Cancellation of the flat tax rate of 2% starting from August 1st

Government draft bill No. 8401, "On Amendments to the Tax Code of Ukraine and other Laws of Ukraine regarding the Features of Taxation during the Period of Martial Law," has been approved by the Verkhovna Rada in its entirety.

The draft bill includes the following provisions:

1. Starting from August 1, 2023, the flat tax rate of 2% is abolished. However, the draft bill establishes a procedure for transitioning from the 2% flat tax rate:

• Taxpayers currently subject to the 2% flat tax rate have the right to submit a declaration to opt out of the 2% flat tax and indicate the taxation system they wish to switch to.
• New businesses that have chosen the 2% flat tax rate upon state registration will automatically be considered taxpayers of the third group of the simplified tax system with a rate of 5%.
• Taxpayers who transitioned from the 2% flat tax rate to the general taxation system in 2023 will have the right to revert back to the simplified tax system in 2023 by submitting an application.

Additionally, starting from August 1, certain restrictions on inspections are partially lifted for excisable goods (alcohol, tobacco, fuel), gambling businesses, and financial services.

The draft bill also includes the following provisions:

• The "technical debt" (accumulated from April 1, 2022, to July 31, 2023, in the electronic cabinet) will not be considered when determining the eligibility of taxpayers to continue operating under the simplified tax system.
• Individual entrepreneurs subject to the unified tax without VAT retain the right to use a simplified form of product (service) names in their accounting documents.

For legal entities, there is no requirement to obtain an approved list from the Cabinet of Ministers to supply goods to the defence forces.