1. Assessments

Taxpayers make returns and payments on a self-assessment basis. However, if the tax authorities determine that the tax shown on the return is incorrect, they may assess taxes within 1,095 days (three years) from the deadline for filing a return or the date on which the return is actually filed, whichever comes later.

There is no limit on the period in which an assessment may be made if a taxpayer has deliberately evaded tax (if proven in court) or when a taxpayer fails to file a return. The tax authorities will also charge significant penalties for late filing or understatement of tax liabilities .

Appeals

Assessments may be appealed administratively or through the court system. The initial appeal is made to the local tax office that issued the assessment. If an appeal is rejected, a taxpayer may appeal in turn to the regional and national office.

An administrative appeal must be filed to the relevant level of the tax administration within ten calendar days of receiving an assessment or official advice that an administrative appeal has been rejected at a lower level.

The tax authorities must respond to the appeal within 20 calendar days. If they fail to do so, the appeal is deemed to be decided in favour of the taxpayer. The 20-day period may be extended by up to 60 days, but only if the authorities advise the taxpayer in writing within the initial 20-day period.

At any stage of the process, or if the national office rejects the appeal, a taxpayer is entitled to pursue an action through the courts instead.

Submitting an appeal suspends the requirement to pay the assessed tax, as well as the accrual of interest and penalties. Interest and late payment penalties will apply only if the taxpayer fails to pay the taxes by a revised due date after the appeal is finally resolved.

Withholding taxes

It is very important to ensure that withholding taxes are properly deducted and accounted for. Businesses generally have an obligation to withhold tax on payments to individuals (including sole proprietors) and payments to non-residents. Failure to withhold tax can attract a 200% penalty, as well as interest.

Withholding tax must be remitted to the authorities no later than the date when the payment is made to the income recipient.

Passive income (dividends, interest, royalties) from Ukrainian sources that is paid to non-resident entities is generally subject to 15% withholding tax. Other payments, including "engineering services," lease payments, agency and brokerage fees, are also subject to 15% withholding tax, but payments for most other services are not subject to withholding.

In addition, 15% withholding tax applies to gain on the sale of property, including real estate and securities, when paid by a resident to a non-resident entity.All withholding tax rates may be reduced under a relevant tax treaty.

Payments to non-resident persons for advertising services performed in Ukraine are not subject to withholding. However, the resident payer is required to pay, from its own funds, a 20% tax based on the value of such services.

A resident payer is similarly required to pay, from its own funds a 12% tax if a payment is made to a foreign insurer or reinsurer whose rating of financial reliability does not meet requirements set by the authorised state agency. A 0% rate applies otherwise.

As the taxes on advertising and insurance are levied on the resident party, they cannot be relieved using a tax treaty.