Legislation Overview (May 2016)

Taxes

VAT

The State Fiscal Service of Ukraine in its letter “On preparation of adjustment calculation to tax invoice, drafted before the start of the reorganization, by the taxpayer, which was reorganized by joining to another VAT payer” of 11.04.2016, № 7964/6 / 99-99-19- 15/02/03 considered the issue.

Controllers indicate in the letter: despite the fact that when the reorganization of the payer of value added tax (hereinafter – VAT) by joining to another VAT payer (assignee) occurs annulment of his/her registration as a VAT payer, the taxpayer (assignee) has no basis for compiling the adjustment calculation to tax invoice (hereinafter – TI) prepared by the taxpayer, including in case of change of the amount of compensation for the cost of delivered goods/services.

If the amount of compensation for the cost of delivered goods/services by the taxpayer increases, the taxpayer as the assignee should prepare a new TI for the amount of the increase at the date of this increase.

The State Fiscal Service of Ukraine in its letter “On exemption from VAT transactions on delivery of software products” of 12.04.2016, № 8181/6/99-99-19-03-02-15 reported: transactions for the supply of systems and/or equipment, an integral part of which is software products, to be not related to transactions for the supply of goods and services, to which VAT exemption applied. Accordingly, when implementation of such transactions, taxpayers are obliged to implement the calculation and payment of VAT on such transactions on a common basis, determined for the delivery of goods and services in Ukraine.

Only if a software product was delivered by the company-supplier as a separate item of supply and property right on such product was transferred (under the contract on transfer of exclusive intellectual property rights), such transaction should be exempt from VAT as a transaction for the supply of software products according to para.261 of subsection 2 of sec. XX of the Tax Code of Ukraine (hereinafter - TCU).

The State Fiscal Service of Ukraine in its letter “On the possibility of using the special VAT regime for transactions for the supply of services for storage of agricultural products by outside organizations and companies” of 20.04.2016, № 8924/6/99-99-19-03-02-15 stated that transaction for the supply of services for storage of agricultural products to other organizations and companies is not a transaction for the supply of agricultural company in the field of agriculture services.

VAT liabilities arising from the subject of a special regime of taxation of such transactions should be recognized in VAT declaration marked “0110”.

It should be reminded that in accordance with para. 5 of Sec.I of the Procedure for completion and submission of tax reports for VAT, approved by order of the Ministry of Finance of Ukraine of 28.01.2016, № 21, the taxpayers, which according to Art. 209 of TCU applied special tax regime of activities in Agriculture and Forestry and fisheries, except for the VAT declaration marked “0110”, which reflected payments to the budget, should submit VAT declaration marked “0121”/”0122”/”0123”. It is an integral part of the reporting for the relevant reporting period. Only those transactions that relate to the special regime established by the mentioned Article are included in such VAT declaration.

The State Fiscal Service of Ukraine in its letter “On the determination of the base of taxation of VAT transactions for the supply of goods in the customs territory of Ukraine, which were previously imported by the taxpayer or purchased in the territory of Ukraine” of 27.04.2016, № 9614/6/99-99-15-03-02-15 noted: according to para.37 of the Regulation on customs declarations approved by the Resolution of the Cabinet of Ministers of 21.05.2012, № 450, registration of adjustment sheet to be possible under condition of obtaining by the authority of revenues and dues of information on transfer of customs payments in the state budget by the declarant, in the form of additional payments or confirmation from by the Treasury Department the fact of return of state budget funds after finishing customs clearance.

Amendments to the customs declaration on the form of a single administrative document by registration of adjustment sheet should be made in accordance with the procedure approved by the order of the Ministry of Finance of Ukraine of 06.11.2012, № 1145.

 The adjustment sheet is to be filled in by the authority of revenues and dues in the case of:

• obtaining by the customs authority of information on transfer of customs payments in the state budget by the declarant, in the form of additional payments or confirmation from by the Treasury Department the fact of return of state budget funds after finishing customs clearance;
• necessity of correction upon a written request of the declarant or an authorized person by indicated in the customs declaration on the form of the Single Administrative Document information about products, not related to transfer of customs payments by such a custom declaration;
• necessity of reflection upon the written request of the declarant or an authorized person the information about products, which became known after finishing customs clearance of goods, not related to transfer of customs payments on customs declaration of Single Administrative Document.

The State Fiscal Service of Ukraine in its letter “On the necessity of accrual of tax liabilities for VAT in accordance with paragraph 198.5 of Article 198 of the Tax Code of Ukraine to the free transfer of goods” of 26.04.2016, № 9399/6/99-99-15-03-02-15  considered this question.

Controllers noted: transaction of free transfer of goods for the VAT, which implements such a transfer is subject to VAT in accordance with the standard procedure, except for cases when such a transaction is not exempt from VAT in accordance with the provisions of TCU, therefore in the implementation of such a transaction, para. 198.5 of TCU should not be applied, and the tax credit formed by the taxpayer when purchasing of transferred goods should not be adjusted.

If the VAT payer the purchased products/services, when the acquisition of which the amount of VAT to be included in the tax credit, uses in the delivery of goods/services to the charitable organizations that in accordance with paragraphs. 197.1.15 of TCU were exempt from VAT, such a payer is obliged to determine the tax liabilities on the basis of para. 198.5 of TCU under such goods/services on the basis of their acquisition cost.

If the VAT payer the purchased products/services, when the acquisition of which the amount of VAT to be included in the tax credit, uses in transactions not exempted from VAT in accordance with norms of TCU, during transactions for delivery of goods/services, he/she accrues VAT liabilities in generally established procedure.

Thus, according to paragraph 188.1 of TCU, taxation base of transactions for delivery of goods/services should NOT be lower than the purchase price of such goods/services, the tax base of operations for delivery of self-manufactured products / services should NOT be lower than the normal price.

Thus, if the acquisition price/regular price higher than the actual price (agreed cost) of delivery, the supplier (seller) should prepare two tax invoices:

• on amount calculated on the bases of actual delivery price;
• on amount calculated on the bases of exceeding the acquisition price/regular price over the actual price.

The State Fiscal Service of Ukraine in subcategory 101.08 “ZІR” gave answer to the question: whether recalculation is carried out of component of the formula that determined the amount of VAT, on which the taxpayer to be entitled to register the tax invoices and/or adjustments calculations in the Unified Register of tax invoices (hereinafter − URTI) (Sperevysh), if the payer prior to the deadline for submission of the VAT tax declaration for the reporting period submitted a new declaration with the corrected index marked “New Reported”?

Index component of the formula (Sperevysh), which determines the amount of tax for which the payer has the right to register the TI and/or adjustments calculations in URTI calculated by the State Fiscal Service (hereinafter − SFS) automatically after the adoption of statements on VAT from the taxpayer, and when the calculation of the positive values of this index, the registration amount of the payer should be decreased on the value. Thus, after submission of a reporting new VAT declaration, the SFS should automatically recalculate index Sperevysh.

The State Fiscal Service of Ukraine in its letter “On taxation of the transactions of provision of services related to means with the use of hardware-software complex” of 18.05.2016, № 10891/6/99-99-15-03-02-15 considered this issue.

In particular, the transaction of the agent on reception, within the agency agreement with the bank, of cash from the mobile communication subscribers with the use of program-technical complex of self-service for a further transfer of such funds from a bank agent, are not the subject to VAT, and such received funds are not included in the tax base.

However, in accordance with paragraph 185.1 of TCU, a service provided by the agent within the agent bank agreement, is subject to VAT taxation, and is subject to taxation in the generally established order at the basic rate. In this case the tax base for such an operation is determined on the basis of fee for the agent, received from the bank in the performance of the agency contract.

The State Fiscal Service of Ukraine in its letter “On the procedure of VAT taxation of operations of the resident-taxpayer for the supply to non-resident of counselling services outside the customs territory of Ukraine” of 05.05.2016, № 10098/6/99-99-15-03-02-15 noted: if the taxpayer carried out transactions outside the customs territory of Ukraine for the supply to non-resident, which to be registered as a business entity outside the customs territory of Ukraine, consulting services (including training for medical representatives of pharmacies and pharmacists), such transaction to be NOT a subject to VAT.

In particular, the SFS experts explain this by the fact that, in accordance with para. 185.1 of TCU, the subject to VAT taxation is transactions of VAT payers on the supply of goods/services, place of delivery of which is located in the customs territory of Ukraine.

In addition, paras.186.2-186.4 of TCU defined categories of services, place of delivery of which was determined by the place of registration of the supplier or the recipient or related services from the place of the actual provision of such services.

The place of delivery of services listed in paragraph 186.3 of TCU, in particular, consulting, engineering, legal (including attorneys), accounting, auditing, actuarial and advertising, is considered to be the place where the recipient of the service is registered as a business entity or − in the case of the absence of such a place − a place of permanent or his/her residence. In this case, the recipient − non-resident and the place of his/her registration as a business entity are outside the territory of Ukraine. Therefore, this transaction is not the subject to VAT.

Unified Social Contribution

The Ministry of Finance of Ukraine by its Order “On Amendments to the Regulations on the procedure for accrual and payment of the unified contribution for obligatory state social insurance” of 28.03.2016, № 393 (to be published in the journal Official Gazette of Ukraine” dated 17.05.2016, № 36) updated rules for accruals and payment of the unified social contribution (hereinafter - USC), because after the legislative amendments in 2016, those Regulations were not adjusted.

In particular, its norms provide for the following:

1. In case of change of class of professional risk of production for the period before January 1, 2016 the taxpayer independently carries out the recalculation of USC for past periods on the basis of the size of USC in force at the date of accrual (calculation and determination) of wages (income), on which USC is charged.

The taxpayer reflects in a report on accrued amounts of USC, which is submitted during the reporting period, independently calculated amount in a result of recalculation (the difference between the accrued amount of USC by the size, established earlier and accrued amount of USC by the established size for a specified period).

Authorities of revenues and fees use the data specified in the report on change of class of professional production risk for the period before 1 January 2016, received from the Social Insurance Fund, to exercise control over correctness of reflection additionally charged (decreased) amounts of USC in the reports submitted to the authorities of income and charges, in accordance with established classes of professional risk of production for the periods indicated in the message.

2. A fine should be imposed, in the amount of 10% of not timely paid amounts, for non-payment (non-transfer) or late payment (late transfer) of USC by taxpayers, who committed specified violation in the period before 1 January 2015.

Starting from 1 January 2015 should be imposed a fine on the taxpayer, in the amount of 20% of not timely paid amounts, for non-payment (non-transfer) or late payment (late transfer) of USC.

For additional charging, the authority of revenues and fees or the payer of not timely paid USC amounts before 1 January 2015 should impose a fine in the amount of 5% of the specified amount, and after 1 January 2015 - 10% of this amount for each complete or incomplete reporting period for which this amount is additionally accrued but not more than 50% of additionally accrued amount of USC.

3. A penalty is charged at the rate of 0.1% on the amount actually paid of a shortage for each day of payment delay on the amount of a shortage. At the same time an example of its calculation in 2016 is given.

4. The forms are given in an amended law:

• statements of the person taking part in the compulsory state social insurance system;
• a model contract for voluntary participation in the compulsory state social insurance system;
• a model contract for one-time payment in the compulsory state pension insurance system.

The State Fiscal Service of Ukraine in its letter “On accrual of the unified contribution on compulsory state social insurance in case of accrual and payment of wages to foreign citizens working in the representative office of a foreign company, situated in the territory of Ukraine” of 15.04.2016, № 8520/6/99-99-17-03-03-15 notes that since foreign citizens working in the representative offices of foreign companies located in the territory of Ukraine, the norms of Art. 253 of the Labour Code of Ukraine (hereinafter − the Labour Code) do not apply, they are not subject to compulsory state social insurance. Accordingly, these representations are not insurers for foreigners in the case of accrual and payment of income for them in territory of Ukraine in the form of wages. At the same time, wages of such citizens are not an accrual base of USC.

Other Taxes and Fees

The State Fiscal Service of Ukraine in its letter “On the issues of confirmation of a certificate of the amount of supplied excisable raw materials” of 15.04.2016, № 8611/6/99-99-15-03-03-15 reported: after the introduction of electronic administration system of fuel realization (hereinafter – EASFR), i.e. after 01.03.2016, company could not use the mechanism of reducing the amount of excise duty payable on the amount of excise tax calculated for the raw materials of which the excise tax was paid, defined  by paras.2,3 of subsection 5 of sec. XX “Transitional Provisions” of TCU, since this mechanism was temporary and it was valid until the introduction EASFR. During functioning of EASFR should be applied the norms of subpara. 217.1.6 of TCU.

The procedure of electronic administration of fuel realization is approved by the Resolution of the Cabinet of Ministers of Ukraine(hereinafter – CMU) of 24.02.2016, № 113 (hereinafter – Procedure № 113). Paragraph 35 of the Procedure № 113 determined the mechanism of preparation of application for replenishment of volumes of fuel balance, where should be indicated the volumes of fuel balance that increase or decrease. The same mechanism is provided by paragraphs 232.4.3 of TCU.

At the same time for calculating the reduction of the amount of the excise tax, the payer should receive from the manufacturer or importer of excisable raw materials a certificate of the volume of supplied excisable raw materials (stating the name of the buyer (recipient) of excisable raw materials, information on the relevant sums of paid excise tax and list of tax invoices for value-added tax, formalized for the supply of such raw materials) and the confirmation of the supervisory authority of the charging of the excise tax to the budget. Such confirmation is provided to the manufacturer or importer of excisable raw materials by the supervisory authority at his/her location within one working day after the appeal by providing relevant certificate (subparas.3 of para. 13 of sub-section 5 of sec. XX “Transitional Provisions” of TCU).

Accounting and Reporting

The Ministry of Finance of Ukraine by its Order “On Amendments to the procedure for the formation and representation of a report to insurers on the amounts of accrued unified contribution for obligatory state social insurance” of 11.04.2016, № 441 approved a new edition of the Procedure of formation and submission of reports to insurers regarding the amounts accrued unified contribution for obligatory state social insurance.

This norm comes into force on the first day of the month following the month of its official publication, i.e. on 1 June 2016.

The following is also stated in a new edition:

• reference of categories of insurers, who pay the unified contribution for obligatory state social insurance;
• correspondence table of category codes of the insured persons and accrual of basis of codes and sizes of rates of the unified contribution for obligatory state social insurance;
• reference of codes of grounds for the taking into account the length of employment to certain categories of persons in accordance with the law;
• Report on the amount of accrued wages (income, cash security, assistance and compensation) of the insured persons and the amounts of accrued unified contribution for obligatory state social insurance to the authorities of revenues and duties (Appendix 4);
• Report on the amount of accrued income of the insured persons and amounts of accrued unified contribution (Annex 5);
• Report of the amounts of voluntary contributions provided by the agreement on the voluntary participation to be paid, and the amounts of additional payments to the authorities of revenues and duties (Appendix 6);
• Report of the occurrence of an accident at work or occupational disease (Appendix 7).

In particular, it is assumed, if the insurer does not submit a report for the previous reporting period(s), in the current reporting month it is not allowed to reflect the amounts of accrued unified contribution to insured persons for the previous reporting period(s). In this case, the insurer is obliged to submit a report for the current reporting period and, if necessary, separately for the previous period(s).

Report for the previous reporting period(s) before 2016, which was not submitted, should be submitted to the authority of revenues and duties in a form effective as on 1 May 2015. This report is to be submitted only once per reporting period.

The statements for May 2016 should be submitted in June 2016 in an “old” form approved by Order № 435. Statements in new forms, approved by the order № 435 as amended by the order № 441, should be submitted by the USC payers starting from 01.07.2016, in other words, starting from the statements for June 2014.

Labor and Salaries

The Ministry of Social Policy of Ukraine in its letter “On Termination of Employment” of 02.03.2016, № 60/06/186-16 reports: if employee’s letter of resignation from work at his/her own request is due to the inability to continue to the work, in particular the move to a new place of residence, the owner or an authorized body should terminate the employment contract within the period which the employee requests. In accordance with Articles 38, 39 of the Labour Code (hereinafter - Labour Code), the employee is entitled to terminate the employment contract concluded for an indefinite period and fixed-term employment contract, giving a two weeks’ notice in writing to the owner or the authorized body.

If it is impossible for any reason to implement termination of employment in accordance with the procedure established by the applicable legislation, these relations should be terminated through the courts.

The Ministry of Social Policy of Ukraine in its letter “On payment for the labour of an employee during business trip” of 06.03.2015, № 141/18/99-15 considered that issue.

Thus, during the time when the employee is on a business trip, the employee should be paid under Art.121 of the Labor Code, according to the order of the director.

In accordance with Art.121 of the Labor Code, employees, who are sent on a business trip, should be paid for the executed work under the conditions defined by the employment or collective agreement, and the amount of such payment should not be lower than the average wage reserved by the employees for all working days on a business trip according to the schedule established at the place of permanent employment. That is, in case of sending an employee on a business trip it is necessary to compare the amount of the daily average and the daily earnings in accordance with the terms of the employment contract and if the daily earnings is above the average pay, the wage should be paid for the business trip, and if the high average earnings, the average wage should be paid.

 Also, it is mentioned in the letter that in accordance with Art. 265 of the Labour Code, persons guilty of a violation of labor legislation, are liable according to the current law.

The Ministry of Regional Development, Construction and Housing and Public Utility Sector of Ukraine in its letter “On the cost of exploitation of the leased construction machinery” of 21.03.2016, № 7/15-2930 explained the procedure for accounting of labor costs of workers employed in the operation and maintenance of removable construction machinery, which to be used for the construction of facilities, when calculating the cost of construction.

Thus, the parties determine the conditions of machinery exploitation when the conclusion of lease agreement of construction machinery.

If, in accordance with the lease agreement, the exploitation of leased construction machinery is carried out by the machinists of the contractor, when determining the cost of the executed construction works, carried out with the use of such equipment, general production expenses and administrative costs as well as profits are taken into account as in general on the construction project and should be calculated based on of labor costs of machinists involved in the management and maintenance of leased machinery.

If the lease contract indicates that exploitation of the leased construction machinery is carried out by the machinists of the lessor, in this case, general production expenses and administrative costs as well as profit of the construction object in general are calculated without taking into account of labor costs of machinists engaged in the management and maintenance of removable construction equipment.

The Supreme Court of Ukraine in its Order of 20.04.2016 with regard to case № 6-100цс16 concluded: deciding when considering the case of the restoration of an employee who was fired according to para.2 of sec.1 of Art.41 of the Labor Code, the question of attributing the claimant in a circle of employees who directly serve financial and commodity values, the court in each case should clarify:

1) if the performance of transactions, associated with the service of values, is the basic content of employment duties of the claimant;

2) if the performance of specified actions has responsible and accountable character with the presence of accounting, control of the movement and storage of valuables.

The employment contract on the initiative of the owner or the authorized body could be terminated in case of guilty actions of the employee, who directly serves the financial, trade or cultural values, if such actions provide the basis for loss of confidence in him/her on the part of the owner or the authorized body (para.2 of sec.1 of Art.41 of the Labour Code).

Termination of employment contract on this basis is possible under the following conditions:

• direct service of monetary, trade or cultural values by the employee (reception, storage, transportation, distribution, etc.);
• guilty action of the employee;
• loss of confidence in the employee on the part of the owner or the authorized body.

Legal analysis of the norm of substantive law gives reason to believe that it assumes the occurrence of negative consequences for the employer or presence of incurred material damage to the employer as a mandatory condition for the dismissal of an employee. Dismissal on the basis of loss of confidence could be considered a reasonable if the employee, who directly serves monetary or commodity values (provides their receipt, storage, transportation, distribution, etc.), committed intentionally or negligently such actions, which give reasons to the owner or authorized body for the loss of confidence in him/her (in particular, violation of the rules of transactions with material values).

The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Law of Ukraine “On Compulsory State Pension Insurance” regarding required insurance experience for the assignment of pensions to invalids of Group II” of 19.04.16, № 1110-VIII. Deputies prolonged the right of disabled of group II to a disability pension with insurance experience, established for persons with disabilities of I group by this Law until 1 January 2017.

Insurance experience, at the time of occurrence of disability or at the date of applying for a pension for disabled of group I, is as follows:

• before a person has reached the age of 25 years old inclusively – 1 year;
• from 26 years old before a person has reached the age of 28 years old inclusively – 2 years;
• from 29 years before a person has reached the age of 31 years old inclusively – 3 years;
• from 32 years before a person has reached the age of 34 years old inclusively – 4 years;
• from 35 years before a person has reached the age of 37 years old inclusively – 5 years;
• from 38 years before a person has reached the age of 40 years old inclusively – 6 years;
• from 41 years before a person has reached the age of 43 years old inclusively – 7 years;
• from 44 years before a person has reached the age of 48 years old inclusively – 8 years;
• from 49 years before a person has reached the age of 53 years old inclusively – 9 years;
• from 54 years before a person has reached the age of 59 years old inclusively – 10 years.

The Ministry of Social Policy of Ukraine in its letter “On calculation of the average wage for payments on compulsory state social insurance” of 07.04.2016, № 101/18/99-16 commented examples of calculation of average wage (income) by type of compulsory state social insurance, approved by order of the Ministry of Social Policy of 21.10.2015, № 1022.

If, within 12 months before the occurrence of the insured event, according to the State Register of compulsory state social insurance, the insured person has insurance experience at least six months, the average wage for the calculation of maternity leave should be determined on the basis of accrued wages, from which insurance premiums are paid, but no higher than of double minimum wage per month and no less than the minimum wage established by law in a month of the insured event.

Despite this, the maternity leave in such a case should be calculated in the following order:

• the average daily wage, based on the actual payments from which insurance premiums are paid, are to be calculated;  
• the amounts of the average daily maximum and minimum payments are to be calculated;
• the daily average amount of actual payments should be compared with the minimum and maximum average daily payments (calculated with double minimum wage);
• if the amount of the actual daily average payment is more than the minimum daily average payment, but does not exceed the maximum average daily payment, this amount is multiplied by the number of days that are the subject to payment;
• if the amount of the actual daily average payment exceeds the maximum payout, the amount of the benefit is to be calculated on the basis of maximum payout.

During the execution of the requirements in terms of determining of the amount of insurance payment per month should be applied bounding algorithm similar to limiting the maximum size of the USC base. That is, if in the full month period of maternity leave, the calculated payment amount exceeds twice the minimum wage (usually months with 31 calendar days), the amount of maternity leave in this month should be limited to this value. Accordingly, the total amount of insurance payments should be decreased.

The Verkhovna Rada of Ukraine promoted the government bill “On Amendments to the Law “On State Budget of Ukraine for 2016” (regarding social standards and volume of subsidies for the provision of benefits and housing subsidies) № 4543, which, among other things, would increase social standards from 1 December of current year. The minimum wage will be increased to UAH 1 600 on the first day of winter. It will be UAH 9.59 per hour.

Living minimum wage will be increased together with minimum wage: general index will be increased up to UAH 1 544. It will be UAH 1 600 for able-bodied persons.

The Verkhovna Rada of Ukraine approved the Law of Ukraine “On Amendments to the Labour Code regarding the test when applying for a job” (draft law № 1639).

The law provides for the following amendments:

• extension of the list of persons for which the test for employment is not to be established (the test is not established for elected for the position, winners of the competitive selection, when entering employment off the main job, etc.);
• not inclusion in the probationary period of those days, when  the employee actually did not work, regardless of the reasons;
• compulsory written employee warning that a labor contract with him/her will be terminated due to the fact that he/she failed the test, with no payment of termination indemnity;
• classification as the grounds of dismissal initiated by employer dismissal of an employee due to unsatisfactory test result.

Mobilization and ATO

The Verkhovna Rada of Ukraine approved the Law of Ukraine “On Amendments to the Law of Ukraine “On temporary measures for the period of the anti-terrorist operation” regarding the unimpeded activity of local authorities (draft bill № 4048) (hereafter − the law).

The law provides for that the conduction of registration actions associated with changes in founding members (participants) and legal entity manager, located in the settlements, in the territory of which the public authorities temporarily do not exercise their powers, and in the population centres located on the frontline for the period of the anti-terrorist operation (hereinafter − ATO) are prohibited.

During the ATO in the settlements located on the frontline, in the territory of which the public authorities exercise their powers, it is possible the conducting of registration procedures for legal entities of public law relating to the change in founding members (participants) and the head, and for legal entities of private law related to the change in founding members (participants) and the head, under the condition that documents are submitted in paper form personally by the founders (participants) and the head of legal entity of private law.

In addition, the law provides for the exemption from the payment of business entities for use of land plots of state and municipal property in settlements according to the list of settlements, in the territory where the public authorities temporarily do not exercise their powers, and the settlements located on the frontline, which is approved by CMU. Also, the rent for the use of state and municipal property in population centres as listed above is abolished for business entities.

Control and Responsibility

The State Fiscal Service of Ukraine in its letter “On the legality of conducting of scheduled documentary on-site audit by the State tax inspectorate of the region, taking into account the Law of Ukraine dated September 2, 2014, № 1669-VII “On temporary measures for the period of the anti-terrorist operation” of 18.05.2016, № 10844/6/99-99-14-03-03-15 explained: Art. 3 of the Law of Ukraine “On temporary measures for the period of the anti-terrorist operation” of 02.09.2014, № 1669-VII should not be applied to the exercising control of the SFS authorities.

According to this article, authorities and officials authorized by law to exercise state supervision (control) in the sphere of economic activity in the period and in the territory of ATO are temporarily prohibited to conduct scheduled and unscheduled inspections of business entities, carrying out activities in the ATO area, except unscheduled inspections of business entities, which in accordance with the approved by CMU risk assessment criteria from the economic activities related to business entities with a high degree of risk. However, the Law of Ukraine “On main principles of state supervision (control) in the sphere of economic activity” of 05.04.2007, № 877-V does not apply to relations arising in the implementation of control measures by the SFS authorities.

Financial Market

The National Bank of Ukraine (hereinafter − the NBU) on its website announced that prepares for the abolition of a ban on the purchase and transfer of foreign currency for the purpose of repatriation abroad to a foreign investor of dividends, which was approved by Resolution of the Board of the NBU “On the regulation of the situation in the monetary and foreign exchange markets of Ukraine” of 03.03.2016, № 140. For this purpose 26.04.2016, the regulator sent an electronic message № 25-0005/36769 to the banks with a request to work with their clients to determine the intentions of returning dividends abroad.

The repatriation of dividends could be implemented by:

• foreign investors (in the case if such transactions are carried out using an investment account);
• issuers of corporate rights/shares/investment certificates, that are subject to dividend payment (in the case when the issuer by own carries out purchase/transfer of foreign currency abroad);
• depositary institution, which support securities account of the depositor − foreign investor and provides for the payment of dividends on securities abroad.

Each of mentioned persons should choose only one authorized bank for this transaction. The bank client will not be allowed to such transactions in case of attempts to pay dividends through several banks.

The following information should be gathered from clients and provided to the NBU before 20.05.2016 by the banks:

• the person who carries out the purchase/transfer of foreign currency in order to return dividends abroad;
• an authorized bank;
• period for which the dividends are paid, year;
• total amount of dividends to be returned abroad to the foreign(-s) investor(s), UAH (for the purpose of filling in the form, the recalculation is carried out at the official rate of hryvnia to foreign currencies established by the National Bank of Ukraine on 26.04.2016).

Based on the received data, the NBU will develop a schedule and procedure for repatriation of dividends. Dividend payments in foreign currency will be implemented abroad gradually over a certain period.

The National Bank plans to abolish the ban on repatriation of dividends and announce the appropriate schedule and procedure after completion of the second review of the extended financing program with the International Monetary Fund.

Summary of Court Rulings

The Supreme Court of Ukraine (hereinafter − SCU) in its decision of 11.05.2016 with regard to case № 6-824цс16 concluded that the fact of the failure to conduct regulatory monetary valuation to be a sufficient basis for the recognition of the disputed land lease contract null and void.

The SCU noted satisfying a claim filed by the prosecutor, that compliance with proper economic regulation of land relations, provision of rent payment receipts in local budgets in the legally defined limits by their proper legal regulation to be directly related to the interests of the country.

The Supreme Administrative Court of Ukraine (hereinafter − SACU) in its decision of 22.03.2016, № К/800/48575/15 established that norm of para.188.1 of TCU did not provide such a separate component of the VAT base as “exceeding of the acquisition price over the price of implementation of the exported goods”. The tax rate depends on the character (type) of transaction: delivery of goods/services in the customs territory of Ukraine, export or import of goods. That is, the size of the rate and VAT exemption depends on the subject of taxation, and not on the taxation base.

Therefore, the requirement tax authorities on the necessity of taxation at the general rate of VAT of volume of goods exported in excess of its cost of acquisition over the actual export price is considered to be illegal.

The Other Things

The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Law of Ukraine “On the farm” on the stimulation of the establishing and activities of the family farms” of 31.03.15, № 1067-VIII.  Now, when establishing the farm its founders are allowed to choose how it should be established as a legal entity or an individual-entrepreneur.

The farm registered as a legal entity, has the status of a family farm on the condition that in its business activities is used the work of members of this farm, which are exclusively members of one family.

An individual-entrepreneur independently or jointly with members of his/her family organizes the family farm without legal entity status on the basis of a contract of the establishment of the family farm. This contract should be notarised.

The Verkhovna Rada of Ukraine approved amendments to some legislative acts of Ukraine − the Law of Ukraine “On Enforcement Proceedings” of 21.04.1999, № 606-XIV and the Law of Ukraine “On indexation of population incomes” of 03.07.1991, № 1282-XII.

 According to made amendments, in particular:

• alimony assigned to subjects to indexation of population incomes;
• indexation of the alimony amount determined by the court to be assigned to competence of state enforcement officers;
• it is established  that the indexation of the alimony amount determined by the court as a fixed monetary amount should be carried out at the expense of those who are responsible for child support.

The State Property Fund of Ukraine (hereinafter - the Fund), in its letter “On indexation of rental payment” of 04.05.2016, № 10-16-8324 reported: the Fund and its regional offices as the state property lessor suspended indexation of rental payment for the use of state property in 2016 (in connection with adoption of the Law of Ukraine “On State Budget of Ukraine for 2016” of  25.12.2015, № 928-VIII, taking into account the order of the Secretariat of the CMU dated 23.02.2016, № 2885/0/2-16).

Accrued rental payment for December 2015 (taking into account the index for December 2015) will apply to lease agreements for the state property concluded by the Fund and its regional offices from January to December 2016.

For example, the rental payment for November 2015 amounted to UAH 1 000. The size of the rent for December 2015, adjusted for the corresponding inflation index (inflation rate for December 2015 is equal to 1.007) is UAH 1 007. Thus, the amount of rental payment for the use of the property from January to December 2016 will amount to UAH 1 007 (per month).