Kyiv Tax Newsletter - January 2019



As of January 1, 2019, the Law of Ukraine No. 2628-VIII, dated November 23, 2018 On Introduction of Amendments into the Tax Code of Ukraine and Some Other Legislative Instruments of Ukraine in Connection with Improvement of Administration and Revision of Rates of Certain Taxes and Duties (hereinafter referred to as the Tax Code Amendment Law), has entered into full force and effect. The Law introduces the following novelties:

Administration of taxes

  • Time limits for filing objections against the inspection certificate and relevant complaints with the highest controlling body were extended - 10 business days from the day subsequent to the day the certificate or tax body's resolution in the form of Act or in the form of tax notification-decision was received.
  • The time limits for the storage of documents related to the period of the tax payer's operations in the instances where the tax payer is in liquidation were set: і) not less than 1,095 days preceding the tax payer's liquidation; іі) 2,555 days - for documents and information pertaining to the transfer price formation.
  • Time limits for tax body's resolutions to be issued in the form of tax notifications-decisions were extended (in the instances of absence of the respective tax payer's objections) - 15 business days from the day subsequent to the date of service on the tax payer of the inspection certificate in the form of Act .
  • The following provisions were approved: The tax payer's inspection in connection with its compliance with the "arm's length principle" will be suspended in the instances when court hearings are conducted as a result of the claims filed by the tax payer in relation to the issues related to the institution, procedures or subject matter of such inspection; the inspection will be suspended until the completion of the court hearings.
  • It was specified, in thorough detail, which actions may be undertaken by the controlling body conducting the inspection in connection with the issues related to the tax payer's compliance with the "arm's length principle":
    • to send inquiries, seeking submission of documents (information) in relation to the transaction, which is subject to control, to other tax payers;
    • in the instances when such tax payers fail to provide the documents (information) (fail to provide the entire set of such documents or provide incomplete information) in reply to the inquiry of the controlling body, the latter may initiate a cross inspection of such tax payers;
    • to conduct an interrogation of the officers and/or employees of the tax payers acting as parties to the transaction, which is subject to control;
    • to send inquiries to the competent bodies of foreign countries;
    • to hold meetings with the tax payer (persons authorized by the latter) in connection with the methods governing compliance of the terms of the transactions, which are subject to control, with the "arm's length principle".
  • It was determined that the fine would commence to accrue in the instances of introducing amendments into the tax reports as a result of the tax payer's rectification of mistakes pursuant to Subsection 39.5.4 of the Tax Code, upon the expiry of 270 calendar days.

Transfer Price Formation

  • The list of the transactions, which are subject to control (i.e. controlled transactions), is supplemented with internal business settlements made between a non-resident and its permanent representative office in Ukraine.
  • The list of business transactions was specified in thorough detail for the purposes of transfer price formation, in particular:
    • transactions involving goods such as raw materials, finished products, etc.; transactions pertaining to the acquisition (sale) of services; transactions involving intangible assets, (royalty, licenses, payment due for utilization of patents, signs for goods, know-how, etc.); financial transactions, including leasing, participation in investments, loans, commissions for issuance of guarantees, etc.; transactions pertaining to purchase or sale of corporate rights, shares or other investments, purchase or sale of long-term tangible or intangible assets.
  • A criterion of the transaction, which is subject to control (i.e. controlled transactions), is determined as "prevalence of substance over form" in the chain of business transactions between the tax payer and non-resident, when the right of ownership to the item (result) of such transaction is transferred to one or several persons prior to its transfer from the tax payer to a non-resident and the transaction between the non-resident and any of such person(s) was not acknowledged by the tax payer as the transaction, which is subject to control.
    • The criteria, which were determined, include, inter alia:
      • despite such totality of transactions, non-residents fail to perform essential functions related to the acquisition (sale) of goods (works, services);
      • during such totality of transactions, they do not utilize essential assets, nor do they assume essential risks.
  • A criterion of assets characterization was determined for application during determination of comparability with respect to the terms of comparable transactions and terms of the transaction, which is subject to control; in addition to the above, a criterion was determined for review of the transactions, which are subject to control, pursuant to real actions and terms of their performance.

Profit Tax

  • The term "asset related to the right to use" was defined as the asset acknowledged by the lessee pursuant to the requirements of the International Financial Reporting Standards, which asset constitutes the lessee's right to use the basic asset during the term of lease.
  • The assets related to the right to use under the lease agreements were exempted from application of the depreciation differences thereto.
  • A minimum cost-related criterion was determined for referring assets to the fixed assets falling into the fourth group: electronic equipment (6000 Hryvnias).
  • A new difference was determined for insurance companies: The financial result is subject to increase by a positive difference between any payments (remuneration) due to the insurance intermediaries and other persons for the services rendered in connection with entering into/prolonging insurance agreements and the standard amount of expenses incurred as a result of payments made to the insurance intermediaries.

Personal income tax

  • Excluded from the tax base: insurance benefit, insurance compensation or redemption sum, received by the tax payer under the insurance agreement from the resident or non-resident insurance company, other than long-term life insurance (including insurance of life pensions and non-state pension fund schemes).

Value-added tax

  • It was determined that the mail communication operator or express carrier was the person responsible for payment to the budget of the tax arising in the instances of bringing goods into the customs territory of Ukraine via international and express mails.
  • The list of transactions, which are not subject to VAT, was supplemented with regard to bringing into the territory of Ukraine goods with total invoiced value not exceeding the equivalent of €100 and €150, via unaccompanied luggage, international mail, etc., along with setting a certain transition period for individuals.
  • Exempted from VAT: transactions pertaining to the provision of services regarding letting (subletting) land plots, which are owned by the state or territorial community, if the funds due for such services are paid directly to the respective budget accounts of these bodies.
  • An additional mandatory detail to be set out in the tax invoice was established: "individual tax number".
  • The following VAT-related preferential provisions were prolonged:
    • supply of ferrous and non-ferrous waste and scrap, paper and cardboard for recycling – until January 1, 2022;
    • transactions involving pharmaceuticals and medicinal products – until December 31, 2020;
    • supply of coal and/or coal beneficiation products – until January 1, 2022;
    • supply of battery-driven vehicles – until December 31, 2022.

Excise duty

The following amendments are to enter into full force and effect as of July 1, 2019:

  • The definition of fuel sale was changed; thus, fuel sales shall mean any transactions related to physical transfer (supply, shipment) of fuel or ethyl alcohol, with transfer of the right of ownership to such fuel or ethyl alcohol or without such transfer, for a fee (remuneration) or without such payment, on the customs territory of Ukraine, from the excise warehouse/moving excise warehouse: і) to the excise warehouse; іі) to the moving excise warehouse; ііі) for own consumption or industrial processing; iv) to any other persons.
  • The definition of excise warehouse was rendered more precise. Thus, according to the new definition, an excise warehouse means:
    • specially equipped premises on a limited territory – for operations with ethyl alcohol, vodka, liqueurs and spirits;
    • premises or territory on the customs territory of Ukraine – for operations with fuel.
  • Such notion as moving excise warehouse was introduced - in particular, this is a transportation vehicle (automotive, railway, marine, river, air and main pipeline), via which fuel or ethyl alcohol is transported and/or stored on the customs territory of Ukraine.
  • Notion of "administrator of moving excise warehouse" is introduced; in particular, it is a payer of excise duty, who is the owner of fuel or who is carrying out activities related to the production of ethyl alcohol and, as a result of use of the transportation vehicle (regardless of the fact, who owns such transportation vehicle), is selling or storing fuel or ethyl alcohol; bringing fuel (with respect to which the excise duty is paid) into the customs territory of Ukraine.
  • Definition of the person selling fuel was extended. Now, this is not merely a person selling fuel, rather it is the person (including a legal entity keeping records related to the results of operations under a joint activities agreement without establishment of a legal entity), selling fuel or ethyl alcohol.
  • Definition of an object, on which excise duty is chargeable, was updated. Thus, the object includes  not only fuel, but ethyl alcohol, too, if they are sold from/to the excise warehouse / moving excise warehouse.
  • It was determined that transfer of fuel or ethyl alcohol between the excise warehouses would be deemed to be the sale of products.
  • Regulations governing establishment, fitting and registration of excise warehouses were introduced.
  • The system for electronic administration of operations related to the sale of ethyl alcohol was introduced.


  • Subsoil use rates were increased by 2 percent:
    • oil: from the deposits, which are entirely or partially located at a depth of up to 5000 meters - from 29 percent up to 31 percent;
    • from the deposits, which are entirely located at a depth of more than 5000 meters – from 14 percent up to 16 percent.

Land Tax

  • The land tax rates were determined for the land plots, whose mandatory appraised monetary value was not established:
    • located outside or within urban settlements - determined in the amount of not less than 5 percent of the mandatory appraised monetary value of a unit of tillable land;
    • for agricultural lands - not less than 0.3 percent and not more than 5 percent of the mandatory appraised monetary value of a unit of tillable land;
    • for forest lands - no more than 0.1 percent of the mandatory appraised monetary value of tillable land.
  • It was determined that the resolution of the councils in connection with mandatory appraised monetary value of land plots must be published officially by the respective body of local self-government before July 15 of the year preceding the budget period.

Tourist duty

The amendments to the Tax Code entered into full force and effect, whereby the tourist duty is attached to the minimum wage, and amounts of the duty were equalized for hotels of various categories.

Earlier, the duty was approximately equal to 1 percent of the room rate per night. Now, the local authorities should determine the tourist duty rate independently. The overall range: up to 0.5 percent of minimum wage for the Ukrainian tourists and up to 5 percent for foreign tourists. Thus, in 2019, the tourist duty may not exceed 20 Hryvnias and 86 kopecks (approximately €0.65) per day of accommodation for Ukrainian tourists and 208 Hryvnias and 65 kopecks (approximately €6.5) for foreign tourists.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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