Taxes
VAT
The Cabinet of Ministers of Ukraine by its Resolution “On Amendments to paragraph 9 of the Procedure of the electronic administration of value added tax” of 09.11.16, № 788 regulated the question regarding the registration in the electronic administration system of value added tax (hereinafter − VAT) of the amounts to which companies-utility providers could increase the registration limit. It is about the VAT repaid at the expense of the budget subvention to cover the difference in tariffs for heat energy, heating and hot water supply, services on centralized water supply, wastewater disposal, etc., which are delivered to the population.
Government officials predict that utility companies will be able to make out tax invoices to the relevant amount without the distraction of working capital for replenishment of electronic account in electronic administration system.
The State Fiscal Service of Ukraine in its letter “On reorganization of the VAT payer by a merger with another legal entity” of 03.10.16, № 21410/6/99-99-15-03-02-15 explained the VAT consequences for businesses that underwent the procedure of reorganization.
When as a result of the reorganization, all property rights and obligations of one VAT payer are transferred in full to another newly established company-VAT payer, then such a transaction is not the subject to taxation. In other circumstances, the transfer of property of companies should be taxed at the general rules.
At the same time, the company that is being reorganized by merger, consolidation, transformation, division and allocation, should be cancelled as the VAT payer. However, in this case, there should not be applied the rules of accrual of conditional VAT from para.198.5.1 of the Tax Code of Ukraine.
Consequently, such payer does not accrue the tax liabilities for goods/services, non-current assets on which the tax credit was reflected and which were not used in taxable transactions, and does not reduce the tax credit for their purchase transactions.
The State Fiscal Service of Ukraine in its letter “On the procedure of reflection of data on accounting statement in tax accounting for VAT” of 03.10.16, № 21411/6/99-99-15-03-02-15 reported that it was allowed to renew the tax credit on goods, services, non-current assets acquired before 01.07.15 for exempted from VAT transactions or non-business activity, if such purchases to be used in taxable transactions. The amount of the tax credit can be increased on the basis of the accounting statement (para.36 of sub-sec.2 of sec. XX of the Tax Code of Ukraine).
The data of the accounting statement should be reflected in the VAT declaration in lines 10.1, 10.2 (if the goods/services/non-current assets acquired in the territory of Ukraine) and 11.1, 11.2 (for imported goods/non-current assets).
When filling in the lines 10.1 and/or 10.2, the application D5 should be submitted to the declaration.
The data of the accounting statement should be specified in Table 2 of the application “Transactions for the acquisition with the value-added tax, which are the subject to the basic rate and the rate of 7%” of section II “Tax Credit”:
- in column 2 “Supplier (individual tax number)” − individual tax number of the taxpayer;
- in column 3 “Tax invoice, other document/drafting period” − the date of preparation of the accounting statement;
- in column 5 − the volume of supplies (without value added tax);
- in columns 6 and 7 − the corresponding tax rate (20% or 7%).
The State Fiscal Service of Ukraine by its letter “On the procedure of drafting of tax invoices by the company that engaged in retail trade” of 21.10.16, № 22779/6/99-99-15-03-02-15 explained that as of the date of implementation of a gift certificate (funds receipt), the tax liabilities arose for the VAT payer. The payment of purchased products with such a certificate by the buyer will be the second event, which has no consequences in VAT-accounting.
Retail dealers, who use the cash registers, should include the cost of the gift certificate in the final tax invoice issued on the date of sale.
As of the date of the actual delivery of products with payment of such a gift certificate (second event), the cost of such products is not included in the final tax invoice for that day (if the cost of these products is equal to the value of the gift certificate).
If the cost of products, which are paid by the gift certificate, exceeds their cost, the difference paid additionally by the buyer should be reflected in the final tax invoice prepared on the day of sale of the goods.
When the cost of production, which is paid by the gift certificate, is less than its cost, the difference should not be returned to the buyer. Tax authorities believe that the products are sold at a cost equal to the value of the gift certificate. At the same time, the tax liabilities formed as of the date of realization of the gift certificate (at the first event), should not be adjusted.
The State Fiscal Service of Ukraine in its letter “On the tax consequences on VAT on transaction upon presentation of the right of claim of the new creditor to the debtor and receiving the debt from the debtor” of 19.10.16, № 22627/6/99-99-15-03-02-15 explained what tax consequences on the value added tax (hereinafter − VAT) would have the transaction upon presentation of the right of claim of the new creditor to the debtor and receiving the debt from the debtor.
Replacement of the creditor in the obligation is withdrawal of the primary creditor for the obligation, accession of a new creditor to the obligation and the preservation of the full content of the obligation. Transaction upon presentation of the right of claim of the new creditor to the debtor does not lead to tax consequences on VAT, since it is passed the debtor’s obligations, which is not a product or service. Therefore, the new creditor at the date of assignment by the supplier of the right of claim to the debtor does not form a tax credit on VAT in the amount of the assigned right of claim, and does not accrue the tax obligations on VAT on the date of receipt the debt from the debtor.
The State Fiscal Service of Ukraine in its letter “On the clarification of the VAT tax reporting by agricultural commodity producers” of 21.11.16, № 37146/7/99-99-15-03-02-17 explained to the agricultural commodity producers – those who on special VAT treatment, how to correct mistakes made in the reporting (tax) period to 01.01.16 (when other rules of VAT accounting and form of special declaration). In this regard it is necessary to submit clarifying calculation according to current form approved by the order of the Ministry of Finance of Ukraine of 26.01.16, № 21.
If the error resulted in underpayment, then it should be paid to the budget and transferred to the special account of the agricultural company. It is necessary to apply the relevant proportions of distribution provided by Art.209 of the Tax Code of Ukraine (hereinafter − TCU).
Corporate Income Tax
The State Fiscal Service of Ukraine in its letter “On the limitation of liability of the income tax payers when applying para.31 of subsection 10 of Section XX of the Tax Code of Ukraine” of 05.07.16, № 14557/6/99-99-15-02-02-15 explained exactly for which violations regarding income tax on the results of activities in 2015 the company would not be fined.
According to para.31 of subsection 10 of sec. XX of TCU it is provided for exemption from liability only in the form of penalty (financial) sanctions under sections 3-5 of para.50.1, para.120.2, para.123.1 of TCU, in specific cases:
- violation of the procedure for calculating of the income tax;
- violation of correctness of filling of tax returns on the income tax;
- violation of completeness of payment of the income tax.
PIT and War Tax
The State Fiscal Service of Ukraine in its letter “On the procedure for accrual and payment of the personal income tax (the war tax) from the mentioned income at the expense of own funds” of 03.11.16, № 23653/6/99-99-13-02-03-15 considered the situation when the income was paid to the employee, but the tax agent, instead of withholding the income tax and the war tax, paid such amounts at his/her own expense. As a result of such actions, the employee has an additional benefit in the amount of paid taxes for him/her. In order to avoid such a situation, it is necessary to increase the base on the coefficient in kind and then to withhold the taxes.
Unified Social Contribution
The State Fiscal Service of Ukraine in its letter “On payment of the unified contribution by individuals − the entrepreneurs, who have chosen a simplified tax system and are pensioners” of 18.10.16, № 33824/7/99-99-13-02-01-17 noticed that the payers of the unified tax that were retired due to age or disabled (and receive a pension or social assistance according to the law) should be exempt from the obligation to pay the unified social contribution for themselves. At the same time the unified payer-pensioner or disabled person can voluntarily be the payer of the unified contribution independently defining for him/her the accrual base of the unified contribution (no more than the maximum value of the accrual base of the unified contribution).
After payment of the unified contribution, there is the right to receive social benefits of any kind (including sick leaves) in the mentioned category. In view of this, the fiscal authority states: the application of such a payer on the refund of the amounts of the unified contribution paid to him/her should be satisfied only after receiving of confirmation of the failure to receive the social benefits him/her.
Other Taxes and Fees
The State Fiscal Service of Ukraine in its letter “On the coefficient of profitability of mining companies at a discount rate of the National Bank of Ukraine” of 08.11.16, № 35730/7/99-99-12-03-04-17 explained which coefficient of profitability should be used by the rent payers for the use of subsoil for mineral product mining, who violated the term of regular geological and economic evaluation of mineral resources within the areas of mineral resources, for which they were issued special permits for subsoil use.
Therefore, in order to accrue the tax liabilities from rent for the use of subsoil for mineral product mining for III quarter of 2016 it should be applied the coefficient of profitability of mining company in the amount of 47.16% − triple amount of the weighted average discount rate of the National Bank.
The State Fiscal Service of Ukraine in its letter “On the rent for special water use” of 10.10.16, № 32993/7/99-99-12-03-04-17clarified: if a business entity − the landlord of premises has a concluded contract for the supply of water with company providing services on centralized water supply, and tenants of premises did not concluded separate contracts for the water supply − such transferred volumes of water should be considered as the subject to taxation of rental fee of the water user-supplier.
Therefore, the business entity that uses water exclusively for its own drinking water and sanitation needs, in case of providing of premises (non-residential or residential) should calculate and pay a rental fee for all the volumes of water, transferred to them by the company, providing services on centralized water supply to economic entities-water users, which rent items of immovable property.
Accounting and Reporting
The State Fiscal Service of Ukraine in its letter “On provision of the report by the insurers on the amounts of accrued unified contribution obligatory state social insurance” of 08.11.16, № 35758/7/99-99-13-02-01-17 reported: an updated form of USC report (as amended by the order of the Ministry of Finance of Ukraine of 09.07.16, № 813), should be submitted by the employers for November 2016 (in December 2016). Therefore, it is necessary to account for October 2016 according to the old form.
Labor and Salaries
The Cabinet of the Ministers of Ukraine by its Resolution “On Approval of the criteria for assessing the risk of economic activities in the field of mediation in employment abroad and determining the frequency of routine activities of the state supervision (control) by the Ministry of Social Policy” of 26.10.16, № 750 approved criteria that assessed the risk of economic activities in the field of mediation in employment abroad.
It should be noted that the specific level of risk of the business entity (high, medium or small) impacts on the frequency of scheduled inspections.
Consequently, the Ministry of Social Policy will conduct regular inspections of economic entities on compliance with legislation on mediation in employment abroad with the following frequency:
- with a high risk level − no more than once every two years;
- with a medium risk level − no more than once every three years;
- with a low risk level − no more than once every five years.
Control and Responsibility
The Cabinet of Ministers of Ukraine by its Resolution “Amendments made to the Procedures approved by the Cabinet of Ministers of Ukraine dated May 30, 2011 № 594 and 615” of 02.11.16, № 775 detailed certain provisions on reissuance of special permits for subsoil use and holding of an auction.
In order to obtain a permit without an auction, the applicant should submit the application with its two copies and documents attached to it.
There was an additional reason for the reissuance of the permit - in relation to the legal succession of a legal entity (subsoil user) as a result of reorganization by transformation. In addition, it was prescribed that the law could establish other reasons for the reissuance of the permit. Also, it was spelled out new lists of documents to be attached to the application for reissuance of the permit.
Besides, the composition of the auction committee should be approved with the consent of Ministry of Environment.
It was detailed that the decision to start preparing of the subsoil area to the auction or on refusal to conduct such preparing should be taken within 10 working days of the applications receiving by the organizer.
The State Fiscal Service of Ukraine by its Order “On approval of Guidelines for the procedure for interaction between departments of the state fiscal service when the organization, conducting and implementing of the documentary inspections of compliance with legislative requirements of Ukraine on the state customs affairs” of 12.10.16, № 856 issued new recommendations on the procedure for interaction between departments of the state fiscal service when the organization, conducting and implementing of the documentary inspections of compliance with legislative requirements of Ukraine on the state customs affairs.
New Guidelines are made more scrupulously. For example, there were listed the subdivisions of the SFS agencies, which conducted documentary inspections, the information to be analyzed to identify risks on the violation of customs legislation by the taxpayers, rules of working groups forming for inspections etc.
The Ministry of Justice of Ukraine by its Order “On Amendments to certain legislative acts of the Ministry of Justice of Ukraine on the state registration of legal entities and individuals - entrepreneurs and community formations” of 02.11.16, № 3150/5 changed certain rules of state registration of business entities. In particular, the principle of exterritoriality was narrowed.
Now, the subject to the state registration conducts the state registration regardless of the location of business entities, but it is within the Autonomous Republic of Crimea, Kyiv and Sevastopol cities, regions. That is, if the location of legal entity, for example – Kyiv region, he/she can apply to any State Registrar within his/her native region.
If the documents are submitted in electronic form, the state registration should be conducted regardless of the location of the person or community formation in Ukraine.
The state registration of legal entity termination by its liquidation under the simplified procedure should be conducted by the subject to the state registration, authorized to store such legal entity registration case in paper form.
The registration cases of business entities should be stored in a paper form by the city councils of regional centres and/or Republican ARC values, Kyiv and Sevastopol cities, districts, district state administrations in Kyiv and Sevastopol cities at the location of legal entities, individuals-entrepreneurs.
The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On amendments to certain legislative acts of Ukraine regarding the improvement of the state registration of rights to immovable property and the protection of property rights” of 06.10.16, № 1666-VIII, which aimed at protecting property during the registration action. The administrative and criminal liabilities of entities of registration actions, participants of illegal conspiracy were also strengthened.
Now, the authenticity of the signatures of the founder (participant), authorized person or the head and secretary of the general meeting on the decision of the authorized management body of the legal entity, which is submitted for the amendments state registration on the legal entity, should be notarized. It is also necessary to notarize the authenticity of the signature on the founding document, the transfer act and the balance of distribution of the legal entity, the statement of withdrawal from the association.
It was introduced the messages sending (via e-mail) to all owners of the property on the submitted/received applications for carrying out of registration actions regarding their property.
The law increased the time limit for submission of complaints against the state registrar - up to 60 calendar days from the date of the decision that is disputed, or from the date when person became aware or could have known of the violation of his/her rights by relevant acts or omissions.
The Ministry of Justice of Ukraine received the right to exercise control in the sphere of state registration, including through the monitoring of registration actions in the Unified State Register in order to identify violations of the procedure for state registration by the public registrars, authorized persons of the subjects to the state registration. Thus, the Ministry of Justice will be able to initiate the cancellation of the certificate on the right to practice the notary activity by the Higher Qualification Commission of notary.
The law took effect from 02.11.2016.
The Ministry Justice of Ukraine by its orders “On Approval of the Procedure for exercising control over activities of employees of the state executive service, private executors” of 21.10.16, № 3004/5 and “On approval of the Provisional Disciplinary Commission of the private executors” of 21.10.16, № 3003/5 determined the mechanism for implementation of its inspections of employees of the state executive service and private executors. Thus, the Ministry of Justice will carry out comprehensive monitoring, scheduled, unscheduled and target validations.
In order to start the mechanism of attraction of private executors to disciplinary liability, the Provisional Disciplinary Commission of the private executors was established at the Ministry of Justice. The very commission will consider the issue of attraction of private executors to disciplinary liability for committing of disciplinary offenses and make a decision on the application of disciplinary punishment to them.
The Provisional Commission will have the power until the convocation of the Congress of private executors of Ukraine and the formation of the Disciplinary Commission of private executors.
The Cabinet of Ministers of Ukraine by its Resolution “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated August 6, 2014 № 409 and dated August 23, 2016 № 534” of 11.11.16, № 803 determined the following: if the local authorities established higher housing and utilities services norms of consumption than social norms, the compensation of additional costs for citizens (without cold and hot water counters), which receive a subsidy, should be carried out at the expense of local budgets. Therefore, the compulsory share of public services payment in such a situation should be calculated under the social norms for the consumers with a subsidy.
The State Fiscal Service of Ukraine in its letter “On the implementation of table wines without a license for the right of retail trade of alcoholic beverages” of 15.11.16, № 24600/6/99-95-42-01-15 explained that business entities could carry out retail trade only with table wines without a license for the retail sale of alcohol. At the same time, the restrictions on sale and consumption of table wines are in force for such sellers. The restrictions are provided for by Articles 152 and 153 of the Law of Ukraine “On state regulation of production and turnover of ethyl alcohol, cognac and fruit, alcoholic beverages and tobacco products” of 19.12.95, № 481/95-BP.
In particular, it is about the sale of table wines:
- to persons under the age of 18, and by persons under the age of 18;
- in premises and in the territory of educational institutions, health care facilities;
- from vending machines and in sales areas not provided for this.
Temporarily Occupied Territory
The State Fiscal Service of Ukraine “On taxation of incomes in the form inheritance received by an individual, who has a tax address (location) in “Crimea” FEZ territory of 01.11.16, № 11497/П/99-99-13-02-03-14 noted that the inherited property from an individual-resident with the tax address in “Crimea” FEZ territory should be imposed 18% of the income tax and 1.5% of the war tax (sub-para. 174.2.3, para. 167.1 of the Tax Code of Ukraine). Since the individuals, who have tax address (residence) in “Crimea” FEZ territory, are equated to non-resident with the purpose of taxation (para. 5.3 of the Law of Ukraine “On creation of “Crimea” free economic zone and the peculiarities of economic activity in the temporarily occupied territory of Ukraine” of 12.08.14, № 1636-VII).
However, if the person received the status of internally displaced person, he/she should be equated to the resident for tax purposes. Therefore, after the obtaining of the heritage from a family member in the first-degree relation, he/she does not pay the income tax and the war tax (sub-para. “a” of sub-para.174.2.1, sub-para.1.7 of para.161 of subsection 10 of Section XX of TCU).
Financial Market
The National Bank of Ukraine in its letter “On the activities of individual payment systems and settlement systems” of 02.11.16, № 57-0002/90626 noted that issuance of electronic money could be exercised only be the bank that previously agreed rules on the use of electronic money with the financial regulator.
The rules regarding trademarks as “Webmoney”, “Yandex.Money”, “QIWI Wallet”, “Wallet one”/ “Yedynyi gamanets” etc. were not agreed by the National Bank, so it is prohibited for users to provide services using these brands.
At the same time the National Bank agreed rules of domestic payment system “WebMoney.UA”, which was not the rules of use of electronic money and does not contain a description of transactions with electronic money.
The list of domestic and international payment systems, which have the right to operate in Ukraine, as well as the list of banks, which are eligible to issue electronic money, can be found on the official website of the National Bank in the section “Payment systems and settlements”.
The National Bank of Ukraine by its resolution “On approval of amendments to the Regulations on the use of foreign currency in insurance activities” of 01.11.16, № 398 made amendments to the Regulations on the use of foreign currency in insurance activities approved by the NBU Board of 11.04.2000, № 135. In particular, the requirement on obligatory translation of documents in a foreign language was cancelled.
The authorized bank will be able to buy foreign currency and conduct other transactions on the basis of both originals of the relevant documents (including electronic documents), and copies in electronic/paper form from the original documents in hard copy. Copies of documents in hard copy could be not only notarised, but signed by the head or deputy head of the client with the imprint of his/her seal (if available).
The National Bank of Ukraine by its Resolution “On Amendments to the Resolution of the Board of the National Bank of Ukraine dated September 14, 2016 № 386” of 22.11.16, № 402 softened the temporary restrictions in the foreign exchange market for the banks and their clients.
In particular, previously the banks could buy the currency in the interbank market for their customers only if the balance of its own funds in foreign currency was less than 25 thousand US dollars (equivalent). The National Bank extended the list of exceptions that should not be included in such a balance.
Now, when its calculation, the money, which there is on the client’s account, is not taken into account, but will be used on the day of purchase of foreign currency for payments on the basis of payment orders that do not require the inclusion in the appropriate registers. Funds, which will be used to meet the obligations for transactions of goods import together with the purchased currency, also should not be included in the balance.
The amendments entered into force on 23.11.16 and are valid until 15.12.16 inclusively.
Securities Market
The National Commission on Securities and the Stock Market (hereinafter – NCSSM) by its decision “On approval of amendments to certain normative legal acts of the National Commission on Securities and the Stock Market (concerning the conversion of obligations into shares)” of 27.09.16, № 950 took measures due to which the obligations could be converted into shares of the joint-stock company. In particular, it is allowed to use the norms of the Procedure of increasing (decreasing) of the authorized capital of a public or private joint-stock company approved by the decision of the NCSSM of 14.05.13, № 822 for the conversion of the monetary obligations into the company’s shares via private placement of additional shares of existing nominal value (excluding banks).
The sources of the increase of the authorized capital of the company could be additional contributions, including monetary contributions made by offsetting a similar claim of regress on monetary obligations (other than rights of claim under obligations to pay wages and the obligations to pay the unified contribution for obligatory state social insurance, taxes and duties (mandatory payments) and other obligations toward state and local budgets).
It is clarified that placement of the shares can be paid not only with monetary funds but also under the agreement between the company and the investor − offsetting a similar claim of regress on monetary obligations, property rights, moral rights having monetary value, securities (except for debt of equity securities, issued by the purchaser, and the commercial papers), other property.
The Other Things
The Cabinet of Ministers of Ukraine by its Resolution “On approval of foodstuff sets, non-food items and range of services for main social and demographic groups” of 11.10.16, № 780 approved new foodstuff sets, non-food items and range of services for main social and demographic groups. Therefore, now the living wage should be calculated taking into account composition of a new consumer goods basket.
It should be noted: the adoption of the updated consumer basket was forcibly. Because, almost for a year the Government was satisfying a judgment, which had obliged it to review the consumer basket.
It should be recalled that the establishment of the living wage is based on three elements:
- foodstuff set;
- non-food items;
- range of services.
These sets should not lose their relevance. It means that they should be reviewed at least every five years. But the requirement was successfully ignored, because heretofore the basis of the living wage included the consumer basket of 2000.
The Cabinet of Ministers of Ukraine by its Resolution “Certain issues of management of the state property” of 02.11.16, № 783 determined a temporary discount on the rent of the state property. In particular, rental rates for the lease of the state property should be applied at rate of 70% of the determined volume up to 31.12.19.
In order to settlement of lease agreements of integral property complexes of the state enterprises, organizations and their structural divisions (branches, departments, sections), concluded before 10.11.16, it should be applied the rental rate in the amount of 70% of the rental rates for the use of integral property complexes of the state enterprises, specified in Annex 1 to the Methodology for calculation of rent for the state property and the proportion of its distribution, approved by the Cabinet of Ministers of Ukraine of 04.10.95, № 786.
The President of Ukraine signed the Law of Ukraine “On Amendments to the Tax Code of Ukraine on the clarification of certain provisions on the taxation of non-profit organizations” of 06.10.16, № 1667-VIII. According to this law, religious organizations with non-profit status will have a privileged position compared to other non-profit organizations. In particular, religious organizations, which did not bring their founding documents in line with the requirements of paragraphs 133.4.1 of TCU, would not be excluded from the Register of non-profit institutions and organizations to 01.01.18. The norm was added to para.35 of sub-sec.4 of sec. XX of TCU. It should be reminded: other non-profit organizations could be excluded from the Register for the offense starting from 01.01.17.
Also, religious organizations with non-profit status were allowed to use the revenues for charitable activities provided for by the Law of Ukraine “On freedom of conscience and religious organizations” of 23.04.91, № 987-XII, including for the provision of humanitarian assistance, charitable activity, mercy.
The Verkhovna Rada of Ukraine made amendments to the Law of Ukraine “On Higher Education” of 01.07.14, № 1556-VII. According to the amendments, the graduates of institutions of higher education (hereinafter − IHE) are free to choose the place of work, except in cases determined by the law. Additionally, IHEs are not required to employ them.
Applicants, who concluded an agreement on working out at least three years in rural areas or towns, will be eligible for priority enrolment in medical and pedagogical universities under the state order. The government will also provide housing with heating and lighting for free use for them.
The Ministry of Justice of Ukraine in its letter “On the need for confirmation of meeting the requirements of para.133.4 of Art.133 of TCU by local governments with their constitutive documents” of 17.10.16, № 35488/28454-0-33-16/7 reports: local governments should not confirm the compliance of their constituent documents with the requirements of para.133.4 of TCU for the purpose of inclusion in a new Registry of non-profit institutions and organizations.
