Ukraine

Taxable period

The reporting year for companies generally follows the calendar year. The exception is for qualified agricultural manufacturers (other than on simplified [unified] tax), whose reporting period starts from 1 July of the current reporting year and ends on 30 June of the next reporting year.

Tax returns

Tax returns for CIT should generally be submitted on a quarterly basis, but some taxpayers will have to submit them annually (newly established, agricultural producers, and taxpayers with prior year annual income equal to or less than UAH 40 million net of indirect taxes).

Monthly returns (e.g. VAT, 2% simplified [unified] tax) must be filed within 20 calendar days following the end of the respective reporting month.

Quarterly returns are due within 40 calendar days following the last day of the reporting quarter. However, the deadline for submitting a fourth quarter CIT return (on a quarterly reporting period basis) is 60 calendar days after the reporting year-end; this term also applies for other annual returns (including CIT returns on a yearly reporting period basis).

Taxpayers also have to submit financial statements to the tax authorities.

Resident companies and non-resident entities with a PE in Ukraine must keep records that comply with the tax rules.

Payment of tax

Taxes payable assessed on the basis of tax returns are due within ten calendar days following the deadline for filing the relevant tax returns.

Starting from 1 January 2021, a unified tax account is enabled. It is now possible to pay CIT, PIT, and USC through a unified tax account, as well as other payments, the control of which is entrusted to the State Tax Service. Please note, such account is not used for payments of VAT and excise tax on fuel and alcohol.

The use of a unified tax account starts on the next business day after the submission of the notification on the use of such tax account. If the taxpayer intends to stop usage of the unified tax account, it will be terminated starting from 1 January of the following calendar year.

Once in a year, the taxpayer has the right to notify (via electronic cabinet) of the choice either to use or terminate a unified tax account.

Penalties

The tax authorities will charge significant penalties for late filing, late payment, or understating tax liabilities.

Late payment of tax may result in a penalty in the amount of 10% of the underpaid amount for delays of up to 30 calendar days (20% if the delay exceeds this).

If the tax liabilities are understated, the amount of penalty depends on the frequency of violations (i.e. understatement of CIT and VAT liabilities, overstatement of VAT refunds) during a period of 1,095 consecutive calendar days. In particular: 10% for the first innocent violation, 25% for the first intentional violatiоn, and 50% for the second intentional violation and each subsequent violation related to the same taxes (75% may also be applied for the third and subsequent violation of WHT and payroll taxes).

In addition to the abovementioned penalties, late payment interest (LPI) is calculated based on 100%/120% of the prime rate of the National Bank of Ukraine. The rules for calculation of LPI are vaguely worded and are open to interpretation.

If a taxpayer fails to withhold tax when required, a penalty of up to 75% of the deficient tax is imposed. 

If the taxpayer fails to register VAT invoices, penalties are up to 150% of the VAT amount (100% if the customer complains and the supplier does not follow the tax authorities' prescriptions within deadlines). If the taxpayer fails to register excise tax invoices, penalties are up to 40% of the excise tax amount due on the supply of the respective excisable goods.

Potential criminal responsibility could be claimed against the taxpayer’s management if the total amount of additional tax liabilities assessed by the tax authorities during the tax audit exceeds 3,000 times the amount that is equal to 50% of the statutory subsistence minimum for able-bodied individuals (i.e. UAH 4,542,000 of additional tax liabilities for 2024). There are several options to close such criminal proceedings (the procedure should be properly managed from the legal perspective).

If the taxpayer identifies and self-adjusts understated tax liabilities, such taxpayer is required to self-assess penalties of 3% or 5%, depending on the way in which the adjustment was made.

Non-resident legal entity that conducts activities in Ukraine through a separate business unit (including a PE) without registering with Ukrainian tax authorities will be charged with penalties of UAH 100,000.

Changes related to the introduction of martial law

During the period of martial law:

• Taxpayers who do not have the opportunity to meet the deadlines for payment of taxes and submission of tax returns are exempt from penalties provided that they will submit tax returns and pay the respective taxes within three months after the termination or abolition of martial law in Ukraine.
• Full release from responsibility for compliance with terms of payment of taxes and fees applies only to taxpayers (including branches, representative offices, etc.) that were not able to fulfil tax obligations. Tax obligations in this regard covers:
  • Registration of VAT invoices / adjustment calculations in the Unified Register of Tax Invoices (URTI).
  • Submission of tax reporting.
  • Payment of taxes and duties.
• Taxpayers are exempt from assessment and payment of penalties and interest for understatement of tax liabilities under certain conditions.
• The late payment interest for violations of the legislation on the calculation and payment of the unified social tax is resumed from 1 August 2023.
• If the tax authorities detect violations of tax legislation in result of tax audits, taxpayers’ responsibility will be determined taking into account force majeure circumstances, but without consideration of moratorium on application of penalties during the period of martial law and/or emergency state.
• Business entities are exempt from liability for violations of the rules for the use of registers of payment transactions (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% of the value of goods (works, services) sold in violation for a violation committed for the first time.
  • 50% of the value of goods (works, services) sold in violation of this clause for each subsequent violation.

Standard audit file (SAF-T UA)

Starting from August 2021, an obligation for large taxpayers to submit a standard audit file (SAF-T UA) was established by the Order of the Ministry of Finance of Ukraine. Formally, the tax authorities may request an SAF-T UA from large taxpayers during audits already from this date.

The structure of the SAF-T UA consists of the following sections:

• General information about the taxpayer.
• Directories on the taxpayer and its activities.
• Accounting records in the context of each individual business transaction with details of the transaction performed.
• Information about documentary support of accounting records.
• Tax differences.

In 2022, the State Tax Service of Ukraine has published the Detailed Technical Description Elements of SAF-T UA; however, it is expected that the current version of such description may be amended in the future.

At the request of the tax authorities during the audit, large taxpayers must provide an SAF-T UA within two working days after receiving the request.

It is expected that an SAF-T UA will become a regular annual tax reporting for large taxpayers from 2025 and for all VAT payers from 2027. For non-submission and violation of the SAF-T UA filing procedure, the draft law stipulates penalties in the amount of:

• 100 minimum wages (UAH 710,000 as of 2023) for large taxpayers.
• 10 minimum wages (UAH 71,000 as of 2023) for VAT payers, except for self-employed persons.

Tax audit process

Due to the war in Ukraine, the tax authorities had been prohibited to start all types of tax audits of taxpayers since 3 March 2022. On 8 December 2023, all types of tax audits were resumed with minor limitations.

According to the Tax Code, the tax authorities may carry out scheduled audits once a year. Taxpayers must be notified of the audit in writing at least ten days in advance. The State Tax Service is required to release a schedule of planned audits for the following year on its official website by 25 December of the year preceding the year when such audits are to be conducted. The schedule may be reviewed on a monthly basis. Tax audit of the companies included in the schedule after its initial publication may be started not sooner than two months after publication of the changes to the schedule (for some types of businesses this term is decreased to 30 days).

The following companies may be a subject for a scheduled tax audit:

• Non-resident taxpayers who carry out activities in Ukraine through separate divisions if (i) the level of income tax growth is 50% less than the growth level of the taxpayer's income or (ii) wages were calculated by the company in the absence of declaration of the object of taxation with income tax/declaration of income exempted from taxation.
• All payers who, according to the results of 2021, meet at least one of the following criteria:
• Had a level of income tax or VAT (with certain exceptions) 50% lower than the level of tax payment in the relevant industry.
• Had accounts receivable twice as large as accounts payable.
• Had a total amount of expenses in the amount of 75% of the amount of annual income (provided that the annual income is UAH 10 million or more).
• Accounted income in the form of salary (as legal entities - tax agents) in an amount lower than the average salary in the relevant industry and region.

The levels of payment of the relevant tax by industry and the indicators of the average salary in the relevant industry by region, formed on the basis of the indicators based on the results of the 2021 calendar year, are published on the official website of the State Tax Service of Ukraine. When forming the plan-schedule for conducting scheduled document inspections for 2024, indicators of positive dynamics of the level of tax payment in 2023 are also taken into account.

In addition, the tax authorities may perform actual, off-site and out-of-schedule audits in certain circumstances (e.g. if a tax violation has been identified, a taxpayer does not file tax returns on a timely basis, or during the counter-check it fails to provide the tax office with all documents specified in the request).

The moratorium on tax audits is not cancelled for:

• Single taxpayers of the first and second groups (until 1 December 2024).
• Enterprises located in temporarily occupied territories or territories where hostilities are taking place (with certain exceptions).

As of the end of October 2023, the Ukrainian tax authorities have already conducted 11,605 tax audits. According to the official statistics of the State Tax Service of Ukraine, the total amount of accrued tax liabilities is UAH 8,902,384,000.

Statute of limitations

Under Ukrainian tax legislation, a three-year statute of limitations applies (1,095 days) on any outstanding Ukrainian tax liability, starting from the date a tax return is due to be filed and/or the date the tax is due to be paid, if assessed by the tax authorities. There is no limit on the statute of limitations in which an assessment may be made if a taxpayer has deliberately evaded taxation (if proven in court) or when a taxpayer fails to file a return.

The statute of limitations for transfer pricing controlled operations is seven years (2,555 days).

As a part of tax measures related to COVID-19, the statute of limitations was suspended for the period starting from 18 March 2020 and until the end of the quarantine period (30 June 2023).

In addition, the statute of limitation will lay off if there is one of the following conditions:

• The tax authorities are prohibited from starting the tax audit of the taxpayer.
• Tax authorities stopped, continued, or rescheduled the tax audit.
• The taxpayer refuses to let the tax authorities start the tax audit.
• There is litigation within which the taxpayer appealed the legitimacy of the tax audit.

Changes related to the introduction of martial law

The duration of all statutes of limitation supervised by tax authorities is suspended for the duration of the martial law legal regime.

From 1 August 2023, the statute of limitations for scheduled and unscheduled audits remaining under the moratorium is suspended (with certain exceptions). For more details, please refer to Tax audit process above.

Tax advice

The Ministry of Finance of Ukraine is authorised to issue summarising tax consultations in cases of inconsistency among various tax law provisions. Additionally, tax advice may be sought from the tax authorities, who are required to issue such clarifications.

Tax advice is not legally binding and may be challenged in court. A taxpayer may use the tax advice as guidance on the methodology to be applied by the taxpayer. In practice, the tax advice often does not provide solid protection against future assessment of tax, but it does protect from penalties.

A unified database of individual tax consultations was established in 2017 and administered by the State Fiscal Service of Ukraine with free unobstructed access to its records. All individual tax consultations issued by the tax authorities from 1 April 2017 and further on are to be entered into the database.

Topics of focus for tax authorities

Currently, tax authorities are focusing on the following areas:

• Proper calculation of taxable profits as per accounting records (including timely documentation of expenses and their proper allocation between the periods), and correct application of tax differences, prescribed by the Tax Code.
• Compliance with beneficial ownership requirements for the purposes of CIT and WHT.
• Compliance with transfer pricing rules and reporting requirements (including compliance with business purpose requirements).
• Compliance with transfer pricing rules and reporting requirements (including compliance with business purpose requirements).
• Deductibility of marketing/transport/intra-group expenses with poor supporting documentation.
• Approach to payment of PIT for employees who work outside of head office.
• Approach to recognition of foreign exchange differences on payment of dividends in favour of non-residents.
• Analysis of taxpayer’s rights for recognition and recovery of input VAT.

Electronic taxpayer’s cabinet

An electronic taxpayer’s cabinet features the following functions:

• Access to the taxpayers’ information, which was collected and accumulated by tax authorities.
• Ability to reconcile tax payments made to the state and local treasuries by obtaining the reconciliation statements.
• Ability to manage overpaid or mistakenly paid monetary obligations and penalties.
• Electronic submission of tax returns and other reporting, registration of VAT, and excise invoices.
• Access to the electronic system of VAT administration.
• Informs taxpayers on scheduled audits, ability to file administrative appeals against decisions taken by the tax authorities.
• Ability to receive requests, tax audit reports, and tax assessment notices from the tax authorities.
• Informs on status of counterparties using information supplied by publicly available information sources maintained by the Ministry of Finance of Ukraine, other registries and databases that are maintained according to the Tax Code of Ukraine, etc.
• Exchange of documents between the taxpayer and the tax authorities.