Сurrency restrictions and tax audits

26/ 04/ 2023

Temporary restrictions of the National Bank of Ukraine in terms of currency legislation and tax inspections during the state of war were discussed at the first meeting of the updated Committee on Law and Taxes of the Associations Office. On April 26, together with Kristina Onyshchenko and Yosyf Ivaniuk, co-chairs of the Committee on Law and Taxes of the Associations Office, issues of currency restrictions and the procedure for conducting tax audits, which are relevant to the business community in conditions of the state of war, were discussed. One of the specific restrictions is the transfer of foreign currency, which was introduced by Resolution No. 18 of the Board of the National Bank of Ukraine On the operation of the banking system during the period of martial law. Khrystyna Onyshchenko emphasized some interesting relaxations, such as: permission to transfer foreign currency to pay interest on corresponding loans, permission to perform operations for returning to a non-resident an advance payment received by a resident to its current account in a bank in Ukraine after February 23, 2022, under a contract for the purchase and sale of goods with a non-resident due to the non-fulfillment of obligations by the resident under this contract; from October 1, 2022, the NBU also allowed enterprises to transfer funds to their branches and subsidiaries abroad. When making payments in foreign currency, the enterprise must first use the foreign currency it has, and then, if necessary, buy it on the foreign exchange market. Among other things, it was also emphasized that banks do not have the right to terminate currency supervision over compliance by Ukrainian businesses with the maximum settlement deadlines for an operation related to the export or import of goods on the basis of documents on the termination of obligations by offsetting. In addition, Resolution No. 18 of the NBU with amendments and additions from July 7, 2022, established that from April 5, 2022, the maximum settlement deadlines for operations related to the export and import of goods are 180 calendar days, and for operations conducted before April 5, 2022, they are 365 days. Josyf Ivanyuk drew attention to the peculiarities of conducting tax audits during a state of war, in particular, the prohibition of planned documentary audits and the possibility of conducting desk, documentary unplanned, and factual audits during a state of war. Planned audits may resume from July 2023. Until the adoption and entry into force of Bill No. 8401 of January 31, 2023, they are prohibited. The audit plan is already available on the website of the State Tax Service of Ukraine at the following link: https://itd.rada.gov.ua/billInfo/Bills/Card/41268. It is recommended to conduct a tax audit to identify potentially risky transactions of the company. During the audit, it is advisable to adhere to written communication with the tax inspectors and it is possible to request a working meeting to discuss audit issues. The latter will be carried out in the same order as before the introduction of the state of war. We thank all participants for their involvement and interest in the committees activities, and our experts for sharing their experience, useful tips, and their time!

On April 26, together with Kristina Onyshchenko and Yosyf Ivaniuk, co-chairs of the Committee on Law and Taxes of the Association’s Office, issues of currency restrictions and the procedure for conducting tax audits, which are relevant to the business community in conditions of the state of war, were discussed.

One of the specific restrictions is the transfer of foreign currency, which was introduced by Resolution No. 18 of the Board of the National Bank of Ukraine “On the operation of the banking system during the period of martial law.” Khrystyna Onyshchenko emphasized some interesting relaxations, such as:

permission to transfer foreign currency to pay interest on corresponding loans,
permission to perform operations for returning to a non-resident an advance payment received by a resident to its current account in a bank in Ukraine after February 23, 2022, under a contract for the purchase and sale of goods with a non-resident due to the non-fulfillment of obligations by the resident under this contract;
from October 1, 2022, the NBU also allowed enterprises to transfer funds to their branches and subsidiaries abroad. When making payments in foreign currency, the enterprise must first use the foreign currency it has, and then, if necessary, buy it on the foreign exchange market.

Among other things, it was also emphasized that banks do not have the right to terminate currency supervision over compliance by Ukrainian businesses with the maximum settlement deadlines for an operation related to the export or import of goods on the basis of documents on the termination of obligations by offsetting.

In addition, Resolution No. 18 of the NBU with amendments and additions from July 7, 2022, established that from April 5, 2022, the maximum settlement deadlines for operations related to the export and import of goods are 180 calendar days, and for operations conducted before April 5, 2022, they are 365 days.

Josyf Ivanyuk drew attention to the peculiarities of conducting tax audits during a state of war, in particular, the prohibition of planned documentary audits and the possibility of conducting desk, documentary unplanned, and factual audits during a state of war.

Planned audits may resume from July 2023. Until the adoption and entry into force of Bill No. 8401 of January 31, 2023, they are prohibited. The audit plan is already available on the website of the State Tax Service of Ukraine at the following link: https://itd.rada.gov.ua/billInfo/Bills/Card/41268.

It is recommended to conduct a tax audit to identify potentially risky transactions of the company. During the audit, it is advisable to adhere to written communication with the tax inspectors and it is possible to request a working meeting to discuss audit issues. The latter will be carried out in the same order as before the introduction of the state of war.

We thank all participants for their involvement and interest in the committee’s activities, and our experts for sharing their experience, useful tips, and their time!