OPERATING EXPENSES AND COST UNDER THE TAX CODE OF UKRAINE | UBC

Operating expenses and cost: how tax practice changed

The material was prepared as commentary on the version of the Tax Code in force at the time of publication. It is useful for understanding the logic of tax accounting, but the stated limits, rates, deadlines and references to individual provisions should not be applied to 2026 transactions without checking the current legislation.

How to Start Business in Ukraine

What formed cost

The approach described in the material treated the following as costs of goods, works and services where they were directly connected with production or provision of a service:

• raw materials, materials, components and semi-finished products;
• pay of employees directly engaged in production;
• depreciation of production fixed assets and intangible assets;
• purchased works and services directly connected with the production process;
• other direct expenses, including certain social contributions and payments for the use of property or land shares.

A key rule was to link expenses forming cost to the period in which income from the sale of the relevant goods, works or services was recognised. Other expenses were recognised in the period in which they were incurred, subject to special rules. For taxes and fees, the reference point was the period for which they were accrued.

Marketing services and proof that they were actually provided

Company Incorporation in Ukraine

The authors paid particular attention to marketing: market and demand research, sales promotion, pricing policy, organisation of movement of products to consumers, after-sales service, placement of goods at points of sale and inclusion of information in trade databases.

For business in Ukraine, the key issue is not the title of the agreement but the ability to show the actual result. It is advisable to supplement the agreement and acceptance certificate with a report, data sample, list of competitors studied, media plan, advertising campaign materials, proof of placements and an explanation of how the service relates to the company's business activity.

Documents issued by non-residents

The earlier text drew attention to the possibility of supporting expenses with documents prepared by a non-resident under the rules of another country. In practice, the accountant should check mandatory details, translation, the link between the document, agreement and payment, and the tax consequences of the transaction with the non-resident.

Individual categories of expenses

The publication considered expenses for fuel and operating leases of passenger cars, warranty repairs, insurance, charitable transfers, business travel, professional education and staff training. Some restrictions stated in the earlier material were later changed or ceased to apply.

For business travel, the authors emphasised the travel order, source documents and evidence that the trip actually took place. Electronic tickets were also regarded as possible evidence of expenses. For education abroad, the connection between the qualification obtained and the conditions of the business activity was important.

Expense check

International Trade and Market Entry

Before recording a material or unusual transaction, it is worth answering four control questions:

• does the expense have a clear business purpose and a link to income or the company's activity;
• do the subject of the agreement, invoice, acceptance certificate, payment and actual result correspond;
• have the recognition period and accounting account been determined correctly;
• is there any special tax difference, restriction or rule concerning a non-resident.

A documented chain of evidence from the business need to the source document is a stronger position than the formal existence of an acceptance certificate with general wording.

How the approach to the issue changed

The page is preserved as part of the history of UBC tax consulting. For a current declaration or inspection, the current version of the Tax Code, accounting rules and the individual circumstances of the transaction must be checked.