Business needs clarity on tax rules
For more than 5 months, there has been uncertainty regarding Draft Law No. 1210 on Amendments to the Tax Code of Ukraine on Improvement of Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation.
The draft law implies large-scale changes to the rules of corporate taxation, taxation of individuals, as well as the rules of tax administration.
We have received recently more and more uncoordinated messages from various government officials. On the one hand, it is said that the President plans to veto the draft law, on the other hand, that the draft law will still be signed and it will enter into force shortly. However, there are currently more questions than answers. Suffice it to say that the text of the draft law, which was sent to the President for signature, is still not available to the public. Business does not understand what changes to expect and at what time they will take place, and how to plan further activities in such conditions. It is worth noting that the draft law provided for significant changes that require time for business and authorities to get prepared for their implementation, as well as the rules that can be implemented immediately and are expected by the business. The latter includes the so-called "soybean amendments", changes to the rules of penalties for late registration of VAT invoices, etc. So I hope that soon the government will decide on an action plan for the draft law and the picture will become clearer. If the government is going to introduce draft law No. 1210, businesses will insist on making changes to this law that would provide enough time to prepare for the new rules and, in general, would adapt the law to today′s realities.
The business welcomes the following new rules:
1. Abolishing discriminatory “soybean amendments” to restore equitable tax conditions and fair competition in the agricultural market.
2. Reducing penalties for late registration of VAT invoices and adjustment calculations, which are not provided to the recipient (buyer).
3. Changes to the definition of the base of excise duty on electricity given the introduction of the Law of Ukraine № 2019-VIII On the electricity market.
4. Standards for the wider use of accelerated depreciation.
5. Increasing the cost threshold for recognizing an asset as non-current.
6. Increasing the threshold of annual income (up to 40 million hryvnias), which in case of non-achievement the taxpayers are allowed not to apply the adjustment of the financial result to tax differences.
At the same time, the draft law contains a large number of contradictory rules, in particular:
– Introduction of rules on “business purpose”.
– Introduction of rules on “conditional dividends”.
– Introduction of burdensome changes to the rules on interest deduction.
– Introduction of rules on the suspension of depreciation for the period of non-use of fixed assets in economic activity, etc.
We draw special attention to the insufficiency of time for business and regulatory authorities to prepare for the implementation of such large-scale changes.
We emphasize that in case Draft Law No.1210 enters into force, immediate changes to this normative act will be required, which would delay the start of implementation of certain rules. At the same time, it is necessary to improve the rules that currently concern the business.
The business needs clarity on tax rules and their predictability – these are extremely important conditions for building a quality business climate in the country. We hope that situations similar to the one with Draft Law No.1210 will be an unfortunate exception and will not repeat in the future.
Finally, it will be recalled that business is still waiting for at least some tangible measures of fiscal support for entrepreneurs in a crisis. Assuming that business continues as usual, and expecting that the business will be able to withstand the growing tax burden, may lead to a decline in business activity and job losses shortly.