At the beginning of this year, the amendments to the Tax Code of Ukraine (hereinafter - TCU) entered into force, according to which, for the period to December 31, 2021, that is, within five years, it would be applied 0% rate for taxpayers who meet certain criteria. Let’s clarify what these criteria are.
Criteria
It should be reminded that amendments to para. 44 of sub-sec.4 of sec. XX “Transitional Provisions” of TCU were made by the Law of Ukraine “On Amendments to the Tax Code of Ukraine for Improving the Investment Climate in Ukraine” dated December 21, 2016, No. 1797-VIIІ.
Thus, for the period to December 31, 2021, 0% rate should be applied for of the income tax payers, whose annual income determined in accordance with the accounting rules for the last annual reporting period does not exceed UAH 3 million and the amount of salary (income) accrued for each month of the reporting period to each employee who is in labor relations with the taxpayer, is not less than two minimum wages, the amount of which is established by the law. In other words, in order to apply the rate of 0% in 2017, each employee should be paid a salary of not less than UAH 6 400 (3 200 x 2).
In addition, a payer who wants to apply a zero tax rate must meet one of the following criteria:
- a company should be created after January 1, 2017;
- an operating company during the three consecutive previous years (or during all previous periods, when since its formation past less than three years), the annual amount of income must be declared in the amount not exceeding UAH 3 million and the average number of employees during this period should be from 5 to 20 people;
- a company should be registered by the payer of the unified tax in the period to January 1, 2017, its revenues from sales of products (goods and services) for the last calendar year should be up to UAH 3 million, and the average number of employees - from 5 to 50 people.
Calculation of the average number of staff employees
The calculation of the average number of staff employees is established by the Instruction on Statistics of the Number of Employees approved by the order of the State Statistics Committee of Ukraine dated September 28, 2005, No. 286. According to para.3.2 of this document, the average number of staff employees is calculated on the basis of daily data on registered number of staff employees. These data should be specified in accordance with the orders on admission, transfer of employees to another job and termination of employment contracts. The average number of staff employees per month should be calculated by summing the number of staff employees of the accounting staff for each calendar day of the reporting month, that is, from 1 to 30 or 31 (for February - 28 or 29), including weekends, holidays and days off, and division of the received amount on the number of calendar days of the reporting month.
Who cannot apply a zero rate?
However, even if all the above criteria are met, not every company can go to zero tax. The list of exceptions provided by TCU is rather wide. The business entities that carry out the following activities cannot apply a zero rate:
- entertainment activities. It should be recalled that according to para.14.1.46 of TCU activity in the field of entertainment is the economic activity of legal entities and individuals - entrepreneurs, which consists in conducting lotteries, as well as entertaining games, participation in which does not involve the receipt of cash or property prizes (winnings) by participants, in particular billiards, bowling alley, table games, children’s video games, etc.;
- production, wholesale, export, import of excisable goods. According to para.14.1.145 of TCU, excisable goods (products) are the goods by codes in accordance with the Ukrainian Commodity Classification of Foreign Economic Activity, on which the rates of excise tax were established by the TCU. The list of excisable goods and the rates under which the excise tax is calculated when taxing these goods is determined in para.215.3 of the Tax Code;
- production, wholesale and retail sale of fuels and lubricants;
- extraction, serial production and production of precious metals and precious stones, including organogenic formations;
- financial and insurance activities (from gr.64 to gr.66 Sections K КВЕД ДК 009: 2010);
- currency exchange activities;
- extraction and sale of minerals of national importance;
- transactions with real estate (gr. 68 КВЕД ДК 009: 2010);
- postal and courier activities (gr. 53 КВЕД ДК 009: 2010);
- activities on the organization of bids (auctions) by art, collectibles or antiques;
- activities on rendering services in the field of television and radio in accordance with the Law of Ukraine “On Television and Radio Broadcasting” No. 3759-ХІІ;
- security activities;
- foreign economic activities (except activities in the field of informatization);
- production of goods on the customer’s raw materials;
- wholesale trade and mediation in wholesale trade;
- activities in the field of production and distribution of electricity, gas and water;
- activities in the field of law and accounting (gr. 69 КВЕД ДК 009:2010);
- activities in the field of engineering (gr. 71 КВЕД ДК 009:2010).
In addition, business entities that are formed after January 1, 2017 through reorganization (merger, joining, division, allocation, transformation), privatization and corporatization do not apply taxation at the rate of 0%. It should be recalled that the procedure for termination of a legal entity through merger, joining, division and transformation is established by Art.107 of the Civil Code of Ukraine.
