Govt approves Finance Ministry bill on asset taxation rules, abuse prevention in line with EU standards

The Ukrainian Cabinet of Ministers has approved a draft law aimed at implementing taxation rules for the transfer of assets outside Ukraine, aligning with EU standards. This move is part of the EFF program with the International Monetary Fund. The registration of this draft law with the Verkhovna Rada is a significant step in protecting Ukraine's corporate income tax system from tax evasion and profit shifting.

The legislation introduces an exit tax mechanism, which taxes the appreciation in value of assets transferred outside Ukraine. This rule applies to corporate tax payers, including non-residents with permanent establishments, but not to temporary transfers or intra-group transfers. Additionally, the draft law introduces a general anti-abuse rule (GAAR) to prevent transactions made for tax benefits without valid commercial reasons.

The burden of proof will lie with the tax authority, and audits and objections will be handled by a Commission with representatives from the Ministry of Finance and experts from the taxpayer. Rules will also address hybrid mismatches, reverse hybrid mismatches, and tax residency mismatches caused by differing tax treatments across jurisdictions.

The new rules will apply from the date of publication and start on January 1, 2028, following Parliament's approval. Implementation will follow existing reporting requirements without new tax returns. The document is yet to be registered with the Verkhovna Rada.