The amendments to the Tax Code have been effective, with some exceptions, since 1 January 2017. Below is a summary of the most significant changes in corporate profit tax and transfer pricing.
Corporate profit tax:
- The general tax rate remains at the level of 18%. Principles of tax base calculation remain unchanged.
- “Tax holidays” until 2021 are introduced for taxpayers with annual income less than UAH 3 million provided they meet some requirements.
- Accelerated depreciation within 2 years is allowed for machinery and equipment purchased and set in operation in 2017 and 2018, provided that such machinery or equipment is used solely for the purposes of the taxpayer’s own business activity.
- Royalties paid to non-beneficial owners and in other special cases are no longer deductible at all (even if the payments satisfy the “arm’s length” criteria).
- The withholding tax rate on interest paid to non-residents is reduced from 15% to 5% or 0% upon fulfilment of special requirements (other than the application of tax treaties).
- 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.
- The deadline for submitting the report on controlled transactions has been changed to October 1 of the year following the reporting one.
- Self-adjustments can be made to maximum or minimum values of the range of prices (profitability), not to the median, as it was previously envisaged.