Renewal of tax audits and changes in VAT administration
17/05/22
On May 12, 2022 the Parliament of Ukraine passed a law (draft law № 7360 dated May 10, 2022, hereinafter - the "Law"), which prescribes further changes to the tax legislation in connection with introduction of martial law. In particular, the Law repeals some amendments previously implemented under the martial law.
PwC experts in Ukraine have analysed the amendments introduced by the Law. In our view, taxpayers should file tax reporting (which should have been submitted during the martial law) as soon as it is possible under the current circumstances. We also recommend the taxpayers to prepare for desk and field (potentially) tax audits. It should be considered that the penalties for violation of tax compliance, if identified by the tax authorities during tax audits, could be more severe than during the COVID-19 quarantine before the martial law.
In addition, we recommend preparing VAT invoices for registration and plan such registration within the deadlines the Law prescribes.
The Law becomes effective from the day following the day of publication, except for the changes in respect of the desk tax audits related to VAT refund. The latter are coming into force starting from June 2, 2022.
Below we highlight the key changes.
- Responsibility of taxpayers
- Administration of taxes
- VAT
- International trade
Responsibility of taxpayers
- full release from responsibility for compliance with terms of payment of taxes and fees applies only to taxpayers (including branches, representative offices etc.), which were not able to fulfil tax obligations. Tax obligations in this regard covers:
- registration of VAT invoices / adjustment calculations in the Unified Register of Tax Invoices ("URTI")
- submission of tax reporting
- payment of taxes and duties
- to benefit from exemption from responsibility for failure to fulfil tax obligations, taxpayers having the possibility to fulfil tax obligations must register VAT invoices / adjustment calculation in URTI by July 15, 2022, submit tax reporting until July 20, 2022 and pay taxes and duties by July 31, 2022
- taxpayers who recovered the possibility to fulfil tax obligations, are exempt from responsibility for untimely fulfilment of tax obligations, provided they fulfil such obligations within 60 calendar days from the first day of the month after the 6th month after recovering such possibility
- third group the unified tax payers (applying the of 2% rate) are exempt from responsibility for untimely fulfilment of tax obligations, provided they fulfil such obligations within 60 calendar days from the date of transition to the tax system they used before transferring to the unified tax system at the rate of 2%
- taxpayers are exempt from assessment and payment of penalties and interest for understatement of tax liabilities due to errors in the reporting periods covered by the martial law, provided such taxpayers adjust their tax reporting for the relevant periods to correct such errors until July 20, 2022
- if the tax authorities detect violations of tax legislation in result of tax audits, taxpayers’ responsibility will be determined taking into account force majeure circumstances, but without consideration of moratorium on application of penalties during the period of martial law and/or emergency state and/or on the period of COVID-19 quarantine established by Cabinet Ministers of Ukraine.
Administration of taxes
- all desk and actual inspections are resumed
- unscheduled field tax inspections are resumed provided they are conducted:
- at the request of the taxpayer
- due to reorganisation procedure (except for transformation) of a legal entity, termination of entrepreneurial activities of individual-entrepreneur, liquidation of a permanent establishment or a branch of a legal entity, including foreign companies or organisations, initiation of bankruptcy proceedings or submission of statement for deregistration of a taxpayer
- if a taxpayer declares VAT refund or negative VAT amount exceeding UAH 100 thousand
- in respect of taxpayers for whom tax information was received, which indicates that the taxpayer has violated the currency control requirements regarding deadlines for receipt of goods within import transactions and/or revenues for export transactions
- the peculiarities of conducting desk and documentary inspections during the martial law have been established
- the deadlines stipulated under the Tax Code may not be suspended for the period of martial law or state of emergency, if directly stipulated by the Tax Code. In particular, the deadlines for the taxpayers and the tax authorities are renewed for:
- registration of VAT invoices and adjustment calculations to them in URTI, submission of tax reporting, payment of taxes and duties
- deadlines of conducting desk audits, drafting audit reports, submitting and considering objections, determining monetary obligations, accepting, sending and appealing the tax notification-decision based on the results of in-house inspections, accruing fines
- deadlines for conducting actual and field unscheduled tax audits, drafting audit reports, submitting and considering objections, determining monetary obligations, accepting, sending and appealing the tax notification-decision based on the results of in-house inspections, administrative seizure of property based on actual inspections
- the possibility of submitting tax returns in paper form has been abolished (unless it was specifically prescribed even before the martial law was declared)
- a document the tax authority sends to the electronic cabinet is considered delivered to the taxpayer if it is created in compliance with the requirements of legislation on electronic documents.
VAT
- VAT refund resumes on July 21, 2022
- registration of VAT invoices and adjustment calculations in URTI resumes. For the tax periods February-May 2022, taxpayers may report input VAT based on the available primary documents if such VAT was incurred on purchase of goods / services without VAT invoices registered in the UTRI
- recipients of services from non-residents with a place of supply in Ukraine have the right to may report input VAT based on primary / payment documents if they also report respective VAT liabilities appropriately
- input VAT related to the goods that were subsequently destroyed (lost) due to the force majeure during martial law cannot be claimed for refund, but should be carried forward and offset against VAT liabilities until their full utilisation
- until the termination or abolition of martial law, VAT payers are not entitled to submit downward adjustments (i.e. reducing tax payable and/or increasing claimed VAT refund) to VAT returns for the reporting periods until February 2022.
International trade
- sanctions for violation of currency control requirements for import transactions (365 days rule) do not apply if the violation is caused by impossibility to import goods due to the decree of Cabinet Ministers Of Ukraine of April 9, 2022 N 426 "On application prohibitions on import of goods from Russian Federation"
- temporarily, during martial law, as well within 12 months after its termination or cancellation, but not later on December 31, 2023, legal entities may import and perform the first state registration in Ukraine vehicles (UKT ZED codes 8702, 8704 and 8705) complying with ecological standard not lower than "EURO-3", provided that legal entities import those vehicles for their own use without the right of disposal for 1095 days from the date of their first state registration in Ukraine. Those rules do not apply to the means of transport originating or being imported from the Russian Federation, Republic of Belarus and temporarily occupied territories Of Ukraine.
Contact us
Managing Partner, Attorneys Association "PwC Legal in Ukraine"
Tel: +380 44 354 0404
Zhanna Brazhnyk
Director, Head of Disputes Resolution Practice, Attorneys Association "PwC Legal in Ukraine"
Tel: +380 44 354 0404
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