What should be known about changes in taxation and inspections of foreign business?

10/ 08/ 2021

Tax audits of foreign companies registered in Ukraine began on July 1. In this regard, the Tax Committee of the European Business Association held a meeting during which business together with experts of the State Tax Service in the Kyiv region discussed the consequences of the introduction of tax accounting of foreign companies (regardless of the existence of their permanent office in Ukraine), as well as the peculiarities of reporting and inspections of such companies by Law of Ukraine №466-IX of January 16, 2020. It will be recalled that since the beginning of the year, the list of income taxpayers has excluded permanent representative offices of non-residents but includes parent companies or head offices of such representative offices, as well as other non-residents who are obliged to pay corporate income tax. To meet the new requirements, non-residents must submit documents to the supervisory authorities for registration with the tax authorities of Ukraine. Accordingly, the business has a range of questions about the practical implementation of these changes. Unfortunately, there is currently a range of aspects that remain unclear for the business: How to register a foreign company that does not have a permanent representative office in Ukraine, but provides services in the field of international transportation? How to deregister foreign representative offices that were registered in the 90s and have not been operating for a long time? When will the electronic keys for filing tax returns for foreign companies take effect? When will it be technically possible to transfer the balances of the overpaid income tax of the representative office to the registration of a non-resident in the electronic cards of taxpayers? How to account for income, expenses, and income tax for representative offices and their foreign companies? How to file a report on transfer pricing for 2020, if the representative office has already lost the status of income taxpayer? As always, no changes to the tax legislation are avoided by the difficult fate of finding ways for their implementation. Despite a range of information letters from the State Tax Service of Ukraine, the key question What is being taxed?, unfortunately, remains unanswered to this day. The European Business Association continues to communicate with the tax authorities to obtain answers to these and other questions from the business. Meanwhile, we expect urgent action from the Government, the Ministry of Finance of Ukraine, and the Verkhovna Rada Committee on Finance, Tax and Customs Policy to provide methodological explanations for the changes. Once again, we are forced to state that changes in tax legislation are being introduced hastily, without proper consideration and sufficient time to train both government regulators and businesses, which once again signals to investors that the bureaucracy is indifferent to the concerns of real transparent business. Besides, given the realities of change for foreign companies, the EBA insists at the legislative level to provide for the non-application of penalties for errors in tax reporting of both representative offices and their foreign companies. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

It will be recalled that since the beginning of the year, the list of income taxpayers has excluded permanent representative offices of non-residents but includes parent companies or head offices of such representative offices, as well as other non-residents who are obliged to pay corporate income tax. To meet the new requirements, non-residents must submit documents to the supervisory authorities for registration with the tax authorities of Ukraine. Accordingly, the business has a range of questions about the practical implementation of these changes.

Unfortunately, there is currently a range of aspects that remain unclear for the business:

How to register a foreign company that does not have a permanent representative office in Ukraine, but provides services in the field of international transportation?
How to deregister foreign representative offices that were registered in the 90s and have not been operating for a long time?
When will the electronic keys for filing tax returns for foreign companies take effect?
When will it be technically possible to transfer the balances of the overpaid income tax of the representative office to the registration of a non-resident in the electronic cards of taxpayers?
How to account for income, expenses, and income tax for representative offices and their foreign companies?
How to file a report on transfer pricing for 2020, if the representative office has already lost the status of income taxpayer?
As always, no changes to the tax legislation are avoided by the difficult fate of finding ways for their implementation.

Despite a range of information letters from the State Tax Service of Ukraine, the key question “What is being taxed?”, unfortunately, remains unanswered to this day. The European Business Association continues to communicate with the tax authorities to obtain answers to these and other questions from the business. Meanwhile, we expect urgent action from the Government, the Ministry of Finance of Ukraine, and the Verkhovna Rada Committee on Finance, Tax and Customs Policy to provide methodological explanations for the changes.

Once again, we are forced to state that changes in tax legislation are being introduced hastily, without proper consideration and sufficient time to train both government regulators and businesses, which once again signals to investors that the bureaucracy is indifferent to the concerns of real transparent business.

Besides, given the realities of change for foreign companies, the EBA insists at the legislative level to provide for the non-application of penalties for errors in tax reporting of both representative offices and their foreign companies.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.