Legislation overview (March 2019)

Taxes

VAT

The State Fiscal Service of Ukraine in its letter “On the analysis of the economic activity of tax payers in 2018, in particular regarding the implementation of export transactions” of 28.01.2019, No. 2559/7/99-99-12-03-01-17 reported that SFSU carried out analysis of the taxpayer’s economic activity in 2018, regarding the implementation of export transactions.

Despite the introduction of the Register of VAT refunds and automatic control over their provision, there are cases of minimizing VAT tax obligations by using tax evasion schemes through export transactions that are unusual for the main type of activity, the so-called “non-standard export”.

Therefore, the SFSU will conduct a detailed analysis of the identified business entities and will take comprehensive measures to properly process. In the course of the work, a study will be carried out on the subject of the reality of business transactions between the “nominee owner” and “real exporter” and the reality of changing the property status of the first one.

An analysis will also be provided:

• the application of prices for the subject of compliance with the usual ones;
• the fact of conducting business transactions (or only drafting of documents) and actual changes in the structure of assets and liabilities, equity of the companies in connection with its economic activity and the establishment of the following elements:
• establishment of a special legal personality of participants in a business transaction;
• establishment of the connection between the fact of acquisition of goods (services) and business activity of the taxpayer;
• establishment of compliance by the taxpayer of the specific requirements on the documentary confirmation of the amounts of the tax credit and/or budget VAT repayment;
• establishment of the fact of long VAT payment in the price of goods (services) bought by the taxpayer;

In addition, it will be taken into account that the resale of goods by the exporter with a small margin almost always has a positive financial result, which suggests that there is a reasonable economic objective. At the same time, the courts have repeatedly pointed out that despite the existence of a positive financial result, the tax revenue from such transactions for the taxpayer is much more significant. In its turn, level out the essence of business activity, since the subject must seek to obtain an economic effect from the growth of assets, and not from minimizing tax liabilities. Consequently, if the amount of income from the transaction is not significant in relation to the size of the tax benefit, then such a transaction may be considered illegitimate.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On Value Added Tax” of 19.02.2019, No. 614/ІПК/26-15-12-01-18 reported: if the mandatory requisite of the tax invoice (hereinafter – TI) which refers to the full or shortened name of the seller/buyer corresponds to the name indicated in the statutory documents of such persons, or the mandatory requisites of TI concerning the tax number of the seller/buyer corresponds to the numbers specified in the Register of value added tax payers (hereinafter – VAT) with an additional indication of the numerical branch numbers, then TI is not subject to correction.

In case the mandatory requisites concerning the description (nomenclature) of goods/services is indicated in a foreign language because of the impossible translation from the foreign language of the trademark or the name of the goods into the state language and in order to preserve the identification of the product, this does not prevent the identification of the performed transaction, its contents (goods/services supplied), period, parties and amount of tax liabilities, then this TI is not subject to correction.

The State Tax Service of Ukraine through the Large Taxpayers Office reported: in connection with the numerous appeals of taxpayers regarding the formation of tax liabilities and tax credit for value added tax (hereinafter – VAT) for electricity supply/purchase transactions, taking into account the Law of Ukraine “On the Electricity Market” of 13.04.2017, No. 2019-VIII (hereinafter – Law No. 2019), is as follows.

The legal principles of the VAT assessment are set by sec. V and sub-sec.2 and para. XX of the Tax Code of Ukraine (hereinafter – TCU).

According to sub-para. “a” and “б” of para. 185.1 of TCU the subject to VAT taxation is the transactions for the goods/services supply of the tax payers, the place of supply of which is situated in the customs territory of Ukraine.

The rules of the VAT credit formation are regulated by Arts. 187, 198, and 201 of TCU.

The taxpayer, which conducts supply transactions for goods\services listed in para.44 of sub-sec.2 of sec. XX of TCU, should determine the data of tax liabilities and tax credit occurrence according to the cash-basis method.

The rules of adjustment of tax liabilities and VAT credit are determined by Art. 192 of TCU.

In case of provision of a universal service for the supply of electricity to the consumer (universal service), the supplier should:

• determine VAT tax liabilities by the cash method, namely on the date of transfer by the consumer or through any third person to a bank account (at the cash desk) of the universal service provider as payment for the supply of electric energy (universal service);
• prepare and register in the Unified Register of Tax Invoices (hereinafter – URTI) the tax invoice (hereinafter – TI) for such a transaction to the consumer. At the same time, such a TI registered in the URTI, is the basis for the calculation of tax amounts that are part of the tax credit for the consumer (VAT payer).

In case of returning by the electricity supplier the amount of prepayment for electric energy to the consumer:

• to non-payer of VAT by transferring such amount to the universal service provider, while simultaneously transferring it to the personal account of the consumer (non-payer of VAT) to the electricity supplier, adjustment of the amount of tax liabilities in the direction of reduction is carried out on the basis of the calculation made and recorded in the URTI in the adjustment calculation to TI;
• to VAT payer by transferring such amount to the universal service provider while simultaneously transferring it to the personal account of the consumer (VAT payer) to the electricity supplier and the consumer (VAT payer), adjustment of the amounts of tax liabilities and, accordingly, VAT credit to the downward direction is carried out on the basis of a contract prepared by the electricity supplier adjustment calculation to TI and registered in the URTI. At the same time, the obligation to register such an adjustment calculation in the URTI is accrued to the consumer (VAT payer).

It should be recalled that the rules of the retail electricity market are approved by the decision of the National Commission, which carries out state regulation in the areas of energy and utilities, “On Approval of the Rules of the Retail Electricity Market” of 14.03.2018, No. 312.

The State Fiscal Service of Ukraine through the Office of Large Taxpayers informed that, in accordance with para. 188.1 of the Tax Code of Ukraine (hereinafter – TCU), the tax base for supply transactions, in particular, of self-manufactured goods/services, may not be lower than normal prices.

Under the usual price, the price of goods (works, services) specified by the parties to the contract is foreseen, unless otherwise specified by the TCU. Unless proved to the contrary, it is assumed that such an ordinary price corresponds to the level of market prices. This definition does not apply to transactions recognized as controlled in accordance with Art. 39 of TCU (para. 14.1.71 of TCU).

Under the market price is understood the price at which goods (works, services) are transferred to another owner, provided that the seller wishes to transfer such goods (works, services), and the buyer wants to receive them on a voluntary basis, both parties are mutually independent legally and in fact, have sufficient information about such goods (works, services), as well as prices which have developed in the market of identical (and in their absence homogeneous) goods (works, services) in comparable economic (commercial) conditions (para. 14.1.219 of TCU).

The market of goods (works, services) is the sphere of circulation of goods (works, services), which is determined by the possibility of the buyer (seller) without significant additional costs to buy (sell) the goods (works, services) to the territory closest to the buyer (seller) (para. 14.1.218 of TCU).

Consequently, the rules of TCU (not taking into account the norms for certain (specific) types of transactions):

- determine that the value added tax base (hereinafter – VAT) for the supply of self-manufactured goods/services cannot be lower than normal market prices;

- establish a number of mandatory conditions for the conformity of the delivery price (contractual price) with the market price, one of which is the possession by the parties of sufficient information about prices that have developed in the market of identical (and in their absence – homogeneous) goods (works, services) in comparable economic (commercial) conditions;

- provide an opportunity to prove inconsistency with the level of market prices of the contractual price.

Consequently, in the understanding of the TCU rules, the usual price for the calculation of the VAT base for the supply of self-manufactured goods/services is the price determined by the parties in the civil law contract, which, in turn, should correspond to the market (the price prevailing in the market of goods/services).

Para. 201.1 of TCU determines that at the date of the occurrence of tax liabilities, the taxpayer must make a tax invoice in electronic form, subject to registration conditions in accordance with the procedure established by law, with an electronic signature of the authorized payer of the person and register it in the Unified Register of tax invoices in the term established by TCU (para. 201.10 of TCU).

Para. 15 of the Procedure for filling in the tax invoice approved by the Ministry of Finance Order No. 1307 dated December 31, 2015, stipulates that in the case of supply of goods/services, the tax base of which is determined in accordance with Articles 188 and 189 of TCU and exceeds the actual price of the supply of such goods/services (in particular, if the tax base is determined on the basis of the purchase price of the goods/services, the usual price of the self-manufactured goods/services or the book value (residual) value of the non-current assets and exceeds the amount of such goods/services, fixed assets, determined on the basis of their contractual value, i.e. the purchase price/the usual price/balance (residual) value exceeds the actual price (contract value) of the supply), the supplier (seller) should make two tax invoices (hereinafter – TI). One – for the amount calculated on the basis of the actual supply price. Other – for the amount calculated in view of the excess of the purchase price/the usual price/balance (residual) value over the actual price. Or it could be made a summary, not less than the last day of the month in which such deliveries have been made, of the consolidated TI, taking into account the amounts of tax calculated on the basis of the excess of the tax base over the actual price, determined separately for each transaction for the supply of goods/services.

In TI (including the consolidated one), which is made at the amount of such excess, a mark is made in accordance with para. 8 of this Order (15 – Compiled for the amount of the excess of the tax base determined in accordance with Art. 188 and 189 of TCU, at the actual price supply). Such an TI is not provided to the recipient (the buyer). At the same time, the supplier (seller) specifies his/her own data in the lines of such an invoice for the indication of the buyer’s data.

Consequently, in the case of the sale of self-manufactured goods sold below the usual price, the supplier has two TI: one – for the amount calculated on the basis of actual delivery price, the other – for the amount calculated for the excess of the normal price over the actual.

The State Fiscal Service of Ukraine issued a draft resolution of the Cabinet of Ministers of Ukraine “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated February 21, 2018, No. 117”.

According to the results of the analysis of registered tax invoices/adjustment calculations (hereinafter – TI/AC), for which there was no automated monitoring of compliance with the criteria for assessing the degree of risk, since the specified TI/AC correspond to the signs in accordance with sub-paras. 2 and 3 of para. 3 of the Procedure for the suspension of registration of a tax invoice/adjustment calculation in the Unified Register of Tax Invoices (hereinafter – the Pending Procedure), it has been established that taxpayers included in the list of risk taxpayers continue to generate a tax credit of probable doubtful origin.

Such standards allow risk payers to increase the number of companies with different executives to carry out transactions with small volumes of supply.

The draft resolution is designed to avoid cases of manipulations by taxpayers by signs, the compliance of which allows to register TI/AC without the implementation of automated monitoring.

The draft resolution proposes to supplement sub-para. 2 of para. 3 of the Procedure of suspension with additional conditions, namely in the total supply for the current month, which should be less than UAH 500 thousand and for one buyer, the amount of such volume should not exceed UAH 50 thousand, the amount of value added tax (hereinafter – VAT) (except for the amount of VAT paid upon importation of goods into the customs territory of Ukraine), paid in the previous month, should amount to more than UAH 20 thousand.

At the same time, sub-para.3 of para.3 of the Procedure of suspension to supplement with an additional condition, which is simultaneously executed with the current (D > 0,05, P < Рм × 1,4). According to it, the total amount of VAT paid in the last 12 calendar months (except for the amount of VAT paid upon the importation of goods into the customs territory of Ukraine) is more than UAH 400 thousand.

Also, the draft resolution proposes to supplement paras. 23 and 28 of the Procedure of suspension with the conditions relating to the compliance of the taxpayer with the criteria of risk, for making decisions on registration of TI/AC in the Unified Register of Tax Invoices (hereinafter – URTI) or the refusal of such registration by the commissions that make decisions about registration.

It is also envisaged to introduce amendments to the Procedure for consideration of complaints on decisions of commissions that make decisions on registration of TI/AC in URTI or refusal of such registration, approved by the Resolution No. 117. Consideration of complaints on decisions of regional level commissions that make decisions on registration of TI/AC in URTI or refusal of such registration and consideration or non-consideration of the data table of VAT payer is carried out by the central level commission, which is a permanent collegiate body of the SFSU, with the participation of the authorized representative of the Ministry of Finance.

In addition, the taxpayer will be entitled to appeal not only the decision of the commission to refuse to register TI/AC, but also the decision of the commission to ignore the data table of the taxpayer.

Comments and suggestions regarding the draft resolution to provide in writing and in electronic forms within one month from the date of publication of the announcement of the SFSU at the following addresses:

The State Fiscal Service of Ukraine: 04655, MPS, Kyiv-53, Lvivska Sq., 8, e-mail: monitoringcentr@sfs.gov.ua.

The Ministry of Finance of Ukraine: 01008, Kyiv-8, Hrushevsky Str., 12/2, e-mail: infomf@minfin.gov.ua.

Proposals and comments can be also sent to the address of the State Regulatory Service of Ukraine: 01011, Kyiv, Arsenal Str. House 9/11, e-mail: inform@dkrp.gov.ua.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the procedure for conducting inspections by tax authorities of VAT tax returns, in which the amount of VAT was charged to the budget reimbursement” of 19.03.2019, No. 1107/6/99-99-12-02-01-15/ІПК reported that taxpayers who were entitled to a budget reimbursement in accordance with para. 200.10 of the Tax Code of Ukraine (hereinafter – TCU) and submitted an application for the refund of the amount of a budget reimbursement receive such a budget reimbursement if agreed upon by the supervisory authority stated VAT refund on the results of cameral inspection and in cases specified by para. 200.11 of this article – the audit referred to in this paragraph conducted in accordance with the TCU.

Para 200.11 of TCU specifies that the controlling body has the right within 60 calendar days following the deadline for submission of a tax return, and provided that such a declaration is submitted after the expiration of the deadline – the day of its actual submission, to conduct a documentary check of the taxpayer in case, if the calculation of the amount of the budget compensation was made at the expense of the negative value formed by the transactions:

• for periods before July 1, 2015, not confirmed by documentary checks;
• from purchase of goods/services for the period up to January 1, 2017, taxpayers who have used a special tax regime, determined in accordance with Art. 209 of TCU.

In accordance with para. 76.1 of TCU, all tax returns should be subject to comprehensive checking. The consent of the taxpayer for verification and his/her presence during the conduct of a desk inspection is not required.

A cameral check of a tax return or a clarifying calculation can be made only during 30 calendar days following the last day of the deadline for their submission, and if such documents were submitted later, by the day of their actual submission (para. 76.3 of TCU).

Documentary unscheduled verification is carried out if at least one of the grounds, determined by Art. 78 of TCU.

One of these grounds is the revealing by the controlling authority of the unreliability of the data contained in the tax returns filed by the taxpayer, if the latter does not provide explanations and their documentary confirmations on the written request of the controlling body, which indicates revealed false data, and the corresponding declaration within 15 working days from the day following the day the request is received, the controlling authority has grounds for carrying out a documentary unscheduled inspection (para. 78.1.4 of TCU).

Along with this reason, in accordance with para. 1 sub-para. 78.1.8 of TCU determines that a documentary unscheduled audit may be conducted if the payer has submitted a declaration in which it is claimed to be reimbursed from the budget of VAT, in the presence of the grounds for verification specified in Section V of TCU, and/or with a negative VAT value, which is more than UAH 100 thousand.

The documentary off-schedule verification is conducted solely with regard to the legality of declaring to VAT reimbursement and/or the negative value with VAT, which is more than UAH 100 thousand (para. 2 of sub-para. 78.1.8 of TCU).

That is, a documentary unscheduled verification of tax returns of VAT in which the taxpayer has declared the amount of VAT to the budget reimbursement, is carried out on the grounds specified in para. 200.11 and Art. 78 of TCU.

Corporate Income Tax

The State Fiscal Service of Ukraine in its letter “On Changes in the Taxation of Company Income Tax” of 11.03.2019, No. 7785/7/99-99-15-02-01-17 reported on the main changes in the taxation of the company income tax in 2019.

The amendments supplemented and clarified some of the norms defined by TCU.

In particular, the concept of an asset for use is introduced – an asset recognized by the lessee in accordance with the requirements of international financial reporting standards, representing the tenant’s right to use the underlying asset during the lease term (para. 14.1.12 of TCU).

The concept of the standard of expenses for payment to insurance intermediaries is defined – the maximum allowable amount of any payments (rewards) to insurance intermediaries and other persons for the services rendered for the conclusion (prolongation) of insurance contracts established for the purposes of the payment order in accordance with the methodology determined by the authorized body that carries out the state regulation in the area of financial services markets, in agreement with the central executive body, which ensures the formation and implementation of the state financial policy (para. 14.1.1251 of TCU).

The concept of the derivative is specified (para. 14.1.45 of TCU), in particular:

• it was withdrawn the derivative as a standard document;
• it is not provided for the approval of the standard (typical) form of derivatives by the Cabinet of Ministers of Ukraine;
• payments for swap transaction are calculated based on the price (quotation) of the basic asset, also taking into account interest rates within the amount specified by the agreement for a specific date of payment;
• it is determined that a forward contract is not a standardized civil law contract, and it is provided that such a contract is executed through the supply of a base asset and its payment by money or conducting between the parties to the contract of cash settlements without supply of the basic asset.

It was clarified the conditions of the inclusion of the legal entities in the non-profit organizations Register.

It was made amendments to the foundation document (para. 133.4.1 of TCU), in particular:

• for the purpose of distributing the received income (profits), the term “participants” of a non-profit organization is used in the sense of the Civil Code of Ukraine;
• for non-state pension funds, it is provided the possibility of transferring assets in case of liquidation of such a fund to other legal entities that provide non-state pension provision in accordance with the law.

At the same time, the legislation established that amendments to para. 133.4.1 of TCU should be applied to tax periods starting from July 1, 2017.

Differences that arise when calculating depreciation:

• are supplemented by new para. 138.4 of TCU, according to which, the requirements of para. 138.1–138.3 of TCU, which defines the differences for adjusting the financial result before tax and the procedure for calculating depreciation, do not apply to assets transactions with use rights under lease agreements;
• it was specified the cost indicator for the application of certain determined by TCU of the minimum allowable useful lives for fixed assets of group 4, which is more than UAH 6 000 instead of the previously determined in the amount UAH 2 500 (para. 138.3.3 of TCU).

Differences in financial transactions:

• it is specified that in determining the differences provided for in para. 140.5.4 of TCU for adjusting to increase the financial result before tax for the amount of 30% of the value of purchased goods, including non-current assets, works and services, the assets under the right of use under the lease agreements are not taken into account;
• it is specified that the requirements for the application of the difference in accordance with para. 140.5.4 of TCU also does not apply to the value of goods, including non-negotiable assets, works and services purchased from the Accumulation Fund and non-state pension funds.

It was supplemented a new difference for adjustment of the financial result to increase in case of exceeding the payments (rewards) to insurance intermediaries over the established cost standard, namely: the positive difference between the amount of any payments (rewards) to insurance intermediaries and other persons for the services provided for the conclusion (prolongation) insurance contracts and the amount of the standard of expenses for payment to insurance intermediaries, calculated according to the methodology determined by the authorized body that carries out the state regulation in the field of financial services markets, with the consent of the central executive body, which ensures the formation and implementation of the state financial policy (para. 141.1.3 of TCU).

Application of accelerated depreciation

Amendments made to para. 43 of sub-sec. 4 of sec. XX “Transitional Provisions” extended for one year the validity of the rules on the right to apply for the calculation of depreciation by the straight-line method of the minimum allowable depreciation period (two years) in relation to fixed assets of the fourth group, if the expenses for their acquisition were incurred (accrued) by the payer, were. taxes after January 01, 2017 and if for such fixed assets the simultaneous fulfillment of the requirements set by TCU is ensured, in particular, the fixed assets are put into operation within one of the tax (reporting) periods from January 1, 2017 to December 31, 2019.

Unified Social Contribution

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the practical implementation of norms of current legislation” of 18.02.2019, No. 583/6/99-99-13-02-03-15/ІПК reported that for the violation of statutory provisions on the Unified contribution, the taxpayers are imposed the obligation to accrue, calculate and pay the USC, according to the Law of Ukraine “On the Collection and Accounting of the Unified Contribution to the Mandatory State Social Insurance” of 08.07.2010, No. 2464-VI (hereinafter – the Law No.2464), the financial sanction to be used according to the Art. 25 of the Law No.2464.

Thus, according to para. 7 of part.11 of Art. 25 of the Law No.2464 for the non-submission, late submission, submission not under the established form of reporting, specified by the Law No.2464, the SFS carries out the imposition of the fine in the amount 10 non-taxable minimum incomes for each such non-submission, late submission or submission not under the established form.

The same actions, done by the payer of the USC to which it was applied the fine for such a violation, – entails the fine imposition in the amount 60 non-taxable minimum incomes for each such non-submission, late submission or submission not under the established form of reporting, specified by the Law No. 2464.

In addition, according to para. 3 of part. 11 of Art. 25 of the Law No. 2464, it should be imposed the fine in the amount 10% of the specified amount for each full or not full reporting period, for which such an amount was additionally accrued, but not more than 50% of the amount of the USC additionally accrued, for additional accrual by the body of revenues and collections or by the payer of the USC late submitted.

The representatives of the fiscal department have emphasized that the responsibility specified by para.3 of part.11 of Art. 25, No. 2464, is used exclusively by the controlling body during the audit of the correctness of the USC accrual and payment.

Accounting and Reporting

The State Fiscal Service of Ukraine in the category 135.03 “ZIR” gave the answer to the question whether it was possible to send several forms of reporting electronically during the day and to re-send the same reporting, in case of correction of indicators (not receiving the first receipt, etc.) and which, in this case, to be considered “Original”.

There are no any restrictions for a taxpayer to send several accounting documents in electronic form under various tax returns, calculations, and reports within one day. In addition, the taxpayer has the right to re-submit tax returns, calculations, reports in case of correction of errors before the expiration of their deadline, indicating the type of document “reporting new”.

If the taxpayer sent several copies of one tax document to the controlling authority (in the case of correction, non-receiving of the first receipt, etc.), the original is considered to be the electronic document received by the controlling authority, provided that it was accepted into the database of the controlling body and the taxpayer received the second receipt.

The State Fiscal Service of Ukraine in its Individual Tax Advice “Should an individual entrepreneur apply the cash register when conducting settlement transactions in a non-cash form for the lease of own or leased real estate?” of 13.03.2019, No. 1027/6/99-99-14-05-01-15/ІПК reported that for the purposes of calculating the goods (services) business entities are obliged to apply cash register, including in the case of making cashless settlements by means of payment art or payment systems using the Internet.In this case, settlement documents for the sale of goods (services) through the Internet are issued in the case of their direct provision to the consumer, during the transfer of goods or services to him/her. In the settlement document (cash receipt from the cash register), the form of payment (cash, electronic payment instrument, credit, etc.) must be indicated.

In order to settle payments for goods (services), business entities are obliged to apply cash register accordingly. At the same time, in the case of conducting settlements between business entities in non-cash form through institutions of banks from the current account of the business entity that receives goods, works (services), on the account of the supplier of the goods, works (services) according to the invoice, the contract etc. the cash register does not apply.

Control and Responsibility

The Cabinet of Ministers of Ukraine approved a provision regulating the procedures of the State fiscal service by dividing it into the State Tax and State Customs Services.

The document defines their legal status, the main tasks, rights and duties of employees related to the implementation of tax and customs policy, as well as establishes the powers of the chairmen of the State Tax and State Customs Services.

According to the provision, the State Tax Service (hereinafter – STS) is a central executive body that implements state tax policy, state policy on administering the unified contribution to compulsory state social insurance, state policy in the field of combating offenses during the application of tax legislation, as well as legislation on the unified contribution and other legislation, the control of which is entrusted to the STS. Activities of the State Tax Service are directed and coordinated by the Cabinet of Ministers through the Minister of Finance.

The provision stipulates that the State Customs Service is the central executive body, which implements state customs policy, state policy in the field of combating offenses during the application of customs legislation. Its activities are directed and coordinated by the Cabinet of Ministers through the Minister of Finance.

Approval of the provisions for each of the services is a prerequisite for a transparent contest for the appointment of an effective and reform-oriented leadership.

The Auditorꞌs Chamber of Ukraine on its website reported that the main criterion for determining the range of business entities subject to mandatory audit is the obligation imposed on them by the law, to publish or provide financial statements (consolidated financial statements) to users of financial statements together with an audit report.

Having analyzed the legal framework, the Auditorꞌs Chamber of Ukraine have come to the conclusion that the following companies are the subject to the audit of the financial statements:

• companies of public interest;
• public joint stock companies;
• subjects of natural monopolies in the national market;
• economic entities that carry out activities in the extractive industries;
• medium-sized companies (in the meaning of the Law on Accounting);
• financial institutions belonging to micro and small companies;
• companies of the state and municipal sectors of the economy.

The Cabinet of Ministers of Ukraine approved initiated and developed by the Ministry of Economic Development and Trade of Ukraine a comprehensive regulation aimed at facilitating business conditions in Ukraine and enhancing its position in the international Doing Business rating.

In particular, the Government simplified the process of bringing the statutes of existing LLC in accordance with the Law “On Limited Liability Companies”. In accordance with the amendments approved in the resolution, the founders of the LLC will be able to elect the version of the statute that is more appropriate to them electronically. The very procedure for registering a partnership will be maximally accelerated.

Also, the Cabinet of Ministers allowed the banking institutions to receive information from the state registers of persons applying for loans. Previously, there was no such opportunity at the legislative level, which complicated the task of banks to predict the ability of a person to fulfill their own obligations in relation to repayment of a loan. The expected result of the decision will be a reduction in the cost of lending.

It was also established a unified, transparent and friendly business procedure for the assignment of postal addresses to construction and real estate. By this time, the legislative field of Ukraine did not have a clear definition of the procedure for giving addresses to ready-made construction projects. This was done by the local authorities at their discretion. The lack of a clear algorithm often resulted in abuses: artificially delaying the procedure and further creating a barrier to registration of new real estate.

The government simplified the registration of the declaration on the readiness of the construction object for exploitation through the expansion of the functional of the e-cabinet of employees of the state architectural and construction control, as well as the definition of the status of electronic service as an electronic cabinet of the customer.

The Cabinet of Ministers passed the resolution on the implementation of environmental monitoring of the discharge of water containing pollutants during the stay of vessels in inland sea waters or the territorial sea, in accordance with the requirements of the Customs Code of Ukraine (the exclusion of ballast water control). By this time, the legislation of Ukraine had an imperfect procedure for the implementation of marine environmental inspections by the State Inspection for the control of water discharges containing pollutants during the stay of vessels in inland waters of Ukraine.

One more Government decision adopted in favor of the business is to simplify the import of automotive spare parts, which will reduce the administrative pressure on the companies importing these products.

Controlled Transactions and Transfer Pricing

The State Fiscal Service of Ukraine in its Individual Tax Advice “On some transfer pricing issues” of 13.02.2019, No. № 513/6/99-99-15-02-02-15/ІПК reported that on 01.01.2019 a new wording of para. 39.2.1.5 of the Tax Code of Ukraine (hereinafter – TCU) came into force. From now on, if in the chain of business transactions between a taxpayer and a non-resident provided for in paragraphs 39.2.1.1. of TCU, ownership right of the object (result) of such a transaction before transferring from the taxpayer to such a non-resident (in the case of export transactions) or from such a non-resident to the taxpayer (in case of import transactions) passes to one or more persons and a transaction between the relevant resident and none of these persons is not recognized by the taxpayer as a controlled transaction, such transaction is considered to be controlled between the taxpayer and that non-resident if the persons that had the ownership right:

• do not perform in such a set of transactions of essential functions associated with the acquisition (sale) of goods (works, services);
• do not use in such a set of significant assets transactions and/or do not assume significant risks for the organization of the acquisition (sale) of goods (works, services).

New wording of para. 39.2.1.5 of TCU lost the link exclusively to a related non-resident person and, as of now, belongs to any controlled transactions provided for in subsections 39.2.1.1 of TCU.

If the intermediary is a resident of Ukraine, that is, transactions between the taxpayer and the intermediary cannot be considered as controlled, then the acquisition of goods by the payer – a resident from a non-resident, if the ownership of such goods passes first to another resident who does not perform essential functions and does not use substantial assets, are considered to be controlled between such resident payer and non-resident.

The resident payer in this case should submit a report on controlled transactions.

At the same time, each specific case concerning the recognition of transactions for the import or export of goods (raw materials) through a reseller of Ukraine, to which the ownership right transfers, controlled transactions should be considered taking into account the contractual conditions, the circumstances of the implementation of the relevant transactions and all primary documents, the registration of which they were accompanied.

Financial Market

The National Bank of Ukraine adopted the Resolution “On Amendments to the Regulation on the Application of the Electronic Signature in the Banking System of Ukraine” of 25.02.2019, No. 42. This document improves the conditions for the use of electronic signature and electronic stamp in the banking system of Ukraine during the creation, processing and storage electronic documents related to the commission of transactions.

Thus, new developments:

• specified the types of electronic signature and electronic seal used in the banking system of Ukraine are;
• clarified the requirements for the use of each type of electronic signature and electronic seal;
• established requirements on the creation and storage of electronic documents in the banking system.

New provision was developed in connection with the entry into force of the Law of Ukraine “On Electronic Trust Services” of 07.11.2018.

It should be recalled that the use of paperless technologies during the provision of banking services can significantly reduce unproductive costs and improve the efficiency of banking transactions and the quality of customer service.

The National Bank of Ukraine on its official website reported that in 2018 the amount of losses of Ukrainian banks from unlawful actions with payment cards amounted to 0.0092% of the total volume of all transactions with payment cards (in 2017 – 0.0077%, in 2016 – 0.011%).

That is, in 2018, 92 hryvnias were accounted for illegal transactions for one million hryvnias of expense transactions using payment cards.

The average size of one unlawful transaction is about UAH 2500 hryvnias (in 2017 – UAH 2100).

In total, the number of unlawful actions with payment cards, for which banks have suffered losses, over the past year increased to 105.5 thousand cases (in 2017 – 77.6 thousand cases). Traditionally, the largest number of fraudulent transactions occurs in large cities (with a population of more than 1 million people).

The largest number of unlawful actions with payment cards in 2018 took place on the Internet – 55.1 thousand cases (52.2% of the total) – and compared with 2017 increased 1.4 times.

Such a negative trend, above all, is associated with an increase in the number of fraudulent using of social engineering. The fraudsters most often used this method during the illegal actions with payment cards or their requisites. It’s about misleading ordinary citizens in any way for them to disclose their own personal data, details of payment cards, codes/passwords, or made a transfer of funds under the psychological influence in favor of fraudsters.

It should be noted that in many cases, criminals try to claim themselves as employees of the bank (or the National Bank or the Bank’s security service) and actively begin to question personal information and other data.

The National Bank once again stressed that the bank’s representatives (especially the NBU) never call and similar requests and do not have the need and authority to ask citizens about their payment cards and accounts.

Never disclosure the payment card details (expiration date, CVC2/CVV2 code, PIN-code to the card) and personal data, login/password for web-banking entry, one-time passwords for additional authentication, etc.

In order to prevent and counteract fraud, the National Bank recommends that you do not respond to suspicious phone calls, contact the issuing bank of the payment card, and check the status of their accounts. In addition, it is advisable to apply limits on transactions with the use of payment cards, first of all – on the Internet, and to use the services of sms-information on the performed transactions.

The State Commission for Regulation of Financial Services Markets of Ukraine (Derzhcomfinposluh) by the Resolution “On Approval of the Amendments to the Professional Requirements for Chief Accountants and Financial Institutions” of 06.12.2018, No. 2131, approved changes to the Professional Requirements to the Chief Financial Officers and Chief Accountants establishments.

Professional requirements now apply to managers and chief accountants of such financial institutions:

• insurers;
• credit unions;
• pawnshops;
• other financial institutions.

Requirements do not apply to managers and chief accountants:

• banks;
• institutions – professional stock market participants;
• Joint Investment Institutions as part of their activities in the stock market;
• financial institutions with the status of intergovernmental international organizations;
• State Treasury of Ukraine, state trust funds;
• non-state pension funds.

The head of a financial institution must meet the following professional requirements:

• have a master’s degree or equivalent;
• undergo advanced training and pass an examination on the compliance of knowledge with the professional requirements of a typical training program for managers, compiled according to the direction of the financial institution and approved by Derzhcomfinposluh, for a duration of at least 72 hours;
• have at least five years of full-time work experience, with at least two years’ experience as a manager, in particular at least one year as a manager in the financial services markets (for the chairman of the board of the credit union and the head of the pawnshop – the seniority of the work of the head of at least one year).

The chief accountant of a financial institution, in addition to companies of public interest, must meet the following requirements:

• have a higher education not lower than a bachelor’s degree;
• undergo advanced training and to pass an examination on conformity of knowledge with professional requirements under the standard program of training of chief accountants, compiled according to the direction of activity of a financial institution and approved by the Derzhcomfinposluh for a period of at least 72 hours;
• have worked as a financial and/or accounting officer in the field of financial and/or accounting activity or experience in financial services markets in positions related to financial or accounting activities for at least three years.

Head and Chief Accountant should have an impeccable business reputation (the person does not have an impeccable business reputation in the event of the presence of the features specified in para. 22 of the Licensing Conditions for the conduct of economic activities in providing financial services (except for professional activities in the securities market) approved by the Resolution of the Cabinet of Ministers of Ukraine of 07.12.2016, No. 913).

The chief accountant of a company of public interest should comply with the requirements of the Law of Ukraine “On Accounting and Financial Reporting”. Other requirements to the chief accountant of the company of public interest may be determined by the law.

Labor and Salaries

The State Labour Service of Ukraine on its website answered the question of whether the accountant had the right to leave for work on a computer, if he/she used an additional leave for an irregular working day of seven calendar days in accordance with a collective agreement.

According to Art. 8 of the Law of Ukraine “On Leaves”, the annual additional leave for a special type of work is granted to workers with an irregular working day – up to seven calendar days in accordance with the lists of positions, works and professions specified in the collective contract, agreement and certain categories of workers whose work is related with increased neuro-emotional and intellectual load or performed in special natural geographic and geological conditions and conditions of increased risk for health – up to 35 calendar days for List of industries, works, professions and positions, approved by the Cabinet of Ministers of Ukraine.

An irregular working day is a special mode of working time, which is set for a certain category of workers in the event of the impossibility of standardizing the time of the labor process. If necessary, this category of workers performs work beyond the normal working hours (this work is not considered as overtime). The measure of labor in this case is determined not only by the duration of working time, but also by the scope of duties and the volume of work performed (load).

In accordance with the Recommendations on the procedure for providing workers with an irregular working day of annual additional leave for a special type of work approved by the Order of the Ministry of Labor and Social Policy of Ukraine dated 10.10.1997 No. 7, an irregular working day at enterprises, institutions, organizations irrespective of the form of ownership, can be used for persons whose work cannot be accurately recorded in time; persons whose working time is divided by the nature of work into parts of indefinite duration (agriculture); persons who distribute time to work at their discretion.

Employees (regardless of profession, educational level, positions) who work on electronic computers and computers (including on personal computers, regardless of the type of monitor) in Appendix 2 of the List of industries, works, occupations and positions of employees, the work of which is associated with increased nervous-emotional and intellectual load or is performed in special natural geographical and geological conditions and conditions of increased risk for health, approved by the Resolution of the Cabinet of Ministers of Ukraine of 17.11.1997, No. 1290, it was provided for the right to annual additional leave for a special type of labor lasting up to 4 calendar days according to the position 58 of XXII “General professions in all sectors of economy” under the section “Other types of industries”.

The particular duration of the annual additional leave for a special type of labor is determined by a collective or employment contract depending on the time of employment of the employee in these conditions.

According to Art. 10 of the Law “On Leaves”, an annual additional leave provided for in para. 1 and 2 of part. 1 of Art. 8 of the Law, is granted more than a yearly basic leave on the same basis as chosen by the employee.

Consequently, an accountant who performs work on a computer and works in an irregular working-time regime, must independently choose one basis on which he/she will receive an annual additional leave for a special type of work.

The Civil Service of Ukraine on Labor Issues on its website reported that according to Article 26 of the Code of Labor Law (hereinafter –Labor Code), during the conclusion of an employment contract, it may be understood by an agreement of the parties to verify the employee’s compliance with the work entrusted to him/her. The condition for the probation must be indicated in the order (appointment) of the recruitment.

The term of the probation period during recruitment, if the other is not established by the legislation of Ukraine, cannot exceed three months, and in separate cases, in agreement with the relevant elective body of the primary trade union organization, – six months. The probation term during the recruitment of workers cannot exceed one month. The days when the employee actually did not work regardless of the cause are not included in the probation term.

When the probation period is over, and the employee continues to work, then he/she is considered to be able to pass the probation. The following termination of an employment contract is allowed only on general grounds.

The labor legislation, including the remuneration of labor in the amount specified by the parties’ agreement, with state and industry guarantee of wages employees are applicable to the employees during the probation period.

In particular, the state social guarantees of labor compensation include the minimum wage established by law for the monthly (hourly) labor standard performed by the employee. From 01.01.2019 it reaches UAH 4 173.0.

According to the current legislation, the minimum wage consists of the basic (tariff) part of the wage (salary, tariff rate) and additional wages (additional payments, allowances, production awards, other incentive payments).

The actual worked time is paid to employees based on a salary (tariff rate) or depending on performance of standard of production and piece wage-rates, taking into account the increases, surcharges and allowances stipulated by the current legislation.

Consequently, if the employee fulfills the monthly labor standard, the wages must be paid to him/her, taking into account various components of it, stipulated by the terms of payment, not lower than the minimum wage (UAH 4 173. 0).

If the employee fulfills the monthly labor standard and the salary accrued to him/her is lower than the statutory minimum wage, the employer is obliged to pay an additional payment to its level, which is paid monthly on a salary basis.

If the employee did not fulfill the monthly standard of work, was on leave, part-time work, etc., in such cases, the payment of labor is made in proportion to the worktime standard.

The State Service of Ukraine on Labor reported what should be done by a person who lost a work record book. A person who has lost a work record book is obliged to immediately notify the owner or the body authorized by him/her at the place of the last job. Not later than 15 days after the application, and in case of complication in other terms, the owner or his authorized body issues the employee another work record book or insert it with the word “Duplicate” in the upper right corner of the first page.

A duplicate of a work record book or insert it should be filled in by general rules. In section “Information about work”, “Information about rewarding” and “Information about encouragement” during the completion of a duplicate, records of work, as well as rewarding and encouragement at the place of last employment on the basis of previously issued orders (orders) should be entered.

If an employee has already worked for this company, when filling in the duplicate of the work record book in the section “Information about the work” in box 3, the first record of the total length of his/her work prior to employment on this company, which is confirmed by the documents, should be entered first.

The total work experience is recorded in total, that is, the total number of years, months, days of work without specification, at which company, in what periods of time and at which positions worked in the past the owner of a work record book, is indicated. After that, the general experience, confirmed by properly documented, is recorded for separate periods of work in the following order: in column 2 the date of employment is indicated; in column 3 the name of the company where the employee worked, as well as the workshop (department) and the position (work), which was accepted by the employee, is to be written. Recording in the duplicate of the work record book of information about work part-time and in combination of occupations is carried out at the request of the employee.

If the documents presented show that the employee was transferred to another permanent job at the same company, then the corresponding entry should be made. After that, in column 2, the date of release is recorded, and in column 3, the reason for the dismissal, if the document submitted by the employee contains such data.

If the documents do not contain fully the above data on work in the past, only the information contained in the documents is entered in the duplicate of the work record book.

In column 4, the name, date and number of the document, on the basis of which the corresponding entries in the duplicate were made, are indicated. Documents confirming the work experience are returned to their owner.

The owner or authorized body is obliged to assist the employee in obtaining documents confirming the length of his work, which preceded the placement of the company.

If the work record book (insert to it) has become unfit (scorched, torn, dirty, etc.), then the owner or authorized authority by him/her at the last place of work gives the employee a duplicate of the employment record (insert it). At the same time, on the first page of the work record book that has become unfit, the mark “Instead issued a duplicate” is made, and the book is returned to its owner. When applying for a new place of work, the employee is required to present a duplicate of the work record book.

A work record book duplicate can be also issued at a new place of work due to the lack of access to the worker’s work record book due to an emergency situation provided for by the Civil Protection Code of Ukraine or the conduct of an anti-terrorist operation in the territory where such person worked.

The Other Things

The European Union decided to extend sanctions against Russia for six months. They relate to 170 individuals and 44 legal entities. This is reported in the EU Official Journal.

Restrictions, which expire on March 15, are extended until September 15, 2019.

It should be recalled that sanctions first were applied for the annexation of the Crimea and the war on the Donbass in 2014. The restrictions relate to the banking, energy and defense sectors of the Russian economy. In particular, Rosneft, Novatek, Vnesheconombank and Gazprombank were slapped with the sanctions.