Ukrainian Law on Tax Amnesty enters into force

On January 17, 2015, the Ukrainian law concerning tax amnesty entered into force. The new law entitled, “On Amendments to the Tax Code of Ukraine Regarding Features of Specification of the Corporate Income Tax and Value Added Tax Liabilities in Case of Application of the Tax Compromise,” is the first time in Ukrainian history that the country has offered legal entities a tax amnesty in such a manner.

Alongside the new law, Ukrainian tax authorities have also issued recommendations regarding the tax amnesty with information on how to complete the required tax forms.

The law offers legal entities the opportunity to settle corporate back taxes and/or value-added back taxes not paid before April 1, 2014. Those who take advantage of this will not be subject to administrative, financial or criminal penalties related to the initial default in payment. According to the new law, the amount of these tax liabilities is calculated based on the 5% rate while the remaining 95% is regarded as settled.

One interesting aspect of the law is that it is set out as a right and not an obligation for the taxpayer. However, the law also includes a limited window of opportunity – taxpayers can take advantage of this amnesty for only a set period of 90 days from when the law went into effect (January 17, 2015).

Specifically, during this 90-day period, taxpayers can send a tax return which includes a calculation of their unpaid corporate income or value-added back taxes. Taxpayers should also include a statement summarizing the reason the entity is taking advantage of the tax amnesty. Next, tax authorities have the right to order a tax audit of the entity to verify whether tax liabilities have been properly calculated. Tax authorities can then issue a tax notification decision in which they confirm the amount of back taxes due and determine whether or not the company can take advantage of the tax amnesty.

Because amnesty will allow the Ukraine government to collect a substantial amount of unpaid taxes, it is probable that following the amnesty period, the government will pursue renewed efforts aimed at tracking down legal entities with outstanding tax liabilities and impose harsher fines and penalties.

If you have any questions regarding Ukrainian Tax Law or how your company can take advantage of the tax amnesty, please contact us at Specht Böhm law firm.