Tax updates in Ukraine (10.01.2025)

The updated list of low-tax jurisdictions came into force on January 1, 2025

Starting January 1, 2025, Ukraine has implemented an updated list of low-tax jurisdictions. Transactions with residents of these jurisdictions are subject to special oversight.

Key aspects:

• The Government has reduced the list of low-tax jurisdictions from 78 to 46, in particular:
  • excluded jurisdictions that have concluded international treaties for the avoidance of double taxation with Ukraine;
  • included jurisdictions assigned to the list of offshore zones approved by the Government and the "blacklist" FATF;
    _{^{Excluded (41 jurisdictions): Bahrain, Bosnia and Herzegovina, Brunei Darussalam, Burundi, Guadeloupe, Guatemala, China, Hong Kong Special Administrative Region (EU), Djibouti, Dominican Republic, Ireland, Autonomous Community of the Canary Islands of the Kingdom of Spain, Cabo Verde, Qatar, Kyrgyzstan, Cyprus, Autonomous Province of Kosovo and Metohija of the Republic of Serbia, Cuba, Curacao, Lao People's Democratic Republic, Lebanon, Liechtenstein, Mauritius, Macau Special Administrative Region of China, The former Yugoslav Republic of Macedonia, Federal Territory of Labuan Malaysia, Morocco, Martinique Passage, Micronesia (Federated States of), Republic of Moldova, United Arab Emirates, Oman, Paraguay, Northern Mariana Islands, Autonomous Region of Madeira of the Portuguese Republic, San Marino, Sao Tome and Principe, Sudan, Timor-Leste, Turkmenistan, Uzbekistan, Montenegro.}}
  • included jurisdictions that do not ensure timely and complete exchange of tax and financial information.
    _{^{Included (9 jurisdictions): American Samoa, Guam, Democratic People’s Republic of Korea, Myanmar, Namibia, Netherlands Antilles, Alderney, Republic of Trinidad and Tobago, Fiji.}}

We remind that taxpayers who carried out business transactions with non-residents registered in jurisdictions included in the list in the reporting year are required to meet the criteria set out in subparagraph 39.2.1.7 of the Tax Code:

• submit a report on controlled transactions by October 1 of the year following the reporting year;
• compile and store transfer pricing documentation;
• provide TP documentation upon request of the supervisory authority within 30 calendar days from the date of receipt of the relevant request.

^{Source:  Government resolution of December 27, 2024 No. 1505 "On amendments to the annex to the government resolution of December 27, 2017 No. 1045" .}

Changes to the criteria for determining related parties came into force on January 1, 2025

Starting January 1, 2025, the amendments to subparagraph 14.1.159 of the Tax Code introduced by the Law of Ukraine No. 3813-IX dated June 18, 2024 regarding the criteria for related parties came into force.

Key aspects:

• The criteria for recognition of related parties were expanded based on the economic ties, namely, supplemented by subparagraph 14.1.159 of the TCU containing the following content:
  • the income of a resident legal entity from the sales to a non-resident or a separate foreign entity without the status of a legal entity during a calendar year exceeds 75% of the income of such resident from the sales to all non-residents, provided that such income exceeds 50% of the total income of such resident from the sales (net of indirect taxes) determined in accordance with the accounting rules;
  • the cost of products purchased by a resident legal entity from a non-resident or a separate foreign entity without the status of a legal entity (including a non-resident conducting business through a permanent establishment in Ukraine) during a calendar year exceeds 75% of the cost of products purchased by such entity from all non-residents, provided that the amount of such purchase transactions exceeds 50% of the total cost of products purchased by such resident.
• The lower boundary of the share of corporate rights of each person in the next legal entity in the chain for determining relatedness (regardless of the results of multiplication) has been increased from 20% to 25%.
• The supervisory authorities are now given the opportunity to prove the connection of persons not only in court, but also based on the results of verification.

^{Source:  Law of Ukraine dated 18.06.2024 No. 3813-IX "On amendments to the Tax Code of Ukraine regarding peculiarities of tax administration during martial law for taxpayers with a high level of voluntary compliance with tax legislation".}
 

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