Tax and Legal news

Below, you will learn about:

• The procedure for obtaining e-residency status by foreigners has been approved
• The activities of separate divisions of foreign legal entities have been regulated
• Procedure for providing information on the ultimate beneficiary and ownership structure of a legal entity
• Essential amendments to the Tax Code
• Some tax audits have been resumed
• Other income of gig-specialists is subject to personal income tax at the rate of 18%
• Currency restrictions on the sale of non-cash foreign currency to citizens have been eased
• New requirements for financial monitoring by banks

 
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The procedure for obtaining e-residency status by foreigners has been approved

The Government adopted a resolution defining the mechanism for obtaining e-residency status online.

An e-resident is a foreigner who has reached the age of 18 and is not a tax resident of Ukraine and has applied for e-resident status and whose information has been entered into the e-resident system.

Key aspects:

• Foreigners do not need to be present in person to register as an e-resident. The possibility of opening bank accounts and managing your own business remotely is being introduced.
• A convenient mechanism for paying taxes and filing reports is provided for e-residents: the Ukrainian bank in which the e-resident opens a current account will be responsible for filing reports and paying taxes.

The mechanism will be fully operational after the development and testing of the information system, which is currently underway.

Source: Resolution of the Cabinet of Ministers of Ukraine No. 970 of 05.09.2023 "Some issues of electronic residents (e-residents) and maintenance of the E-Resident information system".

The procedure for registration, direct activity and termination of separate subdivisions of a foreign legal entity (non-resident) has been regulated.

Key aspects:

• Branches and representative offices of a foreign legal entity are subject to state registration under the same rules as state registration of Ukrainian legal entities. Such branches are terminated by liquidation.
• Information on establishment and termination are entered into the Unified State Register.
• The formation of a branch and representative office of a legal entity formed in accordance with the legislation of the aggressor state, or the occupying state is prohibited.
• The fee for state registration of a separate subdivision of a foreign legal entity amounts 1 minimum wage (in 2023 - UAH 2684), and for the state registration of changes - 0.3 minimum wages (UAH 805.20).

Source: Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Regarding Regulation of Activities of Separate Subdivisions of a Legal Entity Formed in Accordance with the Legislation of a Foreign State" dated July 14, 2023, No. 3257-IX. Valid from 09/03/2023. Implementation will take place from 09/03/2024.

The Procedure defines the procedure for providing explanations and documents to the state registrar to confirm information about the ultimate beneficial owner of a legal entity, documents on its ownership structure contained in the Unified State Register, in case of detection of possible inaccuracy of information about the ultimate beneficial owner or ownership structure of a legal entity, as well as the procedure for their consideration by the state registrar.

Key aspects:

• Within 3 business days from the date of entry in the Unified State Register of a record of possible inaccuracy of information about the ultimate beneficiary and/or ownership structure of a legal entity, the state registrar sends a request to the legal entity.
• Within 10 business days from the date of receipt of the request, the legal entity must provide the state registrar with explanations and documents to confirm the information on the ultimate beneficiary and/or ownership structure of the relevant legal entity.

Source:Order of the Ministry of Justice of Ukraine dated 14.06.2023 No. 2211/5 "On Approval of the Procedure for Providing Explanations and/or Documents by a Legal Entity to Confirm Information on the Ultimate Beneficial Owner and/or Ownership Structure of a Legal Entity, as well as the Procedure for Their Consideration". The Order entered into force on 17.07.2023.

Key aspects:

• Cancellation of the special preferential regime (2% single tax rate) for single tax payers of the third group and establishment of transitional conditions.
• Termination of the possibility for entrepreneurs - single tax payers of groups 1 and 2 not to pay the single tax (except for those whose tax address is located in the territory of hostilities or in the temporarily occupied territory of Ukraine, as of the date of the beginning of hostilities or temporary occupation).
• Renewal of the deadlines for the provision of individual tax consultations by the supervisory bodies and deadlines for the consideration of taxpayers' complaints against the decisions of the supervisory bodies.
• Renewal of the deadlines for taxpayers to respond to requests from the tax authorities.

Source:Law of Ukraine dated 30.06.2023 No. 3219-IX "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Peculiarities of Taxation during the Period of Martial Law". The Law entered into force on August 01, 2023.

Key aspects:

• Documented unscheduled inspections have been resumed, in particular:
  • at the request of a taxpayer;
  • regarding taxpayers for whom information was received on violations of the legislation on taxation of income received by non-residents from Ukraine;
  • for information on taxation of non-residents operating through separate subdivisions, including permanent establishments;
  • taxpayers engaged in activities related to excisable goods, gambling, financial and payment services;
  • in terms of transfer pricing control;
  • taxpayers in respect of whom tax information has been received that indicates a violation of the deadlines for settlements in the field of foreign economic activity.
• The requirements for the formation of a schedule for documentary scheduled audits have been changed. The schedule may only include taxpayers who carry out activities related to excisable goods, gambling, financial and payment services.
• The inspections that were started and not completed before February 24, 2022, except for those subject to the moratorium, have been resumed.

Source: Law of Ukraine dated 30.06.2023 No. 3219 "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Peculiarities of Taxation during the Period of Martial Law". The Law entered into force on August 01, 2023.

The State Tax Service has provided clarifications on personal income taxation of income of a gig specialist in the form of an annual paid vacation, which is not part of remuneration for work performed (services rendered).

Key aspects:

• The income of a specialist of a Diya City resident paid in his favor by a Diya City resident in the form of salary, gig remuneration (basic and additional), royalties for the creation of an employee work and the transfer of rights to employee works is taxed at the personal income tax rate of 5%.
• Since annual paid leave is not part of the remuneration for work performed (services rendered), such income is taxed in the general manner, i.e. at the personal income tax rate of 18%.

Source: Category 103.03 ZIR.

Key aspects:

• The sale of non-cash foreign currency to individuals is allowed without confirmation of the grounds or obligations for such a transaction. Such transactions will be carried out at the exchange rate set by the bank within the monthly limit of UAH 50 thousand equivalent per bank.
• The monthly limit on the purchase of non-cash foreign currency by individuals has been increased from UAH 100 thousand to UAH 200 thousand in equivalent with further placement on deposit for a period of three months or more.

Source: Resolution of the Board of the NBU dated 28.08.2023 No. 104 "On Amendments to the Resolution of the Board of the National Bank of Ukraine dated February 24, 2022, No. 18". The Resolution entered into force on 29.08.2023.

Key aspects:

• Banks are obliged to respond to cases where the maximum amount of financial transactions declared by a client is exceeded (this refers to the data from the client's questionnaire that he or she fills out when opening an account with the bank). This requirement does not apply to individual clients who carry out ordinary financial transactions in amounts and to the extent that are rationally justified.
• The list of suspicion indicators related to customer financial transactions has been supplemented, namely: exceeding the maximum amount of financial transactions declared by the customer before establishing business relations/updated during the servicing of the customer more than twice a month and atypical activity on customer accounts.
• The Resolution clarifies the procedure for banks to carry out due diligence of e-resident clients in terms of identification and verification and remote establishment of business relations with an e-resident.

Source: Resolution of the Board of the National Bank of Ukraine No. 110 dated September 5, 2023 "On Approval of Amendments to the Regulation on Financial Monitoring by Banks". The Resolution entered into force on September 7, 2023.