Starting from 1 August, the temporary 2% unified tax regime is abolished, and certain tax audits and deadlines are resumed

On 30 June 2023, the Verkhovna Rada of Ukraine adopted the Draft Law No. 8401 dated 31 January 2023 on peculiarities of taxation during the period of martial law (further — "Law"). The Law abolishes the preferential regime of the simplified taxation system, establishes certain taxation rules for the period of martial law and partially restores the taxation rules that were in force before the introduction of martial law.

The Law enters into force on 1 August 2023 (provided it is timely signed by the President of Ukraine).

Below we comment on the main changes introduced by the Law. We would be happy to discuss the relevant changes in more detail in the context of your business.

Preferential unified tax regime at a tax rate of 2% (further — "2% regime")

• The 2% regime expires on 1 August 2023.
• On 1 August, taxpayers still using the 2% regime as of 31 July are automatically switched back to the taxation system they were in before the 2% regime. Until 31 July, taxpayers may choose to switch to another taxation system by self-rejecting the 2% regime. At the same time, we recommend considering if import of goods was performed under the 2% regime.
• The Law introduces to the Tax Code of Ukraine (further — "TCU") certain peculiarities and requirements for taxpayers in the context of returning to the taxation system those taxpayers were subject to before the transition to the 2% regime in terms of VAT, corporate profit tax and unified tax.
• In particular, please note that the suppliers whose VAT registration is resumed after the abolition of the 2% regime have to register VAT invoices (further — “VI”) within 60 calendar days from the date of resumption of registration as a VAT payer so that their customers are entitled to the input VAT, which was previously reported based on the primary documents for the period February — May 2022.

Tax audits

• Starting from 1 August 2023, scheduled and unscheduled tax audits resume for the taxpayers conducting the following activities:
  • production and/or sale of excisable goods;
  • organisation and conduct of gambling in Ukraine (gambling business);
  • financial and payment services.
• Unscheduled tax audits based on para. 78.1.9 of the TCU can be conducted based on a complaint filed against the taxpayer failing to provide a correct VI or timely register it (same applies for adjustment calculations and excise tax invoices).
• The accrued penalties shall be deemed cancelled and no late payment interest shall be charged if, within 30 days after receiving the tax notification-decision, the taxpayer pays the tax liability accrued based on the results of a field tax audit resumed or initiated starting from 1 August 2023 and finalised before the date of termination or cancellation of martial law.
• Thus, the legislator has effectively exempted the taxpayer from liability in the form of penalties and late payment interest if the above condition is met, but also established that the amount of the tax liability paid in this case cannot be challenged by the taxpayer.
• A tax notification-decision is unsettled until the tax liability is paid in full, but not later than 30 days after the taxpayer receives it.

Deadlines

• From 1 August 2023, all deadlines specified by the tax legislation previously suspended until the termination or cancellation of martial law in Ukraine (including the deadline for responding to requests from tax authorities) are restored for taxpayers.
• The statute of limitations for scheduled and unscheduled audits remaining under the moratorium after 1 August 2023 is suspended, and the periods for storing documents and information related to the calculation and payment of taxes and fees are extended for the period of suspension of such statute of limitations.

Responsibility

• If the taxpayer self-corrects the mistakes that led to the understatement of the tax liability in the period from 1 August 2023 until the termination or cancellation of martial law in Ukraine, that taxpayer is exempt from the accrual and payment of penalties and late payment interest.
• From 1 August 2023, the late payment interest for violations of the legislation on the calculation and payment of the unified social tax is resumed.
• Business entities are exempt from liability for violations of the rules for the use of registers of payment transactions (further — “RPT”) committed between 1 January 2022 and 1 October 2023, except for liability for violations of the procedure for payment transactions for sale of excisable goods, foreign currency sale/purchase transactions, and activities on organising and conducting gambling.
• From 1 October 2023, business entities will be exempt from liability for violations of the rules for the use of RPT (except for violations of the procedure for payment transactions for the sale of excisable goods) committed by them when selling goods or providing services in the temporarily occupied territories of Ukraine, territories of active military actions or territories of possible military actions.
• From 1 August 2023 to 31 July 2025, but no later than the date of termination or cancellation of martial law in Ukraine, the following penalties for violation of the rules for the use of RPT shall apply:
  • 25 per cent of the value of goods (works, services) sold in violation — for a violation committed for the first time;
  • 50 per cent of the value of goods (works, services) sold in violation of this clause - for each subsequent violation.