On 23 May 2020 the Ukrainian Parliament (the Verkhovna Rada of Ukraine) adopted the Law of Ukraine № 466-IX, which introduced significant changes to the tax legislation of Ukraine. Some changes have already come into force from 23 May 2020, while others will become effective from 1 July 2020 and 1 January 2021.
Main changes effective starting from 23 May 2020 are related to the following areas:
- Transfer pricing (see the Transfer pricing in the Group taxation section).
- Tax depreciation and deduction of certain types of expenses (see Deductions section).
- Withholding taxes and international taxation. Please note that some changes related to Withholding taxes will take effect starting from 1 July 2020 (see Withholding taxes section).
- Taxation of permanent establishments (see Permanent establishment (PE) in the Taxes on corporate income section).
- Rent payment for subsoil usage (see Charge for subsoil usage (rent) in the Other taxes section).
Main changes effective starting from 1 January 2021 are related to the following areas:
- Introduction of controlled foreign companies concept (see Controlled foreign companies (CFCs) in the Group taxation section).
- Thin capitalisation rules (see Thin capitalisation in the Group taxation section).
Incentives related to COVID-19 disease (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 labour law were introduced due to impact of COVID-19 disease:
- 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.
- No limitations for deduction of expenses for the year 2020 upon free of charge provision of medical goods and other goods listed by the Cabinet of Ministers of Ukraine in favour of non-profit organizations during the quarantine period.
- 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 CIT base calculation for 2020.
- Exemption from Unified Social Contribution for certain individual entrepreneurs for March, April and May 2020.
- Exemption from land tax and tax on real estate for March 2020.
- From March 17, 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 June 30, 2020). The list of medicines and medical equipment is defined by the Government. Сustoms clearance procedures should be carried out with priority.
- The following definitions were introduced in the Labour Code:
“flexible working hours” - a form of organization of working regime that is different from the one determined by the rules of internal labour regulations. Establishing a flexible work regime is allowed both at the stage of conclusion of the employment agreement and afterwards. The application of flexible working hours does not entail changes in rate setting, remuneration and does not affect the volume of labour rights of employees.
“remote (home-based) work” - performance of work by an employee outside the premises of the employer. In the case of remote (home-based) work, the employee independently allocates his/her working time and is not subject to the rules of internal labour regulations, unless otherwise specified in the employment agreement (the requirements and restrictions on the total hours of work provided for by the law must be observed).
- An employment agreement for remote (home-based) work should be concluded in writing.
- It is established that an idle time/shutdown of business operations which occurred without the fault of an employee, including due to the announcement of the quarantine, is to be paid at the rate of not less than 2/3 (two-thirds) of the employee’s salary.
- During an epidemic, pandemic and other threats, remote (home-based) work and flexible working hours may be established by an internal order of the employer without the obligatory conclusion of an employment agreement for remote (home-based) work.