Starting from 1 December, more taxpayers can become subject to field tax audits

On 9 November 2023, the Verkhovna Rada adopted in the second reading Draft Law No. 10016-д “On amendments to the Tax Code of Ukraine and other laws of Ukraine on lifting the moratorium on tax audits” (further - “the Law”). The Law expands  the categories of taxpayers that may be included in the schedule of field tax audits.

The Law is expected to enter into force on 1 December 2023. However, we are also aware of initiatives aimed at delaying the signing of the Law and its entry into force.

Below we comment on the main changes  introduced by the Law based on its version for second reading. We would be happy to discuss those changes in more detail in the context of your business.

The schedule of documentary tax audits for 2024 may include:

1) Non-resident taxpayers operating in Ukraine through separate subdivisions, if:

a) the growth rate of corporate profit tax is 50% lower than the growth rate of the taxpayer's revenues; or 

b) the company paid salaries without declaring the object of corporate profit tax/ revenues exempt from corporate profit tax.

2) All taxpayers meeting at least one of the following criteria as a result of 2021:

• payment rate of corporate profit tax or value added tax (with certain exceptions) was 50% lower than the tax rate in the relevant industry
• accounts receivable were twice as large as accounts payable
• total expenses amounted to 75% of the annual revenue (applicable if annual revenue is at least UAH 10 million)
• accrued income in form of salary (as legal entities - tax agents of individuals) in the amount less than the average salary (in the relevant industry and region).

The priority remains for the tax audits that have been started since 1 August 2023 (tax audits of the taxpayers conducting production and/or sale of excisable goods; providing financial and payment services; gambling business).

Moratorium on audits in NOT lifted for:

• simplified (unified) tax payers of the first and second groups (until 1 December 2024)
• Enterprises located on the temporarily occupied territories or territories where military operations are conducted (with certain exceptions).

We continue to monitor developments on this issue and will keep you informed.