal”
2. ƒ The Law introduces a definition of “subdivision” for Section IV (PIT) different from that for all other sections of the Tax Code
3. ƒ The Law changes criteria for qualifying a lease as a “financial lease”

ƒ Administration of Taxes

1. Obligation to sign a tax return is now confined to the head of the taxpayer (or an authorized person); formerly, the obligation was also vested in persons responsible for the accounting function
2. The tax authorities will no longer deliver tax claims and apply the tax pledge where the total taxpayer’s tax debt does not exceed 20 nontaxable minimum incomes
3. ƒ The Law envisages that tax notificationdecisions may be “served” as well as mailed to the taxpayer
4. ƒ Provision of explanations by the taxpayer during tax audits is now listed among the taxpayer’s rights (formerly, it was the taxpayer’s obligation)
5. ƒ The Law provides for the tax authorities’ right to obtain the information necessary to ensure repayment of the tax debt by the taxpayer from the state registry (cadastre) administrators within five working days
6. ƒ The Law provides for the taxpayer’s obligation to register asset management agreements with the tax authorities (subject to certain exceptions)

Corporate Profit Tax

1. ƒ The list of non-taxable income items is supplemented with the property contributed to the taxpayer’s equity and not returned upon its bankruptcy

Value-Added Tax

1. ƒ The Law abolishes restrictions on voluntary VAT registration
2. ƒ The Law amends the definition of a “person” for Section V (VAT): a person shall include natural and legal persons that (1) are not payers of the single tax; (2) are payers of the single tax at a rate of 3%; (3) are payers of the single tax at a rate of 5% and voluntarily switch to 3% rate; in the part regarding the importers and nonresident representative offices the definition remains intact
3. The Law provides for a possibility to submit VAT invoices electronically (subject to registration requirements)
4. ƒ The term for the tax invoice registration is shortened from 20 to 15 days
5. ƒ The Law amends special procedure for the tax base calculation in instances of the deemed sale of assets that are not used in taxable operations

Environmental Tax

1. ƒ The Law amends the scope of persons responsible for paying tax for waste disposal

Royalties for Oil, Natural Gas and Gas Condensate

1. ƒ On 1 January 2013, Section X of the Tax Code becomes ineffective (that is, royalties for oil, natural gas and gas condensate are abolished)
2. ƒ Till 1 January 2013, Section X applies as amended by this Law

Subsoil Use Payments

1. ƒ The Law changes rates for subsoil use payments. Under the new formula, the payment is set in percent of the extracted resources value but cannot be lower than fixed UAH minimums per unit
2. ƒ The Law amends the procedure for subsoil use payments, specifically, by introducing advance payments
3. ƒ The advance payment is set at 30% of the tax paid in the previous reporting period
4. ƒ The advance payment should be paid not later than on the 30-th day of the month
5. ƒ Penalty for failure to pay the advance payment equals 50% of the advance payment

We will keep you informed on any further developments and will separately confirm the above information after the Law is officially published.

Should you have any additional questions, we will be happy to assist you.

Contacts
Tel: +380 (44) 490 3000
E-mail: kyiv@ua.ey.com