TAX CODE

Tax Code of Ukraine: a working path for business in 2026

The Tax Code sets the rules for calculating taxes, registering taxpayers, reporting, audits and appeals against decisions. It is useful for an entrepreneur to read it not as one continuous legislative text, but as a map of specific operations: sales, purchases, payroll, dividends, imports, investments and settlements with non-residents.

How to Start Business in Ukraine

The owner, accountant, director, HR team, lawyer and bank take part in the tax process. Every commercial agreement must be clear not only to the parties but also for accounting: the subject, price, transaction date, primary documents and movement of funds must match.

When the service is needed

The tax system is selected together with the business model. Turnover, margin, number of employees, VAT status, exports, related parties and the method of profit distribution affect the tax burden more than the formal name of the regime.

For the owner, it is important to link tax analysis and business support with the financial model, contract system and launch calendar. A formal action must produce a clear commercial result: the right to operate, raise finance, sign contracts, pass a bank review or start a project without a gap between the documents and the actual activity.

Work starts by defining the scope of the task. UBC analyses the initial information, separates mandatory actions, internal decisions and counterparties' documents, and then forms a working path that matches the scale of the project and the model of tax planning, accounting and reporting.

What has changed in the procedure

In previous years, companies often worked with a printed edition of the Code and separate letters from the tax authorities, while changes were tracked through a publication calendar. Practice was built around paper returns and personal interaction with the tax office.

In 2026, the main communication takes place through the electronic taxpayer account, while registration data, reporting, tax invoices and settlements are compared automatically. The Code remains the basis, but a working solution requires the transitional provisions, sector-specific laws and current guidance to be taken into account.

Digitalisation has reduced some technical operations but increased the importance of source-data quality. Registers and electronic accounts compare information faster, so names, powers, addresses, activity codes, financial indicators and project documents should be agreed before filing.

Comparing the previous and current procedure helps preserve terms understood by the market and at the same time shows which document, registration number, decision, notice or registry entry confirms lawful business activity in 2026.

Comparison of approaches: before and in 2026

Sequence and main stages of providing the service

It is practical to organise the work in stages. This approach helps align the commercial objective, document set and responsibility of participants in advance and then control the result at each stage.

1. describe the business model, operations and planned turnover;
2. compare the general and simplified systems taking account of restrictions;
3. determine the need for VAT and the specifics of foreign trade operations;
4. set up primary documents, accounting policy and electronic services;
5. prepare a calendar of returns, payments and document registrations;
6. reconcile accounting, the taxpayer account and bank operations every month;

Each stage ends with a result that can be checked: an approved decision, a filed package, a registration number, an extract, a permit, a registered issue or other confirmation relevant to the service. This control makes it possible to move to the next stage of tax planning, accounting and reporting without losing the business logic.

What is needed to start work

For an initial assessment, there is no need to collect every possible document. It is enough to prepare the information required to determine the applicable procedure and make an exact list of further actions:

• company registration details and selected activity codes;
• financial plan, prices, costs and cash-flow forecast;
• contracts with clients, suppliers, employees and non-residents;
• accounting policy and rules for signing primary documents;
• information on VAT, single tax and other registration statuses;
• electronic signatures, access rights and distribution of powers in the account;

When some documents are held by a bank, depositary, premises owner, designer, auditor, foreign participant or government authority, this is recorded separately in the working list. Requests can be sent in parallel without linking the whole timetable to one source.

Service specifics and organisational matters

Even where filing takes place online, the main work remains managerial. Within the company, responsible persons must be appointed, source data agreed and consistency ensured for documents supplied to the registrar, bank, regulator or counterparty.

The issue of tax analysis and business support usually concerns management, accounting, the lawyer and the technical or financial team. Decisions by these participants should be based on one set of source data and an agreed version of the documents.

A risk arises when a company chooses a regime by the headline rate without modelling the tax base, VAT, payroll taxes, expense restrictions and future payments to owners. The calculation should be made using real scenarios.

It is useful to maintain a register of control points: what was approved, who signed it, when it was filed, what number was assigned, where the electronic original is stored and who is responsible for the next deadline. For long processes, a calendar of reporting, updates and change notifications is established.

• monthly reconciliation of turnover and tax liabilities;
• control of registration of tax invoices and adjustment calculations;
• checking primary documents before the period is closed;
• calendar of changes to rates, forms and reporting deadlines;
• preparation of evidence of business purpose and performance of major transactions;

What you will receive as a result

For the owner, a normal result is not a separate certificate or system entry, but the ability to lawfully and predictably conduct the chosen activity, enter into contracts, receive payment and confirm the company's status to partners.

The working result is a tax system that reflects the company's real operations, supports cash flow and gives the owner a forecast of liabilities before commercial decisions are made.

After completion, the company receives a working basis for tax planning, accounting and reporting: employees understand the sequence of actions, documents are available for review, and the owner sees how legal and administrative formalities support sales, settlements, financing and project development.

Tax rules and explanations published earlier

The Tax Code of Ukraine was adopted on 2 December 2010, and the rules of Section III on corporate income tax began to apply from 1 April 2011. In the first editions, business moved from the Law on Taxation of Enterprise Profits, the categories of gross income and gross expenses and the first-event rule to an accounting model for recognising income, expenses and financial results. The previously published review is retained below as a subject-specific explanation of this transition, the initial depreciation rules, loss carry-forwards, special transactions, reliefs and the rate schedule used at that time.

As at 1 August 2026, the corporate income tax base is determined from the financial result before tax under the financial statements, adjusted for the differences provided by the Code. The basic rate is 18 per cent, while a basic rate of 25 per cent applies to the profits of financial institutions other than insurers. A company first determines its taxpayer category, reporting period and set of differences, and only then prepares the return and schedules.

A taxpayer with annual income of no more than UAH 40 million may decide not to apply most adjustments to the financial result, while keeping the exceptions expressly established by the Code. If income exceeds UAH 40 million, tax differences apply to the full extent required, and the reporting calendar is based on quarterly periods. For a working tax process, UBC compares the financial statements, primary documents, contracts, transaction category, return, schedules and Electronic Cabinet data.

Corporate income tax in 2026: working control points

The accounting financial result is the starting figure, but the final taxable amount depends on tax differences. The company checks depreciation, provisions, financial operations, controlled transactions, transactions with non-residents, free transfers, prior-year losses and special rules for its sector. The rate is determined separately: 18 per cent for the general category and 25 per cent for financial institutions other than insurers.

The UAH 40 million criterion affects both tax differences and the reporting calendar. If income is within the criterion, the taxpayer may state once in the return, for a continuous set of relevant years, a decision not to apply most differences. Exceeding the criterion means applying the adjustments provided by Section III from that year; taxpayers with income above the criterion use quarterly reporting periods, while the categories specified in Article 137 report annually.

Financial statements are filed together with the return and form an integral part of it. The current return form contains updated schedules, including schedules for systematising certain charitable transactions. Through the Electronic Cabinet, the taxpayer can create, check, sign and send the reporting, receive receipts and reconcile settlements with the budget. The result is confirmed by consistent figures in the financial statements, return, schedules and personal accounts.

Issues covered in the first edition included: taxable object; income and expenses; operating and other expenses; expenses that were not taken into account; fixed assets and depreciation; arm's-length prices; tax differences; loss carry-forwards; dividends; reorganisation; securities; foreign currency; rent-to-own housing; property management; doubtful debts; reliefs; rates and reporting periods.

Under the first version of Article 134, the taxable object was profit sourced in Ukraine and abroad, determined as the difference between income for the reporting period, the cost of goods sold, work performed and services provided, and other expenses of the period. Income of a non-resident sourced in Ukraine was taxed separately. This structure explained the move from the categories of gross income and gross expenses to a calculation aligned with accounting.

Section I defined income as the taxpayer's total income from all types of activity received or accrued during the reporting period in monetary, tangible or intangible form in Ukraine and abroad. Expenses were understood as the taxpayer's costs in monetary, tangible or intangible form incurred for business activity and resulting in a reduction of economic benefits through disposal of assets or an increase in liabilities.

Unlike the former term "gross expenses", the new definition used accounting recognition criteria. The cost of goods sold, work performed and services provided covered expenses directly related to their production or purchase. Other expenses were taken into account under the Code in the period in which they arose according to the nature of the transaction and the supporting documents.

The terms of Section III were used in the meanings established by the national accounting provisions (standards), the Law of Ukraine No. 996-XIV of 16 July 1999 "On Accounting and Financial Reporting in Ukraine" and international financial reporting standards. Tax-accounting data had to be supported by primary documents, accounting registers, financial statements and other documents required by law.

Income from providing services and performing work is recognised on the date an act or other document is prepared in accordance with current legislation confirming that the work was performed or the services were provided. Thus, unlike the former Profit Tax Law, advance payment for goods, work or services is not recognised as income and does not affect the taxpayer's tax liabilities.

Income taken into account when determining the taxable object is classified into the following groups: income from operating activity, including income from the sale of goods, work performed and services provided, and income of banking institutions; other income, including, as under the legislation then in force, dividends received from non-residents, interest, royalties, ownership of debt claims, income from rental or leasing operations, foreign-currency operations, trading in securities and derivatives, fines and penalties, non-repayable financial assistance and goods, work or services received free of charge. Unlike the legislation then in force, the amount of financial assistance received from the taxpayer's founder is not included in taxable income if such assistance is repaid no later than 365 calendar days from the date it was received.

As in the relevant Profit Tax Law, the Tax Code contains a list of income that is not taken into account when determining the taxable object. This includes, in particular, direct investment or reinvestment in the taxpayer's corporate rights, compensation for compulsory alienation of the taxpayer's property by the state, share premium, international technical assistance and similar receipts. At the same time, unlike the previous legislation, the Tax Code removed the rule under which, when goods, work or services were sold and paid from budget funds, the income date was the date those funds reached the taxpayer's current account or the date corresponding compensation was received in any other form, including a reduction of the taxpayer's debt on obligations to that budget. Such income was to be recognised under the general rule.

Unlike the previous legislation, the Tax Code provides that the value of goods, work or services received by a taxpayer is determined for inclusion in income at a level not lower than the ordinary price. Paragraph 137.3 of the Tax Code of Ukraine provided special accounting rules for long-term contracts. If a taxpayer manufactured goods, performed work or provided services within a long-term technological production cycle of more than one year and the contracts did not provide for staged delivery, the taxpayer determined income independently according to the degree of completion of production or services. Completion was measured by the share of costs incurred in the reporting tax period in the total expected costs and/or by the share of services provided in the reporting tax period in the total volume of services.

After ownership of goods, work or services with a long technological production cycle was transferred to the buyer, the contractor adjusted the actual income connected with producing those goods, work or services that had been accrued in previous periods during production. A separate provision of the Tax Code of Ukraine, Article 137.2, set the procedure for recognising income when targeted financing was received from compulsory state social insurance funds or budgets.

Unlike the previous procedure, under which financing was recognised as gross income when actually received, the Tax Code provided that when targeted financing was received from compulsory state social insurance funds or budgets, income was recognised as follows: an amount equal to the depreciation share of the investment object corresponding to the taxpayer's share of budget targeted financing of capital investments in the total value of the investment in that object; targeted financing to compensate costs or losses incurred by an enterprise and financing to support an enterprise without conditions for spending those funds on future activity - when actually received; other targeted funds - during the periods in which costs connected with meeting the conditions of the relevant financing were incurred.

Separate provisions of the Tax Code of Ukraine, unlike the previous legislation, provided that where goods were sold under a commission or agency agreement, the date of income from the sale was the date of sale of the goods belonging to the principal stated in the commission agent's or agent's report, under Article 137.5, while the date of income from the sale of foreign currency was the date ownership of the foreign currency was transferred, under Article 137.12. The Code also provided that the date of a taxpayer's income from credit and deposit operations was the date on which interest, commissions and other payments connected with the creation or acquisition of loans or deposits were recognised under accounting rules. Unlike the previous legislation, the Tax Code provided that the date of receiving other income not separately defined in Section

III of the Tax Code of Ukraine was the date on which it arose under the accounting provisions or standards. It should also be noted that under paragraph 7 of subsection 4 "Special rules for corporate income tax" of Section XX of the Tax Code of Ukraine, income was not determined for goods, work or services shipped or provided after 1 April 2011 to the extent their value had been paid by advances before that date, including while the taxpayer was on the simplified tax system. Expenses under the Tax Code, formerly gross expenses, were governed by Article 138 of the Tax Code of Ukraine, which set their composition and recognition procedure. As with income, advance payments were no longer taken into account when determining expenses.

To determine the amount of expenses and the date on which they arose, taxpayers determined the cost of goods, work or services, including the value of inventories. Unlike the previous legislation, not only the cost of acquiring stocks but also other costs were included in value and reduced the taxable object only when the related income was recognised. Expenses taken into account in determining the taxable object were divided into operating expenses, including the cost of goods sold, work performed, services provided and expenses of banking institutions, and other expenses.

Other expenses in turn included, in particular: general production expenses, such as production management costs, depreciation of general-production fixed assets and intangible assets, costs of improving technology and organising production, and occupational-safety costs; administrative expenses, such as annual meetings, representation costs, business trips, maintenance of the enterprise's management staff, consulting, information services and communication services; marketing expenses, such as packaging materials, remuneration and commissions to sellers, advertising and marketing research, pre-sale preparation of goods, transportation, insurance of goods, freight-forwarding services, warranty repairs and warranty service; other operating expenses, including foreign-currency operations, taxes and fees, information security and interest on loans received, issued bonds and finance leases; and other expenses from ordinary activities, including voluntarily transferred assets and other items listed in the provision.

maintenance and operation of environmental funds, acquisition of licences and special permits, and other costs)

Operating expenses - the cost of goods, work or services - consisted of expenses directly connected with producing those goods, work or services, namely: direct material costs, including raw materials, materials and semi-finished products forming the basis of manufactured goods, work or services; direct labour costs, including salaries and other payments to employees engaged in production; depreciation of production fixed assets and intangible assets directly connected with production; the cost of purchased services directly connected with producing or providing goods, work and services; and other direct expenses, including social costs and rent of land and property shares. Costs forming the value of goods, work or services were recognised as expenses in the reporting period in which income from their sale was recognised. Other expenses were recognised in the reporting period in which they were incurred, subject to their specific nature.

For example, accrued taxes and fees were included in the expenses of the reporting period for which they were accrued. Unlike the previous legislation, Section I of the Tax Code of Ukraine defined the term "marketing services (marketing)". Marketing services were services supporting the taxpayer's activity in market research, stimulation of sales of products, work or services, pricing policy, organisation and management of movement of products, work or services to the consumer, and after-sales customer service within the taxpayer's business activity. Marketing services included, in particular, placement of a taxpayer's products at points of sale, research and analysis of consumer demand, inclusion of the taxpayer's products, work or services in sales-information databases, and collection and distribution of information about products, work or services.

One innovation of the Tax Code of Ukraine was a separate provision allowing a taxpayer to recognise expenses in tax accounting when supported by documents prepared by non-residents under the rules of other countries. The Tax Code did not contain the previous restrictions on accounting for the purchase of fuel and lubricants for passenger cars or the operating rental of passenger cars when determining the taxable object, or on warranty-repair costs and replacement of defective goods where the warranty terms were published by the seller. The existing limit of 5 per cent of gross expenses for insurance costs taken into account in determining the taxable object did not apply to insurance risks connected with production of national films, for which costs could be taken into account up to 10 per cent of the production cost of such films.

The limit for voluntary transfers of funds to budgets or non-profit institutions changed: instead of 2-5 per cent of the previous year's taxable profit, the amount was limited to no more than 4 per cent of that profit. The relevant provision of the Tax Code of Ukraine also increased the deductible daily allowance for business trips: for domestic trips it was tied to a fraction of the minimum wage effective for an able-bodied person on 1 January of the reporting tax year, and for foreign business trips it was limited to no more than 0.75 of that minimum wage per day.

The amount of the daily allowance for business trips within Ukraine and to countries whose entry rules did not require a visa was determined from the business-trip order and the relevant primary documents. Under the earlier legislation, the basis for recognising such travel expenses had included marks by the sending and receiving parties in the travel certificate, but the Code did not make such marks a mandatory element for accounting for the trip. An innovation of the Tax Code of Ukraine was that expenses could be supported, in particular, by electronic tickets.

The Tax Code allowed tax accounting to include expenses for education and/or professional training, retraining or advanced training of individuals at foreign educational institutions where a qualification from such institutions was mandatory for particular conditions of business activity. Unlike the previous legislation, the Tax Code also provided special rules for taxpayers licensed to produce electricity and/or heat using coal and/or fuel oil. In the cost of goods sold, work performed or services provided during the year, a fuel-reserve amount for coal and/or fuel oil created to ensure uninterrupted power supply to consumers was included in direct material costs instead of the actual value of coal and/or fuel oil consumed in the technological process.

The taxpayer determined the fuel-reserve amount independently on the basis of the average monthly cost of fuel, including coal and fuel oil, purchased in the previous year, but not below the actual cost of fuel purchased in the current month.

At the end of the reporting year, the reserve was adjusted to the actual cost of fuel used in the technological process, namely coal and fuel oil. If the actual cost of fuel consumed in the technological process exceeded the reserve accrued for the reporting year, the cost of goods sold, work performed and services provided was increased by the difference between the actual fuel cost and the accrued reserve. If the actual fuel cost during the reporting year was lower than the reserve calculated for that year, the cost of goods sold, work performed and services provided was adjusted by the corresponding difference between the fuel cost and the accrued reserve.

The Tax Code also provided that taxpayers licensed to transmit and/or supply electricity and/or heat included in the cost of electricity and/or heat sold, and in the cost of transmission and/or supply services, the actual expenses incurred in the reporting tax period for purchasing electricity and/or heat. It should be noted that under paragraph 7 of subsection 4 "Special rules for corporate income tax"

of Section XX of the Tax Code of Ukraine, expenses were not recognised for goods, work or services received after 1 April 2011 to the extent their value had been paid by advances before that date if those advances had already been included in the taxpayer's gross expenses when paid, including while the taxpayer used the simplified tax system. For corporate income taxpayers that moved from the simplified to the general system, when income from sales of goods, work or services was recognised under the general system, the cost of goods, work or services produced while the taxpayer was on the simplified system was included in tax expenses in proportion to the amount of recognised income. In addition, under paragraph 13 of subsection 4 "Special rules for corporate income tax"

of Section XX of the Tax Code of Ukraine, temporarily until 1 January 2014, housing and utilities companies recognised income from housing and utility services when money was received from the consumer in the taxpayer's bank account or cash desk. At the same time, such companies recognised the cost of goods, work and services purchased for supplying housing and utility services only to the extent actually paid. Other expenses were recognised under the general rules of Section III of the Tax Code of Ukraine. As under the previous rules, Section III also contained a list of expenses that were not taken into account when determining taxable profit.

These included expenses unrelated to business activity, such as receptions, presentations, celebrations and entertainment, payments under commission, agency and similar contracts, repayment of loans and credits, dividends, fines and penalties. In addition, Articles 138, 139 and 140 of the Tax Code of Ukraine imposed restrictions on certain expenses when determining the taxable object. In particular, unlike the previous legislation, the Code provided that tax accounting did not recognise expenses incurred on purchases of goods, work, services and other tangible or intangible assets from an individual entrepreneur paying the single tax, except for certain work and services purchased from an individual single-tax payer carrying on activity in the field of information technology. Separate attention was also given to restrictions on royalty expenses.

Thus, expenses did not include royalties accrued in the reporting period in favour of: a legal entity exempt from corporate income tax or paying that tax at another rate; a person paying tax as part of another tax, except an individual; or a non-resident, subject to listed exceptions for permanent establishments and certain television, radio, film, music and literary rights, to the extent the royalties exceeded 4 per cent of income from sales of products, goods, work or services, excluding VAT and excise tax, for the year preceding the reporting year.

Expenses also did not include accrued royalties where any of the following conditions applied: the person in whose favour the royalties were accrued was a non-resident with offshore status; the person receiving payment was not the beneficial, actual recipient or owner of the payment, except where the beneficial owner had granted another person the right to receive the remuneration; or the royalties were paid for intellectual-property objects whose rights had first arisen with a resident of Ukraine.

If a dispute arose between the tax authority and the taxpayer over which person first obtained the intellectual-property rights to an object, the tax authority was required to apply to the specially authorised body designated by the Cabinet of Ministers for an appropriate opinion. Another restriction applied where the person receiving royalties was not subject to tax on royalties in the jurisdiction where that person was resident. Unlike the previous legislation, the Tax Code also provided that tax accounting did not recognise expenses incurred or accrued in the reporting period for consulting, marketing or advertising services or work purchased from a non-resident, except costs accrued in favour of permanent establishments of non-residents, to the extent they exceeded 4 per cent of income from sales of products, goods, work or services, excluding VAT and excise tax, for the year preceding the reporting year.

In this case, the full amount of expenses incurred or accrued in the reporting period for consulting, marketing or advertising services or work purchased from a non-resident was excluded from expenses where the person receiving the payments was a non-resident with offshore status. Tax accounting also did not recognise expenses incurred or accrued for engineering services or work purchased from a non-resident, except costs accrued in favour of permanent establishments of non-residents, to the extent they exceeded 5 per cent of the customs value of equipment imported under the relevant contract.

Expenses accrued for engineering services or work purchased from a non-resident were not included in expenses at all where any of the following conditions applied: the person receiving payment for the engineering services was a non-resident with offshore status; or the person receiving payment was not the beneficial, actual recipient or owner of the payment. Another provision of the new Tax Code stated that if a transaction was declared invalid on any grounds, the income and expenses, including the carrying value of fixed assets, previously reflected for that transaction were recalculated.

The actual value of finally rejected products was not included in the taxpayer's expenses, except for products, components or semi-finished goods rejected for unavoidable technological reasons and the cost of correcting such technically unavoidable defects where the products were sold. The rules provided that loss or waste norms were established by the Cabinet of Ministers, and if such norms had not been established, the taxpayer could determine and approve them by its own order, provided the amount was justified. The taxpayer's own norms applied until the relevant government norms were established. Expenses also did not include actual losses of goods except losses within natural-loss or technical production-loss norms and costs from natural-gas imbalance in distribution networks not exceeding the amount set by the Cabinet of Ministers, an authorised central executive body or another body designated by Ukrainian law.

Fixed assets and depreciation under the Tax Code. Attention should be given to the change in the definition of "fixed assets", replacing the former term "fixed funds", in paragraph 14.1.138 of Section I of the Tax Code of Ukraine. As under the previous legislation, two main criteria were used to identify fixed assets: value and useful life. The useful-life criterion of one year did not change, while the value threshold increased from UAH 1,000 to UAH 2,500. However, under paragraph 14 of subsection 4 "Special rules for corporate income tax" of Section XX of the Tax Code of Ukraine, the fixed-asset threshold remained UAH 1,000 in 2011. The Code brought tax depreciation rules as close as possible to the national accounting provisions and standards.

Under Article 145 of the Tax Code of Ukraine, the expanded classification of fixed assets for tax accounting provided for 16 groups instead of the 4 groups used under the previous legislation. The carrying amount of fixed assets in each group was to be accounted for object by object, including improvement costs for assets received free of charge or under operating lease, and for the group overall as the sum of the carrying values of the individual objects in that group. Unlike the previous legislation, depreciation deductions were not separately allocated when determining the taxable object because the depreciation amount was included in cost and other expenses.

Depreciation is charged monthly over the useful life of an asset set by the taxpayer, but not less than the minimum permitted period established by Section III of the Tax Code of Ukraine, starting from the month following the month in which the fixed asset is put into use. For depreciation of intangible assets, the Tax Code introduced a classification of six groups and set depreciation periods for each group. Depreciation could be calculated using the following methods: straight-line, under which annual depreciation is determined by dividing depreciable value by the useful life of the fixed asset; and the reducing-balance method, under which annual depreciation is determined as the carrying value of the asset at the beginning of the reporting year, or its initial value on the depreciation start date, multiplied by the annual depreciation rate.

The annual depreciation rate, as a percentage, is calculated as one minus the result of taking the root corresponding to the number of useful-life years from the ratio of the asset's residual value to its initial value. Under the accelerated reducing-balance method, annual depreciation is the carrying value of the asset at the beginning of the reporting year, or its initial value at the depreciation start date, multiplied by an annual depreciation rate calculated from the useful life and doubled. This method is used only for fixed assets in group 4, machinery and equipment, and group 5, transport. Under the cumulative method, annual depreciation is the depreciable amount multiplied by the cumulative coefficient.

The cumulative coefficient is calculated by dividing the number of years remaining until the end of the fixed asset's useful life by the sum of the numbers of years of its useful life. Under the production method, monthly depreciation is the actual monthly volume of products, work or services multiplied by the production depreciation rate. The production rate is calculated by dividing depreciable value by the total volume of products, work or services that the company expects to produce or perform using the asset. Unlike the previous legislation, the depreciable value of fixed assets, other non-current assets and intangible assets was understood as their initial or revalued amount less residual value, as in accounting.

Depreciation of low-value non-current tangible assets and library collections could be charged as 50 per cent of depreciable value in the first month of use and the remaining 50 per cent in the month the asset was removed from the balance sheet because it no longer met the asset-recognition criteria, or as 100 per cent in the first month of use. For tax purposes, the enterprise used the depreciation method set by its accounting-policy order for preparation of financial statements. Thus, the same depreciation methods were applied in tax and accounting records. The method for a fixed asset could be reviewed if the expected pattern of economic benefits from its use changed, with the corresponding change made in accounting policy. Depreciation under the new method started from the month following the month in which the decision to change the method was made.

Article 146 of the Tax Code also provided for revaluation of fixed assets, similar to indexation of the carrying value of fixed assets under the previous Profit Tax Law. At the same time, as under the previous legislation, any other upward or downward revaluation of the carrying value of fixed assets made under accounting rules was not reflected in tax accounting. It should be noted that the transitional provisions limited the ability to account for revaluation. Current or capital repair costs for fixed assets could still be included in tax expenses within the permitted limit, with the 10 per cent limit calculated from the total carrying value of all groups of fixed assets at the beginning of the reporting year.

The value of goodwill, as stated in the Tax Code and the Profit Tax Law, was not depreciated and was not taken into account in determining the taxpayer's expenses for the assets to which the goodwill related. Special attention was required by paragraph 6 of subsection 4 "Special rules for corporate income tax" of Section XX of the Tax Code of Ukraine, which set the transition to the new depreciation rules from 1 April 2011. To determine the list of fixed assets, other non-current assets and intangible assets for the new groups and calculate depreciation from that date, an inventory was carried out as at 1 April 2011.

The depreciable value of each fixed asset, other non-current asset and intangible asset was determined from its initial or revalued value, taking account of capitalised costs of modernisation, modification, completion, repurposing and reconstruction, and accumulated depreciation according to accounting records as at 1 April 2011. These rules also applied when a taxpayer moved from the simplified tax system to the general system. Thus, single-tax payers could reflect in tax accounting depreciation accrued on fixed assets acquired or manufactured while they were on the simplified system.

If the total value of all groups of fixed assets according to accounting records was lower than their total value according to tax records as at 1 April 2011, the temporary difference arising from that comparison was depreciated as a separate asset using the straight-line method over three years. The useful life of fixed assets, other non-current assets and intangible assets for depreciation from 1 April 2011 was determined by the taxpayer independently, taking account of the date they were put into use, but not below the minimum useful life set by Article 145 of Section III of the Tax Code of Ukraine. The initial value of fixed assets was not increased by acquisition or improvement costs incurred after 1 April 2011

to the extent those costs had already been intended to increase the carrying value of the assets before that date. Section I of the Tax Code of Ukraine also changed the approach to determining ordinary prices.

The Tax Code provided specific methods for determining ordinary prices used in international practice, namely: the comparable uncontrolled price method, under which the ordinary price was determined from the price of identical, or where unavailable similar, goods, work or services sold or purchased between persons unrelated to the seller or buyer under ordinary business conditions; the resale-price method, under which the contractual price of goods, work or services on their subsequent resale by the buyer was used after deducting the appropriate mark-up and selling costs; the cost-plus method, under which the price consisted of the cost of finished products, goods, work or services determined by the seller plus the appropriate mark-up normal for that type of activity under comparable conditions; and the profit-split method, under which the profit from the transaction

was to be divided between its participants.

That profit was divided on an economically justified basis approximating the distribution that the participants would have received if they had been unrelated parties. The net-profit method was based on comparing the profitability of transactions calculated against an appropriate base, for example costs, sales or assets, with similar profitability indicators for transactions between unrelated parties under comparable economic conditions. The Cabinet of Ministers established the procedure for applying these methods of determining ordinary prices.

Unlike the previous legislation, the Tax Code established a list of official information sources for determining ordinary prices: statistical data of government bodies and institutions; prices from specialised auctions for certain products and exchange quotations; reference prices from specialised commercial publications, including electronic publications and other databases; reports and certificates of economic departments within Ukrainian diplomatic missions abroad; and other information sources recognised as official under the established procedure. As before, the state tax authority had the burden of proving that a contract price did not correspond to the ordinary-price level. At the same time, at the tax authority's request, the taxpayer had to justify that the price of a business transaction corresponded to the ordinary-price level.

An important innovation of the Tax Code of Ukraine was the rule that for goods and related items previously imported into the customs territory of Ukraine under import or re-import procedures, the ordinary sale price in Ukraine was the market price but not lower than the customs value of the goods and related services on which taxes and duties had been paid during customs clearance. Another innovation was that where a taxpayer's contractual prices differed upward or downward from ordinary prices by less than 20 per cent, the difference could not by itself be a basis for assessing an additional tax liability, adjusting a negative taxable amount or changing other tax-reporting indicators.

The Tax Code also provided that a large taxpayer could apply to the central tax authority to conclude a pricing agreement for tax purposes. Such an agreement was an arrangement between the taxpayer and the central tax authority on the method for determining prices and applying them for tax purposes during the term of the agreement. The Cabinet of Ministers was to establish the procedure for concluding and performing such agreements. It should be noted that the new rules for determining and applying ordinary prices were to enter into force from 1 January 2013; until then, the procedure established by paragraph 1.20 of the Profit Tax Law remained in force.

According to the definition in Section I of the Tax Code of Ukraine, a tax difference was a difference arising between the measurement and recognition criteria for income, expenses, assets and liabilities under national accounting provisions or international financial reporting standards and the income and expenses determined under Section III of the Tax Code of Ukraine. Two types of tax differences were identified: a temporary difference, arising in a reporting period and reversing in later reporting tax periods; and a permanent difference, arising in a reporting period and not reversing in later reporting tax periods.

Under the relevant provisions of the Tax Code of Ukraine, a corporate income taxpayer was to state temporary and permanent tax differences in its financial statements in a form established by the Ministry of Finance and submit the quarterly or annual financial statements, except for small enterprises, to the tax authority together with the relevant tax return under the procedure for filing tax returns. Small businesses falling within the relevant classification submitted annual financial statements together with the annual tax return. Separate transitional provisions also provided that the methodology for accounting for temporary and permanent tax differences was to be approved under the procedure established by the Law of Ukraine No. 996-XIV of 16 July 1999 "On Accounting and Financial Reporting in Ukraine".

The transitional provisions provided for preparation of a methodology for accounting for temporary and permanent tax differences and its subsequent use in the financial statements of corporate income taxpayers. The loss carry-forward procedure allowed a negative taxable amount to be taken into account in later periods until absorbed, with separate rules for transactions and activities that the Code accounted for separately.

At the same time, an innovation of the Tax Code of Ukraine was that losses from activities subject to patenting were not included in the total amount of losses and were recovered against income received from the same activity in future tax periods.

Under Section XX "Transitional Provisions" of the Tax Code of Ukraine, loss carry-forwards in 2011 were handled as follows: if calculation of the taxable object of a resident taxpayer for the first quarter of 2011 produced a negative amount, that amount was included in the expenses of the second calendar quarter of 2011. Calculation of the taxable object for the second quarter, the second and third quarters, and the second through fourth quarters of 2011 took account of the negative amount obtained for the first quarter within the expenses of those tax periods until the negative amount was fully absorbed.

Special transactions under the Tax Code of Ukraine. For dividends, the Code provided a mechanism for an advance corporate income tax payment when dividends were paid. Unlike the previous procedure, the advance payment was not charged in certain cases, including payments to individuals, businesses on the simplified tax system, fixed agricultural tax payers, and certain distributions by real-estate transaction funds. An innovation of the Tax Code was that the advance corporate income tax payment on dividends was paid at the location of the legal entity and its separate subdivisions in proportion to each subdivision's share of expenses in the taxpayer's total expenses as shown in the latest tax reporting filed by the taxpayer.

Tax accounting on reorganisation in Ukraine. Unlike the previous legislation, paragraph 153.15 of the Tax Code of Ukraine described in detail the tax-accounting treatment of legal-entity reorganisations. Funds or property received from a legal entity terminating through reorganisation were not included in the income of the successor taxpayer. The carrying value of fixed assets and intangible assets of the terminating legal entity was included in the carrying value of the corresponding groups of fixed assets and intangible assets of the successor taxpayer on the date the transfer act was approved and was depreciated under the general procedure. The value of inventories accounted for by the terminating legal entity was included in the successor's inventory value on the date the transfer act was approved.

If the date for recognising expenses incurred or accrued by the terminating legal entity had not occurred before approval of the transfer act, those expenses were taken into account in the successor's tax records. The successor obtained the right to recognise them under the general rules of Section III of the Tax Code of Ukraine. This rule also applied to expenses accounted for under special rules, such as costs of acquiring securities or derivative financial instruments, that had not reduced the terminating taxpayer's income before approval of the transfer act, and to income received or accrued by the terminating taxpayer but not included in income before approval of the transfer act. A negative taxable amount of the terminating taxpayer for the reporting period was included in the successor taxpayer's expenses.

This provision also applied to losses carried by the terminating taxpayer under special rules, including losses from securities, derivatives and claims. As under the previous Profit Tax Law, the financial result of transactions in securities and derivatives was determined separately by type of security or derivative. At the same time, paragraph 4 of subsection 4 of Section XX of the Tax Code of Ukraine provided that transactions involving securities and derivatives acquired before 1 April 2011 were reflected for corporate income tax under the rules in force when those securities were acquired, that is, under the Profit Tax Law.

Foreign currency and foreign-currency operations. Tax accounting for foreign-currency transactions was brought as close as possible to accounting rules. Section III of the Tax Code of Ukraine provided that exchange differences arising from translation of transactions expressed in foreign currency, foreign-currency debts and foreign currency were determined under accounting provisions or standards. An innovation was that when foreign currency was purchased, the expenses or income of the reporting period also included the positive or negative difference between the hryvnia exchange rate at which the foreign currency was purchased and the rate used to determine its carrying exchange value at the official rate. The accounting procedure for finance and operating lease operations was not materially changed by the Tax Code.

However, paragraph 9 of subsection 4 of Section XX of the Tax Code of Ukraine provided special corporate income tax accounting rules for rent-to-own lease transactions under agreements concluded after 1 April 2011 for a period ending no later than 31 December 2020.

Under this provision, the landlord company increased income by the amount of rent accrued to the individual, including the part of the lease payment intended to compensate part of the value of the leased property. The landlord increased the reporting-period expenses by the part of the property's value bearing the same proportion to its total value as the lease payment accrued to the individual for that period, in the part intended to compensate the property value, bore to the total lease payments intended to compensate the value over the entire lease term. Transfer of housing to an individual under a rent-to-own arrangement did not change the landlord's tax liabilities. Transfer of the housing into the individual's ownership at the end of the lease term or

earlier, provided all lease payments were fully paid, including the part intended to compensate the value of the leased property, did not change the landlord company's tax liabilities.

Section I of the Tax Code of Ukraine defined "rent-to-own housing" as a business transaction of a legal entity under which, under a lease agreement, property rights to unfinished real estate and/or housing were transferred to another party, an individual tenant, for payment over a long period of up to 30 years, after which or earlier, provided the lease payments were fully paid and there were no other encumbrances or restrictions, the housing became the tenant's property. A rent-to-own agreement could provide for assignment of the right to claim payments under the lease. Another innovation of the Tax Code was to define special taxation rules for activity carried out under property-management agreements.

A taxpayer that received property under a management agreement was required to keep income and expenses for each management agreement separately from its own tax accounting. Profit under each management agreement was taxed on the general basis and the tax was paid to the budget by the property manager. Income was paid to the settlor only after profit taxation. The property-management fee was included in the property manager's income from its own activity. The Code provided that the central tax authority would establish the reporting form for activity carried out under a property-management agreement. Doubtful-debt accounting in Ukraine under Article

159 of the Tax Code of Ukraine changed, compared with the previous legislation, the rules for adjusting tax accounting for doubtful debts. The changes were aimed at reducing budget risks while preserving taxpayers' basic rights to adjust tax liabilities because of late payment by buyers. In particular, a delay of more than 90 calendar days after the contractual payment deadline was no longer by itself a basis for adjusting the seller's tax accounting for doubtful debt. A taxpayer-seller that reduced reporting-period income by the amount of doubtful receivables

For "old" debt arising from delayed payment for goods, work or services where collection measures had begun before 1 April 2011, the debt continued to be reflected in the seller's and buyer's records for tax purposes until full repayment or recognition as bad debt under the separate procedure in paragraph 5 of subsection 4 of Section XX of the Tax Code of Ukraine. Tax relief in Ukraine under Article

154 of the Tax Code of Ukraine preserved a number of preferential tax regimes, including exemption of profits received by enterprises and organisations founded by public organisations of persons with disabilities; profits from the sale in Ukraine of certain special food products of own production; specified income of the Chornobyl Nuclear Power Plant; income financed by non-repayable international technical assistance or state-budget funds provided as Ukraine's contribution to the Chornobyl Shelter Fund for an international programme; and income of the state enterprises International Children's Centre Artek and Ukrainian Children's Centre Moloda Hvardiia from children's health and recreation activities. As under the Profit Tax Law, the Tax Code also provided special preferential taxation for profits connected with energy-saving technologies and energy-efficiency projects.

Special taxation rules were also retained for non-profit institutions and organisations and agricultural producers. The Tax Code retained the rule under which funds or property voluntarily transferred to resident entities for domestic production of national films, including animated and audiovisual works, could be included in expenses up to 10 per cent of taxable profit for the previous tax year. Unlike the previous legislation, the Tax Code provided that insurance costs for risks connected with producing national films, up to 10 per cent of the cost of producing a national film, were included in expenses; and the taxpayer's costs of producing a national film and acquiring intellectual-property rights to a national film were not depreciated but were included in full in reporting-period expenses.

The initial transitional provisions provided a zero rate from 1 April 2011 to 1 January 2016 for certain small corporate income taxpayers that simultaneously met criteria for income, number of employees and wage level. This provision describes the former preferential regime; for a modern company, the type of relief, its period and eligibility are determined only under the current version of the Code.

This applied to taxpayers meeting one of the following criteria: established under the procedure provided by law after 1 April 2011; taxpayers whose annual declared income for the three consecutive previous years, or all previous periods if they had existed for less than three years, did not exceed UAH 3 million and whose average number of employees during that period did not exceed 20; or taxpayers that had been registered as single-tax payers before the Tax Code entered into force and whose income from sales of products, goods, work or services for the latest calendar year was up to UAH 1 million and whose average number of employees was up to 50.

If a taxpayer applying the zero tax rate reached, in any reporting period, an income, average headcount or average employee salary indicator of which at least one failed the prescribed criteria, the taxpayer was required to tax the profit received in that reporting period at the standard rate. The tax holiday did not apply to businesses created after the Tax Code entered into force through reorganisation, including merger, accession, division, separation or transformation, privatisation or corporatisation, or to businesses carrying on entertainment activity; production, wholesale trade, export or import of excisable goods; production, wholesale or retail trade in fuel and lubricants; or production and trade in precious metals and precious stones, including stones of organic origin, subject to licensing under the Law of 1 June 2000

No. 1775-III "On Licensing Certain Types of Business Activity"; financial activity; currency-exchange activity; extraction and sale of minerals of national importance; real-estate operations and leasing, including leasing retail space in markets or commercial premises; postal and communications services; organisation of auctions for art, collectibles and antiques; broadcasting services under the Law of Ukraine No. 3759-XII of 21 December 1993 "On Television and Radio Broadcasting"; security activity; foreign economic activity, except information-technology activity; production from customer-supplied raw materials; wholesale trade and trade intermediation; production and distribution of electricity, gas and water; and activity in law, accounting, engineering and business services.

Taxpayers using the tax holiday that also accrued and paid dividends to shareholders or owners were required to accrue and pay the advance corporate income tax payment and pay corporate income tax at the standard rate for the reporting tax period in which the dividends were accrued and paid. The Tax Code of Ukraine also provided that corporate income taxpayers using the holiday submitted a simplified corporate income tax return to the state tax authorities and kept simplified records of income and expenses for calculating the taxable object under a methodology approved by the Ministry of Finance.

For taxpayers using the tax holiday, the Tax Code also provided that funds not paid to the budget because the zero rate was applied were to be used to upgrade the material and technical base, repay loans used for those purposes and pay interest on them, and/or replenish the taxpayer's own working capital. Amounts not paid to the budget under the 0 per cent rate were recognised as income at the same time as expenses financed from those amounts were recognised, to the extent of those expenses. If funds retained under the 0 per cent rate were not used for their intended purpose or were not used during the annual reporting period, the unused balance or the amount used for another purpose was payable to the budget in the first quarter of the following year.

income of privately owned preschool and general-education institutions received from providing educational services; and income of energy-sector enterprises within the costs provided by investment programmes approved by the National Electricity Regulatory Commission for capital investment in construction, reconstruction or modernisation of interstate, trunk and distribution local electricity networks and/or amounts directed to repayment of loans used to finance those purposes. Subsection 4 "Special rules for corporate income tax" of Section XX "Transitional Provisions" of the Tax Code of Ukraine also provided a large number of reliefs for corporate income taxpayers.

Temporarily, until 1 January 2020, profits of biofuel producers from the sale of biofuel were exempt from tax. Until the same date, profits of enterprises from business activity involving extraction and use of coal-bed gas or methane carried out under Law No. 1392-VI of 21 May 2009 "On Gas (Methane) of Coal Deposits" were exempt. For ten years from 1 January 2011, exemptions also applied to profits from hotel services in five-star, four-star and three-star hotels, including newly built, reconstructed or substantially repaired or restored buildings, and to profits from the main activity of light-industry enterprises other than enterprises producing from customer-supplied raw materials.

At the same time, during a transitional period until 1 January 2012, light-industry enterprises that, when the relevant Tax Code provisions entered into force, had contracts for producing goods from customer-supplied raw materials expiring within the stated period could use the relief. Exemptions also covered profits of electricity-sector enterprises from sale of electricity produced from renewable energy sources; profits from the main activity of shipbuilding enterprises; profits of aircraft-manufacturing enterprises from their main activity and research and development carried out for the needs of aircraft manufacturing; and profits of engineering enterprises serving the agricultural sector. Temporarily, until 1 January 2015, profits of publishers, publishing organisations and printing enterprises from production of books in Ukraine, except erotic products, were exempt.

Temporarily, until 1 January 2016, funds or property received by film-production entities or animation entities and directed to production of national films were not included in corporate taxable income. As under the previous legislation, for resident space-industry entities licensed to carry on space activity and participating in international agreements, but no later than 1 January 2015, the corporate income tax period was one reporting calendar year. Corporate income tax rates established by subsection 4 "Special rules for corporate income tax"

of Section XX "Transitional Provisions" of the Tax Code of Ukraine applied subject to the following: funds released from taxation were directed by taxpayers to increase production or services, upgrade the material and technical base, introduce new technologies connected with the taxpayer's main activity and/or repay loans used for those purposes and pay interest on them; for tax purposes, amounts released from taxation were recognised as income at the same time as expenses financed from those funds were recognised, to the extent of those expenses; the Cabinet of Ministers established the procedure for targeted use of tax-exempt funds; and if the targeted-use requirements were breached, the taxpayer had to increase corporate income tax liabilities for the tax period in which the breach occurred and pay the penalty accrued under the Tax Code.

Corporate income tax rate and reporting period in the first edition. The initial schedule provided a rate of 23 per cent from 1 April 2011, 21 per cent from 1 January 2012, 19 per cent from 1 January 2013 and 16 per cent from 1 January 2014; profit for the first quarter of 2011 was taxed under the Profit Tax Law at 25 per cent. The legislature later changed this schedule. In 2026, the general basic rate is 18 per cent, while categories subject to special rates are defined by Article 136 of the current Code.

For the 2011 transition, the return was prepared cumulatively for the second quarter, the second and third quarters, and the second through fourth quarters of 2011; the first quarter closed the period governed by the previous law. Under the modern procedure, the quarter, half-year, nine months and year are used depending on the taxpayer category and annual-income criterion, and financial statements are filed as an integral part of the return.

profits of enterprises received from simultaneous production of electricity and heat and/or production of heat using biological fuels; profits of manufacturers of machinery and equipment specified by Article 7 of Law No. 1391-XIV of 14 January 2000 "On Alternative Fuels" for manufacture and reconstruction of technical and transport equipment, including self-propelled agricultural machinery and power plants consuming biological fuel, received from sale of machinery, equipment and devices manufactured in Ukraine. We will be pleased to see you among our regular clients. Good luck with your business. Company registration in Ukraine, LLC registration | Licences | Business information | Marketing research | Offshore. Ready-made companies | Investment consulting | Services for foreigners | Corporate law | Customs law | Intellectual property | Courts | Audit.

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