Changes to the Tax Code of Ukraine: Detailed Analysis of Law No. 466-IX (Bill No. 1210)

 

Law No. 466-IX, which was widely discussed as Bill No. 1210, was signed by the President of Ukraine on May 22, 2020, and came into force the following day. This document fundamentally changed the rules of the game for Ukrainian businesses.

Main objective of the law: improving tax administration, eliminating technical and logical inconsistencies in current legislation, and implementing international tax control standards.

CFC Taxation and Creation of the Appeals Board

One of the most high-profile innovations was the introduction of the Controlled Foreign Companies (CFC) profit taxation concept. From now on, any legal entity registered abroad but controlled by a resident of Ukraine falls under the close supervision of tax authorities.

The law also provided for the creation of a special body — the Appeals Board. It is designed to review taxpayer complaints against decisions of the central STS body, aiming to make the appeal process more transparent.

Excise Tax Administration: Fuel and Alcohol

The law significantly improved the electronic administration system for the sale of fuel and ethyl alcohol. Licensing conditions were simplified for compliant businesses, which is a positive signal for the market.

Sanctions and Accounting

At the same time, the timing and procedure for applying fines for violations of accounting, production, and circulation rules for fuel or alcohol at excise warehouses were completely revised. Control in this area has become stricter.

Financial Liability and Penalty Reform

An important step was the reform of the penalty (late payment interest) concept. It is now viewed not as a classic fine, but as a means of discounting money over time. This helps avoid double financial liability, where both a fine and interest were previously charged for the same violation.

Furthermore, businesses should pay attention to:

• Implementation of new transfer pricing reporting.
• Expansion of criteria for defining the permanent establishment of non-residents.

Permanent Establishments and Increased Fines

Tax authorities received the right to independently register non-residents if their activities show signs of a permanent establishment but they evade registration. This significantly limits opportunities for aggressive tax planning.

Fines for violating reporting rules have also increased substantially:

1. For non-submission or submission with errors — UAH 2040.
2. For repeated violation within a year — UAH 4080.

Concept of Guilt: A New Philosophy of Tax Offenses

Law No. 466-IX introduced revolutionary changes to the definition of an offense — the category of guilt has now been added. This means that liability only arises in cases specifically provided for by the TCU where the taxpayer’s guilt is proven.

Liability of Controlling Bodies

For the first time, parity is introduced: liability is borne not only by taxpayers but also by tax officials. An institute for compensation of damages caused by illegal decisions or inaction of the STS is being introduced.

Mitigating Circumstances

The law clearly defines a list of situations that allow a taxpayer to be exempt from financial liability or to have it significantly reduced.

Mitigating circumstances include:

• Committing an act under threat, coercion, or due to material or official dependence.
• A combination of severe personal or family circumstances.
• Self-reporting of the offense by the taxpayer before the start of an audit.

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