Mazars Tax Alerts
On this page, you will find Mazars Ukraine tax alerts highlighting recent developments in Ukrainian legislation as well as Mazars CEE VAT Alert which informs about main changes in VAT legislation of the CEE countries.
Changes in tax treatment of Representative Offices and Permanent Establishments
The new provisions of the Tax Code specifying new rules for non-residents providing activities in Ukraine become effective 1 January 2021.
Inter alia, the new wording of the Tax Code establish:
- Comprehensive definition of the permanent establishment (PE) of non-residents, including additional new criteria for determining the status of a PE;
- Procedure of voluntary and obligatory registration of the non-residents with the tax authorities in Ukraine;
- Possibility for Ukrainian tax authorities to conduct the tax audits of non-residents` activity in Ukraine, recognize non-residents as Ukrainian CPT payers, charge 18% CPT and penalties.
Recently, the State Tax Service of Ukraine issued the clarification letter[1] in which was expounded the following:
- Registered representative offices of non-residents still may define their CPT obligations using one of the three methods of income determination (including application of a 0,7 coefficient) for reporting for 2020. Starting 1 January 2021, the only possible method will be direct allocation of profits and losses with application of the arm`s length principle;
- Those non-residents which have representative offices registered as CPT payers are obliged to register themselves in tax authority as a CPT payer till 31 March 2021. After such registration of non-residents, CPT registration of their representative offices shall be canceled.
- Starting 1 July 2021, the tax authorities will be entitled to start the tax audits of the non-residents and their representative offices which have not fulfilled the registration and reporting requirements.
Please note, that despite the clarifications issued by the tax authorities, there are still a number of uncertainties in the area of taxation of non-residents and their representative offices in Ukraine.
If you believe that your transactions or company may be concerned by these new rules, please do not hesitate to contact Mazars` Ukraine tax specialist for assistance.
[1] Letter of the State Tax Service of Ukraine dated 27.01.2021 № 2367/7/99-00-21-02-01-07
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