On 3 December 2019 the Ukrainian Parliament has finally adopted a Draft Law No. 1210 “On Deoffshorization and Improving the Administration of Taxation” (Law No. 1210). This one of the most discussed laws was adopted within the fulfillment of EU international obligations of Ukraine.

What changes can business expect after entry into force the Law No. 1210?

Without any doubts, the most important changes are implementing CFC rules, improving transfer pricing rules and introducing the Principle Purpose Test.

The significant part of proposed changes is related to administration of taxation. In particular,  it is contemplated to create the Board of Appeal for the purposes of the pre-trial consideration of taxpayers claims. As of today there is a single-level system of pre-trial appeal (i.e., the taxpayers’ claims against the tax notification-decisions are considered by the State Tax Service). After entry into force of the Law No. 1210 provisions, will be created a two-tier system: the Board of Appeal will consider claims in a number of cases specified by the Law No.1210.

The document also introduces changing to the permanent establishment status, legitimization of quarterly adjustment of the scheduling the tax audits, new interpretation of guilt of the individuals, increases the terms of conducting the tax audits.

The rapidly drafted text of the Law No.1210 stipulates many technical errors that may remain in the final version (the final text is not available yet). Despite that, overall the Law No.1210 provisions are progressive, some of them will meet possible implementation difficulties (in view of administering and controlling). It is obvious that new categories of tax disputes are unavoidable due to introducing the new points of intersection of private and public interests. Considering such significant changes, the business is estimating all pros and cons of the new law in view of time and human resources required in a new model of administration of taxation.

Nataliia Musiienko, Senior Associate at KPMG Law Ukraine