Business met with Danylo Hetmantsev, Chairman of the VRU Committee on Finance, Tax and Customs Policy

12/ 02/ 2024

On February 9, the EBA Tax Committee met with Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, to discuss tax issues relevant to business. Reforming the personal income tax system. Progressive personal income tax scale. Taxation of households According to Mr. Hetmantsev, the progressive taxation scale is an economically sound approach that is in line with the practice of European countries and was reflected in the National Revenue Strategy until 2030. At the same time, a progressive scale complicates administration and requires a general declaration. In addition, this issue should be discussed in the context of a broader reform of the income tax system after the first phase of the National Revenue Strategy (covering 2024-25) is completed: reforming fiscal authorities and improving the quality of administration and taxpayer confidence. Before changes in the taxation system, changes in the context of digitalization and increasing trust in tax authorities should take place. According to Mr. Hetmantsev, it is too early to discuss the level of rates and gradations of the scale, and lawmakers will return to this issue later, probably after the war. The issue of taxation of households will not be considered shortly, as such a concept contradicts our obligations to international partners. The Draft law No. 10166 on the taxation of self-employed persons also has little chance of moving forward for the same reason, as this draft law provides for certain benefits and will be considered in the context of income tax reform. Therefore, there are no prospects for its adoption this year. Draft laws No. 10168-2 and No. 10169-2 Draft Laws No. 10168-2 and No. 10169-2 (improving the implementation of foreign economic operations for the export of certain goods) are currently being prepared for the second reading. According to Mr. Hetmantsev, the electronic VAT administration system will track the origin of goods for export purposes. At the same time, it was decided to abandon the linkage of VAT refunds to the fact of returning foreign currency earnings. However, this issue is still being discussed at the level of the Cabinet of Ministers. At the same time, Mr. Hetmantsev pointed out that issues related to forward contracts will be further finalized and that business will be further involved in discussions of the final proposals. Draft Law No. 10346 Businesses have expressed concern about certain provisions of the draft law, in particular, the grounds for license revocation. The companies have concerns that the introduction of such grounds as the establishment by the regulatory authorities of the fact that the licensee is not at the location, non-admission to the inspection, sale of alcohol in the absence of an excise stamp on 1 bottle / with a torn excise stamp on 1 bottle, could potentially be used to put pressure on business. Draft law No. 8137 on CFCs Danylo Hetmantsev agreed with the need to postpone the deadline for submitting tax reports for 2023 on CFCs to 2025. Due to the approaching deadline for submission of tax reports on CFCs (for legal entities - controllers until March 1, 2024, and for individuals - controllers until May 1, 2024), and at the same time, some provisions of the Draft Law No. 8137 have not yet been approved by the Ministry of Finance, it is necessary to find a way to legislatively resolve this issue as soon as possible. Law No. 3173-IX It was also agreed that Danylo Hetmantsev would address the relevant authorities regarding the reasons for the failure to meet the deadlines for the preparation of draft acts and other tasks necessary to ensure the implementation of the Law of Ukraine No. 3173-IX dated June 29, 2023 On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine in connection with the introduction of electronic traceability of the circulation of alcoholic beverages, tobacco products, and liquids used in electronic cigarettes. In particular, it refers to the requirements for technical equipment that must be published in advance. Since this equipment must be imported from abroad, it must be certified and attested, which means time limits, adjustments by specialists who are not available in Ukraine, etc. We are grateful to Danylo Hetmantsev and his team for the meeting and the opportunity for ongoing dialog!

On February 9, the EBA Tax Committee met with Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, to discuss tax issues relevant to business.

Reforming the personal income tax system. Progressive personal income tax scale. Taxation of households

According to Mr. Hetmantsev, the progressive taxation scale is an economically sound approach that is in line with the practice of European countries and was reflected in the National Revenue Strategy until 2030. At the same time, a progressive scale complicates administration and requires a general declaration. In addition, this issue should be discussed in the context of a broader reform of the income tax system after the first phase of the National Revenue Strategy (covering 2024-25) is completed: reforming fiscal authorities and improving the quality of administration and taxpayer confidence. Before changes in the taxation system, changes in the context of digitalization and increasing trust in tax authorities should take place. According to Mr. Hetmantsev, it is too early to discuss the level of rates and gradations of the scale, and lawmakers will return to this issue later, probably after the war.

The issue of taxation of households will not be considered shortly, as such a concept contradicts our obligations to international partners. The Draft law No. 10166 on the taxation of self-employed persons also has little chance of moving forward for the same reason, as this draft law provides for certain benefits and will be considered in the context of income tax reform. Therefore, there are no prospects for its adoption this year.

Draft laws No. 10168-2 and No. 10169-2

Draft Laws No. 10168-2 and No. 10169-2 (improving the implementation of foreign economic operations for the export of certain goods) are currently being prepared for the second reading. According to Mr. Hetmantsev, the electronic VAT administration system will track the origin of goods for export purposes. At the same time, it was decided to abandon the linkage of VAT refunds to the fact of returning foreign currency earnings. However, this issue is still being discussed at the level of the Cabinet of Ministers. At the same time, Mr. Hetmantsev pointed out that issues related to forward contracts will be further finalized and that business will be further involved in discussions of the final proposals.

Draft Law No. 10346

Businesses have expressed concern about certain provisions of the draft law, in particular, the grounds for license revocation. The companies have concerns that the introduction of such grounds as the establishment by the regulatory authorities of the fact that the licensee is not at the location, non-admission to the inspection, sale of alcohol in the absence of an excise stamp on 1 bottle / with a torn excise stamp on 1 bottle, could potentially be used to put pressure on business.

Draft law No. 8137 on CFCs

Danylo Hetmantsev agreed with the need to postpone the deadline for submitting tax reports for 2023 on CFCs to 2025. Due to the approaching deadline for submission of tax reports on CFCs (for legal entities – controllers until March 1, 2024, and for individuals – controllers until May 1, 2024), and at the same time, some provisions of the Draft Law No. 8137 have not yet been approved by the Ministry of Finance, it is necessary to find a way to legislatively resolve this issue as soon as possible.

Law No. 3173-IX

It was also agreed that Danylo Hetmantsev would address the relevant authorities regarding the reasons for the failure to meet the deadlines for the preparation of draft acts and other tasks necessary to ensure the implementation of the Law of Ukraine No. 3173-IX dated June 29, 2023 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine in connection with the introduction of electronic traceability of the circulation of alcoholic beverages, tobacco products, and liquids used in electronic cigarettes.” In particular, it refers to the requirements for technical equipment that must be published in advance. Since this equipment must be imported from abroad, it must be certified and attested, which means time limits, adjustments by specialists who are not available in Ukraine, etc.

We are grateful to Danylo Hetmantsev and his team for the meeting and the opportunity for ongoing dialog!