According to Art 6 of the Law of Ukraine “On the professional development of employees” of 12.01.2012, № 4312-VI, the organization of professional training of employees should be conducted by the employer based on the needs of their own business or other activities in accordance with legal requirements. Should be the cost of employee’s participation of the company in the seminar (conference) taxed, is in the following.
Professional training of employees can be performed directly in the employer on a contractual basis in the Vocational Educational Institutions and Higher Education Institutions, enterprises, establishments or organizations.
It should be reminded that a seminar is a form of group work with participation of invited, the purpose of which is the exchange of information on a particular topic.
Conference is a great meeting to be held one or more days devoted to one key issue or theme, divided into specific questions.
Participation in seminars (conferences) provides for the obtaining of information and consulting services on the basis of concluded contract with the organizer of the seminar (conference).
According to sub-para. 165.1.37 of the Tax Code of Ukraine (hereinafter - TCU), the total monthly (annual) taxable income of an individual (employee) does not include the amount of the employer’s costs in connection with the further training (retraining) of the taxpayer in accordance with the law.
Thus, if the invited party of the seminar (conference) and under conditions of the agreement, the recipient of information and consultation services is a legal entity (employer), whose interests are represented by the employee, the amount paid by a legal entity (employer) for participation in the seminar (conference) is not the income of the employee and should not be the subject to the personal income tax (hereinafter - PIT).
However, if under the contract conditions, the invited party and the recipient of information and consultation services is an employee, the amount paid by a legal entity (employer) for participation in the seminar (conference) for this employee is considered as income received by the latter in the form of additional benefit, which is included in the total monthly (annual) taxable income and should be taxed at the rate of 18%.
It should be recalled that, in accordance with sub-paras. 14.1.47 of TCU additional benefits are the tangible or intangible assets, services and other types of incomes, which a tax agent pays (provides) to the taxpayer, if such income is not wages, and is not related to the performance of duties of employment and is not remuneration under civil law contracts (agreements) concluded with the taxpayer (except for cases directly provided for by the norms of sec. IV of TCU).
In particular, it is noted by the tax authorities (the answer is in section 103.04 ZIR to the question “Should the employee’s participation in the seminar (conference, training) be the subject to PIT?”).
Expenses for professional development (retraining) of an individual, if such advanced training (retraining) is provided by the law (sub-para.165.1.37 of TCU), should be reflected in the tax calculation in form № 1DF with a sign “158”. If the taxable income earned by the taxpayer, is an additional benefit for him, it should be reflected in form № 1DF with a sign of income “126”.
If the cost of training is not included in taxable income, i.e. the conditions for exemption from PIT of paid amount are met, and then such cost is not subject to war tax. If the cost of training is related to additional benefits, then the war tax should be withheld from the employee at the rate of 1.5% (sub-para.1.3 of para.161 of sub-sec. 10 of sec. XX of TCU).
It should be reminded that in accordance with sub-para.1.2 of para.161 of sub-sec. 10 of sec. XX of TCU, the subjects to the war tax are the revenues determined be Art.163 of TCU, in other words the total taxable monthly (annual) income of the employee. The list of revenues, which are included in the total monthly (annual) taxable income of the taxpayer, is determined by Art.164 of TCU.
Training expenses are not included in the wage fund (paras.3.10 and 3.24 Guidelines on statistics of wages, approved by the order of the State Statistics Committee dated January 13, 2004, № 5). Therefore, these expenses are not the basis for the imposition of the unified social contribution (hereinafter – USC). The same is confirmed by para.9 of sec. II of the List of types of payments, made at the expenses of employers, which are not taxed by the unified contribution on the obligatory state social insurance, approved by the Cabinet of Ministers of Ukraine of 22.12.2010, № 1170, under which the USC is not accrued on the training expenses and retraining.
In addition, when the company concludes an agreement with a training centre, the recipient of services is a legal entity, but not an employee.
