#11 November 2016

In focus – TAX

The Ukrainian tax system has been always considered a terra incognita field with burdensome administration. Our tax legislation shows itself to probably contain the most rapidly changing rules for business. An unpredictable future is obviously the main reason why traditional business planning is extremely complicated, with its awkward risks. A liberal tax design is greatly anticipated. But let’s be honest, it is unlikely to be politically feasible for the present economic situation. Meanwhile, the October memorandum with the IMF notes that in 2017 new changes to the tax system are inevitable...

With the support of Tax Regulation

In the event of detection of failure to submit or untimely submission of reporting on controlled operations, a company will receive a fine in the amount of 300 minimum wages set as of 1 January of the reporting year. The amount of such fine for failing to submit reporting in 2015 was UAH 365,400; in 2016 it will be UAH 413,400.

According to the State Fiscal Service, during monitoring (2016) a total of 500 taxpayers were found to have failed to submit their report. Many of those who did not provide their reporting, made a mistake in calculating cost criterion as to recognition of operations as controlled.


Expert Opinion

General Anti-Abusive Rules in the Global and Ukrainian Context

Igor V. Kochkodan, Оksana I. Olekhova

After release of the 2015 OECD BEPS Report, addressing harmful tax practices is on top of the political agenda in the European Union and worldwide. The General Anti-Abusive Rules (the GAARs) were included in the top-5 instruments to tackle tax avoidance recommended by the OECD, together with transfer pricing, thin capitalization rules, controlled foreign companies legislation and specific anti-hybrid arrangements. As a result, the GAARs were incorporated in the EU Anti-Tax Avoidance Directive adopted by the European Council on 12 July 2016 (the ATA Directive). EU Member States are required to implement provisions of the ATAD Directive into their national laws before 31 December 2018.


In Re

Exit Capital Tax — the Alternative to Existing Corporate Profit Tax

Tetyana Y. Suchyk, Anna L. Kravchuk

The existing Ukrainian Corporate Profit Tax (CPT) system appears to be ineffective, creating prerequisites for its reform. The main problems that payers of the CPT face today are the complicated rules of tax base calculation providing for ambiguous and discrete interpretation, which is a constant risk zone for taxpayers, as well as difficulties in tax administration. Moreover, the existing system provides legal mechanisms for aggressive tax optimization, resulting in the maximum CPT load on diligent taxpayers while making CPT neutral for others.

We believe that introduction of an entirely different philosophy of income taxation is needed.


Features of Non-Resident Business Taxation in Ukraine

Ivan I. Legeida, Vitaliy V. Kemin

The essence of business is to ensure that not only revenue is generated but also that the costs are optimized. An important element of optimization is the legally valid reduction of the tax burden. The liberal tax burden is a favorable condition for attracting foreign investment. A limited liability company is a typical form of business in Ukraine by non-residents. However, the most suitable form of business from the point of view of taxation can be chosen depending on the structure, function, and purpose of the specific business.


Tax Residency Status: Issues to Consider When Moving Abroad

Alexander V. Buryak, Kateryna O. Kolos

Recent social and economic developments have had a powerful impact on many Ukrainian citizens and businesses and have led them to look for a better life beyond the borders of Ukraine. Obviously, Ukrainians moving abroad is not something new.  Periods of economic crisis in almost every state are usually accompanied with outflow of human and financial capital.
Moving to the new place of residence or transfer of business activities to another state is a serious challenge...

Pros and Cons of Paying the Residential Real Estate Tax in Ukraine

Iaroslav V. Iaroviy

The law on taxing residential real estate in Ukraine was passed back in 2014. But notwithstanding the time lag it has not played any influence on the majority of Ukrainian citizens. The first reading of the law provided for massive tax reliefs. Tax obligations arose only with owners of flats with a total area in excess of 120 m2 and with owners of homes with a total area exceeding 250 m2. Such reliefs resulted in actually carving out the vast majority of real estate from the taxation base.





Antika acted as legal advisor to Heitman

Redcliffe Partners advised on the extension of a secured facility to Kernel

AVELLUM advised the Ministry of Finance of Ukraine

DLA Piper — legal advisor to DCH Group

AVELLUM advised Onex and Baring Asia

Redcliffe Partners advised Landesbank Berlin



Chad court fined ExxonMobil

Court orders Samsung to pay Apple USD 120 million for patent infringement

Oschadbank won court case against Creative guarantors


Law Digest

Changes to legislation on the fight against raiding

Moratorium on sale of agricultural land extended to 2018

Procedure for implementation of Twinning projects adopted



Regulation of activities of social security funds for period of reorganization proposed

Changes to state investment projects

Protecting political prisoners


Mergers & Aquisitions

AT&T acquires Time Warner

Chinese company buys 25% stake in Hilton hotels

Qualcomm takes over NXP


Online registration of land plots

Banking & Finance

Chinese Yuan officially became an IMF reserve currency

NBU reduces bank rate to 14% per annum

Development of energy infrastructure

Economic discussion

Industrial revolution depends on innovations

Chamber News

Chamber meeting with Volodymyr Kistion, Vice Prime Minister of Ukraine

On 4 October members of the American Chamber of Commerce in Ukraine first met with Volodymyr Kistion, Vice Prime Minister of Ukraine. The meeting was focused on discussing issues in the competence of the vice prime minister, namely the State Road Fund, road construction, budget issues in the area of infrastructure, sea & river transport reform, priorities of increasing energy independence, including electricity sector, coal industry and the oil & gas sector.

UBA News

Waterfall vs Agile

On 20 Octoberthe Ukrainian Bar Association Committee on Telecom, IT & Internet Law organized a regular meeting in the framework of the project “How does IT work?”

Artem Serdyuk, product owner and project manager at ISM Ukraine, coach on flexible methodologies at Scrum Guides, explained the participants the meaning of Agile, Scrum and Kanban terms and applying them in business.

Cover Story

On the Move

The turbulent transformations in the economy are usually a crowning moment for new business ideas. This period reveals entrepreneurial skills and pragmatic financial mindset. The legal market is not exclusion. Splits and spin-offs, amalgamation of teams, pro-active employment and expansions are creating exciting environment in the Ukrainian legal market. The competition leads to precise focus on clients’ needs. Oleg Vdovychen, who announced the establishment of Vdovychen & Partners, explained his vision of managing a law firm on the move. We ask him to tell us about recent challenges for taxpayers, their typical legal requests and vision of tax police reform in the country.

Hot Issue

CFC Rules in Ukraine

Pavlo I. Shovak

On 28 April 2016 the President of Ukraine issued the Decree On Measures to Tackle Base Erosion and Shifting of Profits Abroad, No.180/2016 which establishes a respective working group. The aim is to develop laws to improve transfer pricing control, prevent profit shifting, introduce controlled foreign companies (the CFC) rules, tackle aggressive tax planning and subsequently liberalise currency controls.


Legislative Update

A portion of legislative novelties came from Parliament this month and provided lots of questions to consider. Our expert panel shared their views on the prolonging of the moratorium on agricultural land until 2018; new procedure on registration of rights to immovable property and protection of property rights; implementation of Twinning projects in Ukraine; functioning of the Unified National System of Digital Identification of Individuals and Legal Entities BankID; simplification of the regulatory field for export of services as well as many others topical issues.

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