Changes in paying income tax from January 1, 2022
The State Tax Service (STS) of Ukraine has issued an information letter No. 1/2022. It is focused on changes regarding corporate income tax that were imposed by the "resource" law No. 1914 (bill No. 5600). The letter clarifies the innovations and provides examples of drafting the tax reporting in typical situations. has prepared a summary of this letter.
Financial result adjustment
Starting from the first tax (reporting) period of 2022, major taxpayers have the right to reduce the taxable item by no more than 50% of the accumulated tax losses of the previous years.
For other income tax payers, the procedure for recording tax losses remains unchanged, that is, they can reduce the financial result before taxation by the full amount of previous losses.
Providing non-repayable financial aid
The list of persons to whom providing non-repayable financial aid (goods, works, and services) will require the income tax payer to increase the financial result by the amount of such aid has been expanded.
Until January 1, 2022, this list included only two categories:
- persons who are not income tax payers (except for individuals who are payers of personal income tax);
- taxpayers taxed at a zero rate (except for non-profit organizations inscribed in the relevant state register).
Now, the list includes income tax payers who are related parties.
Taxation of electricity producers according to "green" tariff
For electricity producers according to the "green" tariff, Law No. 1914 imposes several temporary differences in determining the item of taxation on profits. They will be applied when calculating tax liabilities in the period from January 1, 2022 to January 1, 2024.
The law clarified the norm that provides for an increase in the financial result by the full amount of royalties paid in favor of a legal entity that is exempt from income tax or pays this tax at a reduced rate. Now it is allowed not to increase the financial result if the royalty is paid on the basis of agreements concluded with copyright collective management organizations.
Amendments have been made to the application of differences when using allowance for doubtful debts and expected credit losses (diminishing asset utility). These amendments relate to state unitary enterprises and business entities with authorized capital where more than 50% of shares (stakes) belong to the state.
Relief for agricultural producers
Temporarily, until January 1, 2027, the profit of agricultural producers who are engaged only in the following activities is exempt from taxation;
- breeding and raising poultry (except for raising chickens, getting eggs, and operation of the incubators);
- breeding and rearing of quails and ostriches and producing poultry meat (except for chicken meat producing, fat melting, slaughter, and chicken meat processing and packaging);
- selling own manufactured products that are listed above (with the exception of chicken meat).
The tax authorities stress that if an enterprise simultaneously breeds turkeys and chickens, then it does not have the right to preferential taxation.
They also note that the funds released from paying income tax have a special purpose—they are allocated to the creation or re-equipment of the facilities and resources, increase in production, and the introduction of new technologies. The use of such funds must be related to the activities of the taxpayer. The procedure for monitoring the use of these funds must be approved by the Cabinet of Ministers.
In case of violation of the procedure for using the released funds, the taxpayer is obliged to accrue a tax liability, pay a fine and a penalty fee in accordance with the norms of the Tax Code (Article 123).
Changes for foreigners
From now on, the regulatory authority will send a confirmation of the payment of income tax in Ukrainian not only in paper, but also in electronic form to a non-resident annually. The appropriate procedure must be established by the Ministry of Finance.
The full text of the State Tax Service letter can be found here.