The draft Law “On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts of Ukraine,” registered by the Verkhovna Rada of Ukraine under number 4309а, was adopted by the Verkhovna Rada of Ukraine on 31 July 2014.

The draft Law provides for the following major changes to the taxation laws, specifically:

With respect to corporate income tax:

• to limit assessment of corporate income tax on joint investment institutes at preferential rates;
• to abolish taxation of income earned from operations with securities and derivatives at a reduced rate (10 percent);
• to abolish income tax exemption for entities carrying out hotel activities; electric power enterprises generating electricity exclusively from renewable energy sources.

With respect to value added tax:

• to establish from 1 November 2014 the electronic administration system of value added tax, which provides for automatic accounts opening in the value added tax electronic administration system for all registered taxpayers and the possibility of registration of tax invoices in the Unified Register of Tax Invoices only upon availability of the funds on the account in the value added tax electronic administration system;
• to establish from 1 November 2014 mandatory registration of all tax invoices in the Unified Register of Tax Invoices, regardless of the amount of the value added tax in a tax invoice;
• to increase from 1 November 2014 the “threshold” for mandatory registration of a company as a VAT payer from 300 thousand Hryvna to 1 million Hryvna;
• to supplement the procedure for determining the tax base for value added tax calculation with the provision under which the tax base of operations for the supply of goods / services cannot be less than the purchase price of such goods / services, and for the taxation of supplies of the fixed assets cannot be lower than the book (residual) value according to accounting data;
• to extend VAT exemption regime on export of grain and industrial crops until 1 January 2015;
• to abolish VAT exemption regime on supplies of  timber, fuel wood, and wood waste;
• to abolish a zero tax rate on passenger transportation by Intercity+ high-speed trains.

With respect to excise tax:

• to increase by 5 percent the rate of the specific excise tax rates and the minimum excise tax liability with respect to excise tax on tobacco products;
• to assign beverages classified under codes UKT ZED 2103903000 and 210690 and containing 8.5 percent and higher ethanol to alcoholic beverages;
• to set the excise tax rate equal to the rate applied to vodka– UAH 70.53 per 1 liter of 100 percent alcohol for such beverages, and label such beverages with excise stamps;
• temporarily, until 1 January 2015, to introduce tax on alternative fuels at the rate of €99 per 1000 kg.

With respect to payment for the use of subsoil:

• temporarily, until 1 January 2015, to increase the rate for natural gas extraction sold not for the needs of the population: extracted from deposits that lie entirely or partly at depths of up to 5 km – from 28 percent to 55 percent;  extracted from deposits that lie entirely or partly at depths of more than 5 km – from 15 percent to 28 percent;
• to change the tax base for natural gas sold not for the needs of the population, namely to establish that the tax base is not the average customs value of imported natural gas as it is now, but the ceiling (maximum) level of price for natural gas sold to industrial customers which is set by the NERC (and not the average customs value of imported natural gas as it is now);
• to change the rate for natural gas extraction for gas extracted from new gas wells a “lowering coefficient” of 0.55 will apply (during the two years after a new gas well is registered in a State register of oil and gas wells);
• temporarily, until 1 January 2015, to set the following rates for subsoil use for oil and gas condensate extraction: 45 percent - for oil and gas condensate from the deposits lying at depth of up to 5 km; 21 percent - for oil and gas condensate from the deposits lying at depth of more than 5 km;
• temporarily, until 1 January 2015, to set that the rate for subsoil use for iron ore extraction at the rate of 8 percent of its value based on the content of chemically pure metal.

Military charge:

• temporarily, until 1 January 2015, to establish a new statewide charge - military charge at a rate of 1.5 percent charged on personal income in the form of wages and other incentive and compensation payments or other benefits and rewards accrued (paid, provided) to the taxpayer in connection with labor relations and on the basis of the civil law agreements; winnings in public and private money lottery, winnings received by the player (participant) received from the organizer of gambling.

Amendments to the Law of Ukraine “On State Budget of Ukraine for 2014”

The draft Law on Amending the Law of Ukraine ”On State Budget of Ukraine for 2014,” registered by the Verkhovna Rada of Ukraine under number 4308а, was adopted by the Verkhovna Rada of Ukraine on 31 July 2014.

The draft Law specifically provides that inspections of enterprises, institutions and organizations by the controlling authorities (other than the State Fiscal Service) during August-December 2014 shall be carried out only with the permission of the Cabinet of Ministers of Ukraine or upon the application of the entity for its inspection.