Zelenskyy Backs the Return of the Pre-War Tax Regime
Andriy Galytskyi:
Volodymyr Zelenskyy signed Draft Law No. 8401 and returned the business tax rules that were in force in Ukraine before the full-scale war with Russia.
On 26 July, President Volodymyr Zelenskyy signed a draft law abolishing the 2% single tax and partially lifting the moratorium on business inspections. This was reported by Danylo Hetmantsev, Chairman of the Committee on Finance, Tax and Customs Policy, on his Telegram channel.
“Draft law 8401 has become law. Use it,” he posted.
What changes for businesses are expected and when?
Under the law, which was adopted by the Parliament at the end of May, Ukraine will abolish the following starting from 1 August:
- the special single tax regime with a rate of 2% of income;
- the right to exempt individual entrepreneurs of the first and second groups from paying the single tax (except for the frontline areas).
Furthermore, the draft law No. 8401 provides for:
- partial resumption of documental inspections: for excisable goods (alcohol, tobacco, fuel), gambling and financial services;
- reinstatement of fines for violations of tax legislation and the procedure for using cash registers (Payment Transaction Registers (RRO)/Payment Registrar Software PRRO) from 1 October. However, a reduced amount of fines will apply (25% and 50% of the value of the goods instead of 100% and 150%, respectively) if the business does not use Payment Transaction Registers (until the end of martial law, but no later than 1 August 2025).
The new taxes for business
Tetiana Yashchenko, partner at EXPATPRO, explained to Focus that a taxpayer who opted for the 2% tax rate from the date of state registration (“newly established entity”) will automatically be transferred to the 3rd group of the simplified taxation system at the 5% rate from 1 August.
“Therefore, if you need to be on a different system (or at a different rate) from 1 August 2023, you need to apply for the respective transition,” she pointed out.
Natalia Buta, Chief Accountant at GLS Law Firm, highlighted that those taxpayers who shifted from the 2% single tax to the general system in 2023 will be allowed to re-switch to the simplified taxation system of their choice within a year, already in 2023, or after submitting an application.
“In the event that an application is submitted before 1 September 2023, such a taxpayer will be considered a single tax payer from 1 August 2023,” Buta stated.
To remind, on 28 June, Volodymyr Zelenskyy declared that he was not against cutting taxes, but now these plans are being hampered by the war with Russia.
Originally published on 26 July 2023 here:
Tetiana Yashchenko
PhD, partner at Expatpro