Businesses who are registered to pay VAT will have an account opened within this new system commencing in 2015, to this end the Financial Service Authority will send a schedule of registered businesses liable for VAT to the bank. The schedule will include business name, registration number and an INN.

Once registered, all VAT invoices will be made and paid through this system without exception and regardless of the value of any tax invoice.

The amount of VAT will be automatically calculated according to the formula detailed in draft law 5079 and, once approved, funds will be transferred from the business VAT accounts to the Tax Office account.

The new system is designed to prevent the submission of fraudulent VAT returns and claims and will provide a smoother mechanism for tax collection on behalf of the government. It will also improve the transparency of the tax collection and highlight any anomalies due to operations within the shadow economy.

Also from 1st January 2015 the criteria that previously gave automatic VAT refunds will be curtailed.

The Tax Office highlighted the fact that the new VAT rules shall not apply to any refunds due and declared prior to 1st January 2015 which shall be reimbursed in accordance with article 200 of the tax code, effective until 1st January 2015.

There are, however, aspects of the new tax legislation and VAT collection by the newly implemented electronic system that will cause some concerns.

The reserved sum or amount is calculated according to the formula which does not take into account:

- A tax credit accumulated as of 01.01.2015

- Overpayment of VAT, which is recorded in the personal account of the payer as of 01.01.2015. Meaning that the registered VAT payer will need to transfer a certain amount of money from the operational bank account to the newly created VAT bank account.

In addition, this system does not include a mechanism for the reimbursement of overpaid sums of VAT to the business VAT account.

These deficiencies need to be addressed urgently by the tax authorities.

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Stamps for a business enterprise will no longer be mandatory for internal management purposes although their continued use shall be permitted.

Seals will continue to be necessary to authorize financial transactions and contracts between parties if it is regulated and indicated by the contracts.

These changes are in accordance with item 207 ГКУ (ГОСПОДАРСЬКИЙ КОДЕКС УКРАЇНИ - Commercial Code of Ukraine) of the law passed on 30th October 2014.

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