Tax forum of the Ukrainian Advocates’ Association Tax & Business Talks can be justifiably called one of the most distinguished tax events in November. The Forum brought together representatives of the Parliament and the Ministry of Finance, practicing lawyers, attorneys and economists dealing with taxes.
Andrii Reun, Head of Tax, attented this event and shares the most interesting observations:
- Exit Capital Tax
There are strong arguments for both pros and cons. But I’m still «сontra» since I believe that the issue of the corporate income tax (that is to be replaced by the exit capital tax) is not the greatest concern in our country. The mere potential lessening of the tax burden will hardly attract investors to Ukraine. Another «stocking-stuffer» is also unlikely to encourage the businesses. Moreover, businesses will lose the accumulated tax losses. Application of double tax treaties will also be questionable. In addition, it is highly probable that dividends, paid by Ukrainian companies subject to the exit capital tax, will be taxed when received by foreign holdings, since it is possible that the participation exemption will not apply due to the elimination of the corporate income tax in Ukraine (if the law on the exit capital tax is passed). And taking into account Ukraine’s commitment to implement a number of the BEPS actions, introduction of the exit capital tax will demonstrate inconsistency in the state policy.
- Relegating the tax invoice blocking system to the testing mode
The issue is clear: large businesses are against the testing mode, so is the Ministry of Finance. Small and medium businesses support the idea of the testing mode. But the criteria for suspending the registration of tax invoices should definitely be changed. And when the criteria are changed and large businesses are on a level playing field with small and medium-sized businesses regarding blocking of tax invoices, then, perhaps, large business will change their position.
- Alternative sources of tax revenues
By allowing non-residents to register as taxpayers (in particular, VAT payers) in Ukraine, the budget may receive significant tax revenues from e-commerce activities. Why hasn’t this been done yet? That’s a rhetorical question …
- Stronger enforcement of the transfer pricing rules
The State Fiscal Service is studying international transfer pricing experience and will apply it – by “practicing” on Ukrainian taxpayers. Intragroup financing operations are on the radar. The number of production of documents requests has risen, so has the number of transfer pricing tax audits.
- Appealing the Cabinet of Ministers’ decision to include Switzerland in the list of offshore jurisdictions
Taxpayers have already initiated the appealing process in order to remove Switzerland from the list of offshore jurisdictions. If this initiative proves successful, one set of taxpayers, that are currently appealing tax penalties for failure to file transfer pricing (controlled transactions) reports, will have additional arguments in such tax disputes, while another set of taxpayers, that have already lost in such tax disputes, could claim back the tax penalties paid to the budget.
A lot of other important issues were discussed as well: the use of tax audits to exert pressure on businesses, replacing the tax police with a new authority, criminal liability for tax violations, and many more.
Thanks to the hosts, speakers and participants!