Business simplification in Ukraine

CMS Cameron McKenna, 
Kyiv, Ukraine, Thu, May 21, 2015

On 21 April 2015 the Verkhovna Rada of Ukraineadopted Law of Ukraine No. 344 “On Amendments to Article 69 of the Tax Code ofUkraine regarding Simplification of Doing Business” (the “Law”) aimed atsimplification of business activity in Ukraine.

The Law simplifies the procedure for registrationwith Ukrainian tax authorities when Ukrainian taxpayers (both companies andprivate businessmen) open accounts with Ukrainian banks, specifically via thefollowing methods:

1.      The banks will be required toimmediately notify the tax authorities on opening a taxpayer’s bank account. Incontrast, currently the banks are required to send such notification by thenext business day.

2.      A taxpayer will be entitled tostart expense transactions via its bank account from the date the bank notifiesthe tax authorities without needing to wait for any confirmation in reply fromthe tax authorities (unless registration is denied). The tax authorities willbe required to publish confirmation or denial of account registration on itswebsite within one day. As a consequence, companies and private businessmenshould be able to freely use their bank accounts from the day of opening. Incontrast, currently any expense operations via bank accounts are allowed onlyonce the bank receives the tax authorities’ notification of the account’sregistration, and the tax authorities are required to send such notification bythe next business day following notification from the bank.

Thus, the amendments to the accountopening notification procedure will reduce the waiting period of severalbusiness days during which bank accounts cannot be fully used by taxpayers.

The Law also foresees a reduction of theterm for value added tax registration from three business days to just one.

The amendments described above are inline with widely discussed and long anticipated overall deregulation ofbusiness activity in Ukraine. It is anticipated that the introduction of theabove amendments will improve Ukraine’s position in the World Bank’s DoingBusiness 2016 report, particularly in the category of Starting Business.

The Law becomes effective on May 14,2015.

It should be noted that furthersimplification is also expected in tax regulation in Ukraine. In particular,the Verkhovna Rada of Ukraine has recently passed the first reading of a draftlaw aimed at decreasing the tax burden on taxpayers in Ukraine by amending therules on tax audits and tax assessment.

Author:

Olexander Martinenko, Senior Partner, Olexander.Martinenko@cms-cmck.com