Personal Income Tax and Military Fee After Tax Reform 2020

17/ 07/ 2020

Author: Mariia Pushkarova, Accountant, Accountor Ukraine On May 23, 2020, the Law of Ukraine № 466-IX “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” (Bill №1210) entered into force. However, some provisions of the law are coming into force only on July 1, 2020 and on January 1, 2021. Accountor Ukraine proposes to consider the key changes made to the Tax Code under Law № 466 regarding Personal Income Tax and Military Fee: From now on, the Tax Code clearly stipulates that if the deadline for payment of the tax liability is on a day off or holiday, the operational (banking) day following such day off or holiday is considered to be the last day of payment (paragraph 57.1 TCU). From May 23 onward, some penalties increased twice: Offense Before Now TCU Paragraph Failure to submit / late submission of form № 1DF, or mistakes in form № 1DF: • for the first time during the year; 510 UAH 1 020 UAH § 119.1 • for the same actions committed by the taxpayer who was already penalized for the same offense during the year. 2 040 UAH 1 020 UAH Failure to provide the identification code of a resident natural person, or indicating wrong identification code* when filing documents on taxation objects of natural persons, or when paying taxes * 170 UAH 340 UAH § 119.2 *The Law also provides for the annulment of penal sanctions if mistakes in the taxpayer’s registration code in form №1DF are corrected by tax agents on their own, and also within 30 calendar days following the day when information about the mistake was received from supervisory authorities. Penal sanctions for failure to preserve of the primary documents which were used for tax reports from 510 to 1 020 UAH from 1 020 to 2 040 UAH Article 44 TCU 3) From January 1, 2021, the statute of limitations is increased from 1095 days to 2555 days for inspections of personal income tax and military fee, which are deducted from salaries, and other payments related to employment (Article 102 of the TCU). 4) Also, from the beginning of next year, new amounts of tax penalties for offenses related to calculation and payment of tax liabilities (Articles 124-1251 TCU) and new rules for accrual of fine (Articles 129-131 TCU) will apply. 5) The Law № 466 introduces the concept of taxpayer’s fault (Article 109 of the TCU) and determines new conditions when taxpayers will be prosecuted for offenses (Articles 110-113 of the TCU) and the circumstances which will mitigate liability for tax offenses. (Article 112-1 of the TCU). The amount of penalty will depend on whether the taxpayer committed the offense intentionally: Conditions of the Offense Penalties before 01.01.2021 Penalties from 01.01.2021 onward Paragraph of TCU* Type of Offense** Offense Against the Rules of Tax Payments (Art.126 TCU, current edition): • Delay in paying the agreed amount of tax for up to 30 calendar days (hereinafter – c.d.); 10 % 5 % § 124.1 Non-intentional offense • Delay in paying the agreed amount of tax for more than 30 c. d.; 20 % 10 % § 124.1 • Failure to pay taxes if payment is delayed for up to 90 c. d.; 10% - up till c.d.; 20% - after 30 c.d. 25% § 124.2 Intentional offense • Failure to pay taxes if payment is delayed for up to 90 c.d. in case of repeated offense during 1095 c.d.; 10% - up till c.d.; 20% - after 30 c.d. 50% § 124.3 • Failure to pay taxes if payment is still delayed after 90 c.d. 20 % 50 % § 124.3 Offense Against the Rules of Accruing, Withholding and Paying Taxes from the Source of Payment (Article 127 TCU, current edition): • Failure to accrue, withhold and/or to pay taxes for the first time during 1095 c.d.; 25% 10 % § 1251.1 Non-intentional offense 25 % § 1251.2 Intentional offense • Offense repeated within 1095 c.d.; 50 % 50 % § 1251.3 • Offense committed for the third time or more within 1095 c.d. 75 % 75 % § 1251.4 * Paragraph of the TCU according to norms of the Law of Ukraine # 466-ІХ which are coming into force on January 01, 2021. **The classification of offenses will be used for determining the amount of penalty from Januray.01, 2021 onward. It is assumed that the fact that a certain offense was intentional must be proved by the tax authorities. However, it is most likely that in practice, the tax authorities will apply the largest amount of penalties, which the taxpayers have the right to appeal against by voluntarily providing evidence that their offenses were unintentional (paragraph 17.1.16 TCU).

Author: Mariia Pushkarova, Accountant, Accountor Ukraine

On May 23, 2020, the Law of Ukraine № 466-IX “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” (Bill №1210) entered into force. However, some provisions of the law are coming into force only on July 1, 2020 and on January 1, 2021.

Accountor Ukraine proposes to consider the key changes made to the Tax Code under Law № 466 regarding Personal Income Tax and Military Fee:

From now on, the Tax Code clearly stipulates that if the deadline for payment of the tax liability is on a day off or holiday, the operational (banking) day following such day off or holiday is considered to be the last day of payment (paragraph 57.1 TCU).
From May 23 onward, some penalties increased twice:

Offense	Before	Now	TCU Paragraph
Failure to submit / late submission of form № 1DF, or mistakes in form № 1DF: • for the first time during the year;	510 UAH	1 020 UAH	§ 119.1
• for the same actions committed by the taxpayer who was already penalized for the same offense during the year.	2 040 UAH	1 020 UAH	§ 119.1
Failure to provide the identification code of a resident natural person, or indicating wrong identification code* when filing documents on taxation objects of natural persons, or when paying taxes *	170 UAH	340 UAH	§ 119.2
*The Law also provides for the annulment of penal sanctions if mistakes in the taxpayer’s registration code in form №1DF are corrected by tax agents on their own, and also within 30 calendar days following the day when information about the mistake was received from supervisory authorities.
Penal sanctions for failure to preserve of the primary documents which were used for tax reports	from 510 to 1 020 UAH	from 1 020 to 2 040 UAH	Article 44 TCU

3) From January 1, 2021, the statute of limitations is increased from 1095 days to 2555 days for inspections of personal income tax and military fee, which are deducted from salaries, and other payments related to employment (Article 102 of the TCU).

4) Also, from the beginning of next year, new amounts of tax penalties for offenses related to calculation and payment of tax liabilities (Articles 124-1251 TCU) and new rules for accrual of fine (Articles 129-131 TCU) will apply.

5) The Law № 466 introduces the concept of taxpayer’s fault (Article 109 of the TCU) and determines new conditions when taxpayers will be prosecuted for offenses (Articles 110-113 of the TCU) and the circumstances which will mitigate liability for tax offenses. (Article 112-1 of the TCU). The amount of penalty will depend on whether the taxpayer committed the offense intentionally:

Conditions of the Offense	Penalties before 01.01.2021	Penalties from 01.01.2021 onward	Paragraph of TCU*	Type of Offense**
Offense Against the Rules of Tax Payments (Art.126 TCU, current edition):
• Delay in paying the agreed amount of tax for up to 30 calendar days (hereinafter – c.d.);	10 %	5 %	§ 124.1	Non-intentional offense
• Delay in paying the agreed amount of tax for more than 30 c. d.;	20 %	10 %	§ 124.1	Non-intentional offense
• Failure to pay taxes if payment is delayed for up to 90 c. d.;	10% – up till c.d.; 20% – after 30 c.d.	25%	§ 124.2	Intentional offense
• Failure to pay taxes if payment is delayed for up to 90 c.d. in case of repeated offense during 1095 c.d.;	10% – up till c.d.; 20% – after 30 c.d.	50%	§ 124.3
• Failure to pay taxes if payment is still delayed after 90 c.d.	20 %	50 %	§ 124.3
Offense Against the Rules of Accruing, Withholding and Paying Taxes from the Source of Payment (Article 127 TCU, current edition):
• Failure to accrue, withhold and/or to pay taxes for the first time during 1095 c.d.;	25%	10 %	§ 125¹.1	Non-intentional offense
	25%	25 %	§ 125¹.2	Intentional offense
• Offense repeated within 1095 c.d.;	50 %	50 %	§ 125¹.3
• Offense committed for the third time or more within 1095 c.d.	75 %	75 %	§ 125¹.4
* Paragraph of the TCU according to norms of the Law of Ukraine # 466-ІХ which are coming into force on January 01, 2021. **The classification of offenses will be used for determining the amount of penalty from Januray.01, 2021 onward.

It is assumed that the fact that a certain offense was intentional must be proved by the tax authorities. However, it is most likely that in practice, the tax authorities will apply the largest amount of penalties, which the taxpayers have the right to appeal against by voluntarily providing evidence that their offenses were unintentional (paragraph 17.1.16 TCU).