Law of Ukraine “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” No. 466-ІХ of January 16, 2020 (hereinafter – Law No. 466) amends the personal income tax (hereinafter – PIT) and military levy. More detailed information on changes – below.
Personal income
The total monthly (annual) taxable income of taxpayer will not include:
- compensation for non-pecuniary damage determined by the court decision but no more than four minimum salaries set by the law as at January 1 of the reporting (tax) year or in amount specified by the law (subitem 164.2.14 of the Tax Code);
- sum pensions (including amount of their indexation accrued according to the law), including form foreign sources (subitem 164.2.19 of the Tax Code excluded).
Tax discount
Law No. 466 suggests that natural entities in order to receive tax discount send to tax authorities together with tax return the copy of documents confirming expenses (except for electronic settlement documents which are detailed in return) and keep the originals. Previously, there was no requirement to provide copies (subitem 166.2.2 of the Tax Code).
Investment income
There will be rules to determine income form investment activity in case of sale or purchase of investment assets form non-residents – related persons or special non-resident (subitem170.2.2 of the Tax Code).
In addition, the transaction of reducing authorized capital of the corporate rights issuer is equated to the sale of investment asset.
Sale of incomplete construction
It is planned to tax income from sale (exchange) of incomplete construction.
Thus, if selling incomplete construction in the form of a house, apartment or part thereof, no more than one time per reporting tax year then the income from its sale is not subject to tax provided that such object is owned for more than three years (item 172.1 of the Tax Code).
In case of selling incomplete construction, which is owned for less than three years or if it is not a first sale, such transaction is subject to personal income tax (hereinafter – PIT) at 5% rate.
Sale of movable property
It is intended to set that during the reporting (tax) year the sale (exchange) of third and subsequent movables in form of car and/or motorcycle, and/or moped or other vehicles will be subject to tax at 18% rate.
Previously, the sale of third object of movable property was subject to tax at 5% rate. The taxation procedure for sale of first or second object of movable property remains the same. Thus, the sale of first object during the year is not subject to tax and for the second object the tax rate is 5% (item 173.2 of the Tax Code).
1.5% military levy must be paid form the income subject to PIT regardless of tax rate.
Entrepreneurs subject to general tax system
Law No. 466 changes the composition of expenses of entrepreneur subject to general tax system:
- the income includes almost all amount of property tax except for tax for non-residential buildings. Thus, the amount of land tax and rent for state and communal land as well as tax for non-residential buildings reduce the financial result of taxpayer (subitem 177.4.3 of the Tax Code);
- entrepreneurs subject to general tax system can include to expenses the accrued amortization for heavy vehicles and maintenance expenses. Thus, there will be no problem with expenses for fuel and spare parts for heavy vehicles. These are expense incurred for entrepreneur (subitem177.4.6 of the Tax Code). As to cars nothing has changed: expenses for their maintenance, repair and accrued amortization are not considered as expenses incurred for the entrepreneur;
- only expenses for current repair of the fixed assets are not subject to amortization and are fully included in the expenses for the reporting period. At the same time new fixed assets are now assets the cost of which is UAH 20 thousand. But the costs of overhaul, reconstruction, modernization and other types of improvements to fixed assets will be incurred only through amortization. Thus, for such expenses one should be at first increase the cost of fixed assets and then when carrying out its amortization attribute this sum to the expenses;
- “new” entrepreneurs subject to general tax system do not submit first quarterly income declaration. They submit reports only once a year. This applies also to those who are moving from general system to a simplified one.
By the way, it does not affect the payment of PIT advances. They should be paid, as previously, in advance;
- the entrepreneur can submit liquidation declaration during 20 days after the end of the month when the information on liquidation has been entered in the Unified State Register of legal Entities, Individuals - Entrepreneurs and Public Organizations. Previously such report was required within 30 calendar days after deregistration.
