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The Parliament Supports Draft Laws to Improve Tax Administration

The Parliament of Ukraine adopted in the second reading draft laws on improving tax administration and eliminating certain inconsistencies in tax legislation (No. 1209-1, No. 1210).

Introduction of the new standards will help to improve the administration of taxes and fees, comply with the principle of fair taxation, and will enhance Ukraine's economic image globally.

With regard to tax administration, the above draft laws provide the following:

  • introduce the principle of fault-based liability of the taxpayer for tax offenses within the Tax Code of Ukraine;
  • determine the requirements for justifying decisions of the supervisory authorities on the imposition of fines;
  • determine a list of tax offenses of the supervisory authorities. These include non-compliance with the procedure for the registration of taxpayers or VAT refund violations;
  • stipulate financial liability of the authority for the misconduct of its officials and the non-fault-based liability of the supervisory authorities.

With regard to the implementation of the BEPS Action Plan, the above draft laws:

- introduce the concept of taxation of profits of controlled foreign companies at the level of the controlling entity;

- introduce a three-tier documentation structure for international groups of companies, which includes transfer pricing documentation (local file), global documentation (master file) and country-by-country reporting;

- implement steps 8-10 of the BEPS Action Plan to control the distribution of functions, risks and intangible assets within a group of companies, improve the rules for commodity transactions by eliminating the restriction on the use of stock quotes of certain stock exchanges and allowing the use of quotations for such commodities;

- determine the procedure for carrying out mutual approval procedure, which provides for the mechanism of submitting the application for case consideration under the mutual approval procedure, the requirements for such application, the procedure for the competent authority, etc.;

- introduce the concept of taxation of payments equal to dividends, which envisages adjustments according to the methodology and procedures envisaged for control over transfer pricing when conducting transactions with non-residents.

With regard to local taxes and fees, the above draft laws:

- introduce a unified form of information on rates and privileges for all local taxes and fees and the procedure for submitting it by local authorities to the supervisory authorities;

- abolish the obligation of local self-government bodies to adopt annual decisions on local taxes and fees;

- cancel privileges for payments for land and real estate tax other than land plot on the territory of settlements on the contact line;

- cancel exemption from land tax for group I - III single tax payers if they lease out land plots and/or real estate located on such land plots.

In addition, the draft laws introduce changes to the issues of personal income tax, corporate income tax, rent, etc.