Increase in single tax rates, fines and audits: what will change in taxation from 2024

At the end of each calendar year, the Verkhovna Rada, together with the state budget, approves amendments to tax legislation. As a rule, these amendments boil down to increasing tax rates and expanding the powers of the State Tax Service, which are aimed at strengthening the fight against tax evasion.

In 2023, deputies moved away from this practice and did not change tax legislation globally. The head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, Daniil Getmantsev, told Mind that there will be no significant changes in taxation.

According to him, the draft state budget for 2024 was initially built on the current tax base. Therefore, reserves to fill the state treasury must be sought elsewhere. This, in particular, is an additional tax on bank income, a further increase in the excise tax on tobacco products, and a redistribution of personal income tax from local budgets.

Nevertheless, it will not be possible to do without tax innovations in 2024. figured out what taxpayers should prepare for.

Hidden tax increases for small businesses. From January 1, 2024, the cost of living for able-bodied persons and the level of the minimum wage (MW) will change.. In particular, the cost of living will be 3,028 UAH (until the end of 2023 — 2,684 UAH), the minimum wage — 7,100 UAH (until the end of 2023 — 6,700 UAH).

These indicators directly affect the taxation of small businesses.

Entrepreneurs using the simplified system who have chosen the first group of the single tax pay tax at a rate that is equal to 10% of the subsistence level. Accordingly, for them, from January 1, the monthly tax amount will increase to 302.8 UAH. Entrepreneurs of the second group pay a single tax of 20% of the minimum wage. Thus, for them the tax amount will be 1420 UAH per month.

Including a single social contribution linked to the minimum wage. Its base rate is 22% of the minimum wage. So from January 1, the unified social contribution will need to be paid in the amount of UAH 1,562 per month. From April 1, when the minimum wage rises again to UAH 8,000, the unified social allowance will rise to UAH 1,760 per month.

New revenue limits for “simplified people”. The minimum wage affects not only the level of taxation, but also the turnover of small businesses. Although in this case the effect is rather positive, because entrepreneurs can increase their revenues without risking being left out of the single tax.

Let us remind you: for the “simplers” of the first group, the maximum annual turnover is 167 minimum wages, the second group – 834 minimum wages, the third group – 1167 minimum wages.

Since the minimum wage will increase by 6% from January 1, the annual revenue for single tax payers will increase proportionally. That is, for the first group the maximum annual turnover will be UAH 1.19 million, for the second – UAH 5.92 million, for the third single tax group – UAH 8.29 million.

Environmental tax and excise taxes. The gradual abolition of reduced (preferential) environmental tax rates is planned for 2024.

“The environmental tax rates from January 1, 2024 to December 31, 2024 inclusive will be 90% of the rates established in the Tax Code. And from January 1, 2025, the rate of this tax is 100%. That is, the benefits are gradually being removed,” explains Igor Yasko, managing partner of the law firm Winner, and reminds that also in 2024 there will be an increase in excise tax rates and the minimum tax liability on tobacco products.

Bank profit tax. On November 21, the Verkhovna Rada adopted bill No. 9656-d (now law No. 3474-IX), which provides for changes (increases) in bank profit tax rates.

The law came into force in 2023. In 2024, its norms will also continue to apply, and the tax burden on banks will increase by 1.4 times compared to the standard rate. That is, banks will pay income tax at a rate of 25% from January 1, 2024 (standard rate is 18%).

Why is this law important? Because just increasing the level of taxation of bank profits will become one of the alternative sources of replenishing the state budget. By the end of 2023, banks will additionally “pour” UAH 24–25 billion into the state treasury, and in 2024 – about another UAH 7 billion.

Payment of tax liability within the framework of a “zero” declaration. Let us remind you that the campaign for one-time (“zero”) declaration of assets and income of individuals ended on March 1, 2023. Taxpayers who filed such a declaration could choose two options for paying a one-time fee: all at once or in installments (over 3 years in three equal payments).

So, for taxpayers who chose installments, the deadline for paying the second payment was shifted. They originally had to make the second payment by November 1, 2023, but now they have until May 1, 2024 to do so.

However, such an indulgence applies only to those individuals who filed a “zero” declaration after August 31, 2022.

Tax audits and control. For 2024, it is planned to expand the categories of taxpayers to whom the State Tax Service can come with a scheduled audit.

According to Artem Kuzmenko, a partner at the law firm Eterna Law, scheduled inspections of the following business entities will be added to the inspections of manufacturers/sellers of excisable goods, gambling businesses and payment service providers in 2024:

1. non-residents who operate in Ukraine through separate divisions, if the level of increase in their income tax is 50% less than the level of income growth or if the non-resident calculated wages, but did not declare taxable profits or other income exempt from taxation;

2. other payers who, based on indicators generated at the end of 2021, meet at least one of the following criteria:

the level of payment of income tax or VAT (with certain exceptions) is 50% less than the level of tax payment in the relevant industry; accounts receivable are twice as large as accounts payable; the total amount of expenses is equal to or more than 75% of the annual income (provided that the annual income is from 10 million UAH); accrued salary (applies only to legal entities) is less than the average salary in the relevant industry and region.

In addition, when drawing up a plan for documentary audits for 2024, tax authorities will take into account positive changes in the financial performance of the business:

the level of payment of income tax and VAT in the relevant industry for 9 months of 2023; level of wages accrued and/or paid by a legal entity for 9 months of 2023.

Thus, during 2024, the basis for routine inspections of business categories that meet the high-risk criteria is expanded. As a result, the number of inspections will increase, and the tax office will mainly take into account the indicators of payment of income tax, VAT and wage payments,” explains Artem Kuzmenko.

Penalties. In general, the procedure for applying sanctions to violators of tax laws will not change in 2024. The main tightening of liability occurred in the fall of 2023 — for businesses that neglect the requirements regarding the use of settlement transaction registrars (PRO).

“From October 1, 2023, if the regulatory authorities establish the fact of failure to conduct settlement transactions through RRO/PRRO with a fiscal regime of operation, financial sanctions provided for in paragraph. 1 Art. 17 of Law No. 265/95-VR,” warns Igor Yasko.

Namely: the fine is equal to 100% of the cost of goods/services for their sale without using a cash register or for failure to issue a fiscal receipt for the first violation and 150% of the cost for a second violation.

In 2024, these fines will not go away. It is important to take this fact into account for entrepreneurs who, for some reason, have not installed a cash register, but are required to do so in accordance with the requirements of current legislation.

In addition, from January 1, 2024, penalties will be added for violations related to reporting for the automatic exchange of information on financial accounts (CRS). Tax exchange standards began to operate in Ukraine on July 1, 2023 under Law No. 2970-IX.

True, these fines will only affect financial agents (banks, insurance companies, etc.). d.), which must inform the State Tax Service about the accounts of their clients. In particular, the fine for failure to submit a statement of accounts by a financial agent will be 100 minimum wages (710 thousand. UAH), and for late submission of such a report — 0.5 of the minimum wage (3,500 UAH).

Fines for owners of controlled foreign companies (CFCs) will also come into effect in 2024. For example, failure to submit a report on a CFC entails a fine of 100 subsistence minimums (UAH 303 thousand), and concealment of information about controlled companies faces a fine of 3% of CFC income.

“Changes from 2024 related to penalties for tax violations are aimed at strengthening tax control and ensuring timely and full payment of taxes. Also, the listed innovations are aimed at creating conditions for the implementation of the CRS standard in Ukraine and CFC reporting. Therefore, taxpayers should be more attentive to compliance with the requirements of tax legislation in order to avoid the imposition of fines,” advises Artem Kuzmenko.