The parliament of Ukraine adopted a draft law amending the Tax Code on 21 December 2016.

According to the adopted law, costs for repairing and maintenance of non-productive fixed assets will no longer be considered as deductible expenses.

Previously the royalties paid to a non-resident was deductible limited to the taxpayer’s royalty income plus 4% of the taxpayer’s income in the previous tax year. But the adopted law abolished this provision. The thin capitalization rules are also modified by the law.

For individuals the depreciation costs will be allowed as deductible expenses for individual entrepreneurs.

As per the adopted draft law, a transaction will be considered as controlled if (i) the annual income of the taxpayer within the reporting period exceeds UAH 150 million, and (ii) the sum of the transactions with each counter party exceeds UAH 10 million. Also, late surcharges will be introduced for failure to submit a report on controlled transactions or failure to include all controlled transaction in the report.

According to the approved law, registered VAT invoice in the Unified State Register will be considered as unconditional confirmation of the input VAT. Also, according to certain criteria approved by the tax authorities about the nature of the transaction, registration in the Unified State Register of the VAT invoices and respective adjustments could be suspended.

The adopted law increased the terms for registration in the Unified State Register of VAT invoices and corresponding adjustments. The previous special VAT regime for agricultural manufacturers has been abolished. The current two-register system of refund claim has been replaced by only one VAT register and overpaid VAT will be refunded to the taxpayer’s account through the VAT Electronic Administration System.

If signed by the President, the draft amendments will enter into force on 1 January 2017.