Changes related to the introduction of Martial Law
On 15 March 2022, the Verkhovna Rada of Ukraine approved the draft laws, which provide for a set of changes in tax and related laws. Among other changes, the law introduced the voluntary simplified tax system for all taxpayers (2% of revenue). Thus, payers of corporate income tax may opt to choose this simplified tax system instead of paying standard 18% corporate income tax. For more details, please refer to the Simplified (unified) tax regime section.
Other significant developments
In 2020, the Ukrainian Parliament (the Verkhovna Rada of Ukraine) adopted the Law of Ukraine № 466-IX, the Law of Ukraine № 786-IX and the Law of Ukraine № 1117-IX,, which introduced significant changes to the tax legislation of Ukraine. Some changes have come into force from 23 May 2020, 1 January 2021 or 1 January 2022.
In 2021 the Ukrainian Parliament adopted the Law of Ukraine № 1914 (previously the Draft law 5600), which introduced significant changes to the tax legislation of Ukraine. Provisions of the Law № 1914 became effective starting from 1 January 2022.
In addition, on 14 August 2021 the Law of Ukraine1667-IX “On Stimulating the Development of the Digital Economy in Ukraine'' entered into force. The purpose of the Law 1667-IX is creation of a special legal regime for the IT industry in Ukraine called “Diia City”.
On 14 December 2021, the Ukrainian Parliament adopted The Law of Ukraine "On Amendments to the Tax Code of Ukraine to Stimulate the Digital Economy in Ukraine", which is a tax part of the “Diia City” special legal regime and provides special tax conditions for residents of the City. The law entered into force on 1 January 2022.
Main changes effective starting from 1 January 2022 are related to the following areas:
- Introduction of limitations related to tax losses carried forward for large taxpayers.
Introduction of minimal tax burden for agricultural producers on land plots.
Introduction of the controlled foreign company (CFC) concept (see Controlled foreign companies (CFCs) in the Group taxation section).
Place of effective management of non-resident companies in Ukraine (see the Corporate residence section).
Introduction of value-added tax (VAT) for digital business-to-consumer (B2C) services supplied by non-residents.
Diia City: Special legal and tax regime for IT companies in Ukraine
Starting from 2021 the 'Diia City' (a special legal and tax regime for IT companies in Ukraine) started working. This regime is created for the purpose of stimulating the development of the IT sector in Ukraine. Benefits of 'Diia City' include:
- Certain guarantees for its residents (in particular, the validity of the legal regime for not less than 25 years, the stability of tax conditions, the presumption of legality of the residents of 'Diia City').
- The possibility of choosing a special tax regime.
- Protection from excessive interference in the resident’s activities by the state.
- Simplification of the registration of relations with IT specialists (possibility of hiring employees within labour relations, individuals, including foreign IT specialists, under gig contracts, and concluding agreements with private entrepreneurs).
- Engaging and encouraging talent in the field of IT by establishing additional compensation, social guarantees, the use of options, etc.
Incentives related to COVID-19 (already effective):
In response to the global effects of COVID-19 on businesses, many countries around the world are implementing tax incentives to support their economies. In Ukraine, the following tax measures and changes in the law were introduced due to the impact of COVID-19:
- Exemption from penalties for violation of tax laws (with certain exceptions) committed during the tax period starting from 1 March 2020 and until the last day of the month in which the quarantine period ends.
- Exemption from interest for late payment of tax accrued during the tax period starting from 1 March 2020 and until the last day of the month in which the quarantine period ends.
- Income/expenses from free of charge receipt/use of certain goods by state and municipal health care institutions during the quarantine period shall be excluded from the corporate income tax (CIT) base.
- From 17 March 2020 to the last day of the month in which the quarantine restrictions end, the import and supply of medicine, medical goods, and medical equipment needed for performing measures against COVID-19 is temporarily exempt from VAT and customs duty (for customs duty to 30 June 2020). The list of medicines and medical equipment is defined by the government.