On June 18, 2024, the Verkhovna Rada adopted the Law No. 11084, known as the “Law on the White Business Club”.
The law introduces a special club for businesses that comply with tax laws in good faith, encouraging voluntary tax payments and ensuring stable economic development.
Key provisions of the Law
The law establishes the creation of a “compliance manager” position - a tax authority official responsible for the interaction with taxpayers.
The main tasks of the compliance manager include:
- Forecasting tax risks: Analyzing the financial activities of companies to identify the potential tax risks.
- Preventing violations: Developing recommendations and consultations to prevent possible violations of the tax laws.
- Minimizing risks: Developing strategies to minimize the existing tax risks.
- Consulting and support: Providing individualized advice to businesses on tax issues.
Benefits for club members
Taxpayers who become members of the White Business Club will receive a number of benefits:
- Moratorium on documentary audits: Club members are exempted from scheduled documentary audits, which significantly reduces the administrative burden on business.
- Reduction of inspection periods: Desk and documentary audits for the purposes of budgetary reimbursement will be carried out in a shorter time frame.
- Individual tax consultations: Club members will be able to receive consultations on tax issues in a short time.
- Reservation of the employees liable for military service: On the recommendation of the Cabinet of Ministers of Ukraine, club members can book employees, who would otherwise be conscripted, in the amount of no more than 25%.
Requirements for club members
On a quarterly basis, the tax authorities will compile a list of the companies that meet the following requirements:
- Absence of a riskiness: The company should not be classified as a risky taxpayer.
- No violations of payment terms: During the year, there should be no violations of the deadlines for settlements regarding export and import of goods.
- No tax debt: The company’s debt should not exceed UAH 51 thousand, if more than 30 days have passed since its occurrence.
- Submission of reports: No violations in the submission of reports and/or documents, in particular, regarding CFC and financial statements.
- Payment of the unified social contribution: No arrears in the payment of the unified social contribution tax.
- No sanctions: The company and its beneficiaries should not be subject to sanctions under the Law of Ukraine “On Sanctions”.
- Financial stability: No insolvency proceedings against the legal entity or individual entrepreneur are pending.
- Legal status: Absence of the procedure for termination of a business entity.
- Relations with aggressor countries: Absence of citizenship or location within the aggressor country (russia and Belarus) of the company and/or its founders (participants)/final beneficial owners, except for the citizens who received the combatant status after April 14, 2014.
- Stability of activities: No changes in the main type of economic activity in the Unified State Register (USR) during the last 12 calendar months.
Advantages and challenges
The idea of creating the “White Business Club” seems reasonable, as the support of bona fide taxpayers and increased compliance contributes to the stable development of the economy, especially during wartime. However, there are still some challenges that must be further addressed:
- Interaction mechanism: The mechanism of interaction between the taxpayer and the “compliance manager” should be developed in detail to ensure the effective operation of the system.
- Non-discriminatory conditions: It is important to eliminate possible discriminatory conditions for business entities with different taxation systems.
- Transparency of the process: Ensuring transparency during the process of selecting and controlling club members is key to avoiding corruption risks and ensuring fairness.
The law on the White Business Club has the potential to become an important tool to support honest businesses and encourage voluntary tax payment. The success of its implementation will depend on the effective resolution of the above-mentioned issues and ensuring both transparency and fairness of all related procedures.
If you have any questions regarding the new law, please do not hesitate to contact us. We will provide all the necessary information and advice for your business.
