Improving the investment climate in Ukraine
« BackThe investment climate is called a set of financial, political, organizational, legal, socio-economic and geographical factors inherent in a particular state, that positively or negatively affect the flow of investments. In fact, the investment climate reflects the degree favorable situation prevailing in the country in relation to investments that may be involved.
The main factors that determine the investment climate in the country include political and social stability, the perfection of the legal system, the economy, the system of receiving foreign capital in particular tax treatment, the value of customs duties and excise taxes, order registration of companies with foreign participation, etc. The most significant factor that affects the investment attractiveness and the level of investment the country is the state of its regulatory framework.
Changes in legislation since 2017
December 21, 2016, the Law of Ukraine «On Amendments to the Tax Code of Ukraine on improving the investment climate in Ukraine» was adopted, which gained force on 1 January 2017, except for certain provisions. The legislation indicates that this law entails qualitative changes that lead to improvement in both investment and tax climate.
In the administrationof taxes and duties were several changes that, in essence, have a positive impact on the tax relationship. According to this law, one of the most important changes is the implementation of changes in regional tax inspections of controlling bodies that are checking on serving that are exclusively service functions. Those regional tax offices now carry only service of taxpayers, registration and maintenance of appropriate records. The control function is assigned to regional tax offices.
Also, an important change is the introduction of electronic office tax, allowing taxpayers to correspond with the controlling authority, submit, receive documents and view information in real time. This will avoid various corruption schemes that are characteristic of the direct interaction with the taxpayer's controlling body.
This law provides for disclosure at the website of Government Fiscal Service the schedule of documentaries scheduled inspections up to 25 December of the year preceding the holding of such inspections. This makes the whole process of these activities more transparent.
The law provides tax advice procedure reduced the term free to provide individual consultations at the request of taxpayers from 30 to 25 days. Also was introduced individual registration tax advice to a single base of Government Fiscal Service.
In the area of transfer pricing law provides a set of changes that aims to reduce the administrative costs of small businesses. Minimum levels of financial performance for classification of enterprises to use transfer pricing were increased. The minimum annual income of the taxpayer from any activities increased from 50 to 150 million UAH for the tax year, the volume of business transactions of the taxpayer with one contractor for the fiscal year increased from 50 to 100 million UAH.
To prevent the use of schemes of tax evasion law recognized controlled business transactions with non-residents of special legal forms that do not pay income tax or not tax residents of the country where they are registered as legal entities.
Adopted laws simplify and improve administrative procedures. Thus, improved criteria for inclusion in the list of states whose residents operations are recognized controlled, namely, during the formation of this list will be taken into account such criteria as «the state, the competent authorities which do not provide timely and full exchange of tax information and financial requests of the central executive body that implements the state tax and customs policy». Introduced the mechanism for determining exchange rates on the basis of a forward or futures contract, therefore clarified the definition of «forward contract» standardized form which will approve the Cabinet of Ministers of Ukraine.
Methods of establishing compliance of conditions of controlled operation principle of «arm's length» brought into line with the recommendations of the OECD (Organization for Economic Co-operation and Development). Also, regulatory agencies are not eligible to apply during match conditions of controlled transactions tax payer principle of «arm's length» transfer pricing method other than specified in the contract for preliminary approval of pricing.
In addition, in changes in the legislation penalties for failure and separately for late submission of the controlled transactions and transfer pricing documentation are clearly delineated, which in turn makes it possible to avoid a «double» penalties.
Income tax and VAT
Corporate taxation compounded by the rules on the possibility of obtaining documentary evidence of the non-resident income tax in Ukraine. And the period until 31 December 2021 introduced the application of zero rate of income tax for companies whose annual income does not exceed 3 million UAH and the amount of accrued for each month of the reporting period wage workers are no less than two minimum wages.
There were also changes to the Regulation provisions on value added tax. Thus, improved mechanism and penalties system of electronic VAT administration extended registration deadlines tax bills.
In these changes there are some rules that inherently improve the investment climate, this applies to the administration of taxes and fees, transfer pricing, taxation of enterprises. Lawyers of «APC» are always aware of the latest changes in legislation, including in the field of taxation and transfer pricing.
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