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Ukraine To Wipe Out Tax Debts With Amnesty, VAT Bonds

Amendments to Ukraine's Tax Code, which have been tabled before parliament, would introduce a tax amnesty allowing for taxpayers to regularize their pre-2014 tax affairs by paying just 15 percent of unpaid VAT or income tax. The Government is also preparing to settle outstanding VAT refunds by issuing bonds.

The amnesty was approved by Ukraine's Cabinet on May 21, 2014, and legislation was forwarded to parliament. The amnesty provides that companies will be absolved of financial, administrative, and criminal liability providing they pay 15 percent of the outstanding tax liability in full within 90 days. The remaining 85 percent will be considered repaid, a Government statement said.

Also on May 21, 2014, the Government announced that it will clear a backlog of value-added tax refunds for exporters, worth about USD1.45bn, through five-year bonds tied to Ukraine's official interest rate. The payment of VAT refunds was required by the International Monetary Fund as part of the financial assistance package agreed for the nation.

The previous interim Government had confirmed that the headline VAT rate, which which was due to fall to 17 percent in 2015, is to remain at 20 percent indefinitely.

There was a change of Government in elections on May 25, 2014. Billionaire businessman and former foreign minister Petro Poroshenko took office as President.