In 2015 taxpayers will be entitled to a tax compromise

CMS Cameron McKenna, 
Kyiv, Ukraine, Thu, Feb 05, 2015

On 25 December 2014 theParliament of Ukraine passed the Law of Ukraine On Amendments to the Tax Code of Ukraine concerning the Features ofCorrections to the Tax Liabilities of Corporate Income Tax and Value Added Taxin the Case of Application of the Tax Compromise (the “Law”). On 16 January 2015, the Law was published in the officialparliamentary newspaper upon while it came into force and effective.

The tax compromise mechanismis being applied for the first time in Ukraine. As stated in the explanatorynote to the Law, the main aim of this innovation is to exempt taxpayers fromfinancial criminal and administrative liability by allowing them to pay anyundeclared value added tax (“VAT”)and corporate income tax (“CIT”)liabilities.

For this purpose, the taxpayershould submit a correction of its tax liabilities (the template of which is tobe prepared by the tax authorities) in respect of CIT and/or VAT for any taxperiods before 1 April 2014, but within the limitation periods prescribed bythe Tax Code of Ukraine (1095 days).

According to the taxcompromise, if a taxpayer pays 5% of corrected liabilities, the other 95% ofits tax liabilities will be considered settled.

The taxpayers may use the taxcompromise procedure within 90 days from the date the Law becomes effective.The tax compromise procedure should be settled within 70 days from the date ofsubmission of the correction.

The tax authority shouldinform the taxpayer within 10 working days following the submission of thecorrection whether (i) the tax compromise has been accepted, or (ii) there is anecessity to conduct an unscheduled documentary tax audit concerning the dataset out in the correction.

It is important to note thatthe Law allows taxpayers to invoke the tax compromise procedure during thecourse of a tax audit, as well as with respect to tax liabilities which arecurrently under administrative or judicial appeal. In these cases, the taxpayershould submit to the tax authority an indication of its intent to apply for thetax compromise. 

In summary, it appears thatthe Law is aimed to eliminate the shadow economy and the illegal tax schemes,by providing tax avoiders with an opportunity to become legal taxpayers.

Law: Law of Ukraine On Amendments to the Tax Code of Ukraineconcerning the Features of Corrections to the Tax Liabilities of CorporateIncome Tax and Value Added Tax in the Case of Application of the Tax Compromise.

 

Authors:

DanielBilak, Managing Partner, daniel.bilak@cms-cmck.com

OlexanderMartinenko, Senior Partner, olexander.martinenko@cms-cmck.com

Mariana Rybii, Lawyer, mariana.rybii@cms-cmck.com