Taxes
VAT
The State Tax Service of Ukraine in category 101.04 “ZIR” has answered the question "Are the funds received as a result of rounding in accordance with the resolution of the NBU Board “On optimizing the circulation of small denomination coins” included in the VAT tax base?"
Item 4 of Resolution of the Board of the NBU “On optimizing the circulation of small denomination coins” No. 25 of March 15, 2018 (hereinafter – Resolution No. 25) establishes the obligation of legal entities regardless of organizational and legal form and form of ownership and individuals engaged in business activity, from July 1, 2018, in the absence of coins of small denominations, to round off the total amounts of cash payments in the check for goods (works, services) and total amounts of payments in the act of issuance of funds or other document issued during the refund in case of return of the goods, according to the rules established by the specified item.
Rounding should be understood as a mathematical operation, which consists in replacing a number in the direction of increase or decrease with the appropriate accuracy.
Rounding is not a discount or surcharge, advertising or promotion of the sale of goods (works, services) within the meaning of these terms defined by the legislation of Ukraine.
In accordance with paragraph 194.1.1 of the Tax Code of Ukraine (hereinafter – the Tax Code) value added tax (hereinafter – VAT) is 20, 7 and 14% of the tax base and is added to the price of goods/services.
According to paragraphs “a” and “b” of item185.1 of the Tax Code the object of taxation are the transactions of taxpayers for:
a) supply of goods, the place of supply of which is located in the customs territory of Ukraine, in accordance with Art. 186 of the Tax Code, including transactions on gratuitous transfer and transfer of ownership of collateral to the borrower (lender), goods transferred on the terms of a trade credit, as well as the transfer of the object of financial leasing for use by the lessee/leaseholder;
b) supply of services, the place of supply of which is located in the customs territory of Ukraine, in accordance with Art. 186 of the Tax Code.
Subitem 188.1 of the Tax Code stipulates that the tax base of transactions for the supply of goods/services is determined on the basis of their contract value, taking into account national taxes and fees (except for excise tax on retail sales of excisable goods, mandatory state pension insurance withheld the cost of cellular mobile services, VAT and excise tax on ethyl alcohol used by manufacturers – entities for the production of medicines, including blood components and drugs made from them (except for medicines in the form of balms and elixirs).
In this case, the tax base for transactions for the supply of goods/services may not be lower than the purchase price of such goods/services, the tax base for transactions for the supply of self-manufactured goods/services may not be lower than normal prices, and the tax base for transactions for non-current assets may not be lower than book (residual) value according to the accounting data, formed as of the beginning of the reporting (tax) period, during which such operations are carried out (in the absence of accounting for non-current assets – based on the normal price), except for:
- goods (services), the prices of which are subject to state regulation;
- gas supplied for the needs of the population;
- electricity, the price of which has developed in the electricity market.
The contractual value includes any amount of funds, the value of tangible and intangible assets transferred to the taxpayer directly by the buyer or through any third party in connection with compensation for the value of goods/services.
The contractual value does not include the amount of fines and penalties, three percent per annum of the overdue amount and inflation costs, damages, including compensation for lost profits by decisions of international commercial and investment arbitrations or foreign courts, imposed on the taxpayer due to non-performance or improper performance of contractual obligations.
Therefore, funds received as a result of rounding in accordance with Resolution No. 25 are not included in the VAT tax base.
Simplified Tax System
The State Tax Service of Ukraine in category 107.01.03 “ZIR” has answered the question “What amount is considered the income of the sole proprietor – payer of single tax (first – third groups) in the case of using payment terminals when making payments for goods (works, services): total revenue (taking into account the amount of the commission withheld by the bank) or the amount of revenue minus the amount of the commission withheld by the bank?”.
The procedure for applying the simplified system of taxation, accounting and reporting is defined in chapter 1 section XIV of the Tax Code of Ukraine (hereinafter – the Tax Code).
According to paragraph 1 item 292.1 of the Tax Code for a sole proprietor – payer of the single tax the income is the income received during the tax (reporting) period in monetary form (cash and/or non-cash); tangible or intangible form, defined by item 292.3 of the Tax Code.
The income does not include passive income received by such an individual in the form of interest, dividends, royalties, insurance payments and indemnities, income in the form of budget grants, as well as income from the sale of movable and immovable property owned by an individual and used in its business activity.
The amount of income of the single tax payer includes the value of goods (works, services) received free of charge during the reporting period (paragraph 1, item 292.3 of the Tax Code).
The date of receipt of the single taxpayer's income is the date of receipt of funds by the single taxpayer in monetary form (cash or non-cash), the date of signing the single taxpayer's act of acceptance-transfer of goods (works, services) received free of charge. For a single taxpayer of the third group, who is a value added tax payer, the date of receipt of income is the date of writing off accounts payable, for which the statute of limitations has expired (item 292.6 of the Tax Code).
Therefore, if during the settlements for goods (works of service) with the use of payment terminals from the amount of revenue the bank withholds a fee for settlement services, the income of asole proprietor – payer of the single tax is the total cost of goods sold (works, services) taking into account the interest (commission) of the bank.
The date of receipt of income is the date of receipt of funds on the current account of the single taxpayer.
Other Taxes and Fees
The President of Ukraine has signed the Law of Ukraine “On Amendments to item 4 of Chapter XXI “Final and Transitional Provisions” of the Customs Code of Ukraine on exemption from import duty of new equipment (components) and components imported for the implementation of an investment project with significant investments to implement a special investment agreement” No. 1294-IX, approved by Parliament on March 2, 2021.
According to this document, until January 1, 2035, equipment and hardware imported to Ukraine for the implementation of investment projects in accordance with the Law “On State Support of Investment Projects with Significant Investments” are temporarily exempt from import duties.
These tax benefits are provided given that the imported goods are manufactured not earlier than three years before the date of their importation into Ukraine, have not been used, and do not originate from the occupying or aggressor state or from the occupied territory of Ukraine.
It is assumed that the list and volume of imports of such goods are approved by the Cabinet of Ministers of Ukraine together with the conclusion of a special investment agreement.
The Head of State also signed the Law of Ukraine “On Amendments to the Tax Code of Ukraine on the Peculiarities of Taxation of Business Entities Implementing Investment Projects with Significant Investments in Ukraine” No. 1293-IX, which was also adopted by the Verkhovna Rada on March 2.
According to this law, until January 1, 2035, operations on import of equipment (hardware), components to Ukraine, imported for the implementation of an investment project with significant investments, are temporarily exempt from value added tax (hereinafter – VAT).
Investors who are parties to a special investment agreement concluded in accordance with the Law of Ukraine “On State Support of Investment Projects with Significant Investments” are also exempt from corporate income tax, provided that this profit is received as a result of such an agreement.
Exemption from income tax is provided after the commissioning of the investment project within five years within the term of the special investment agreement. A prerequisite for the application of the tax exemption is the fulfillment by an investor with significant investments of its obligations under a special investment agreement.
In addition, the law allows local governments until January 1, 2035 to reduce land tax rates and rents for state and communal land or exempt from paying land tax for land used in the implementation of investment projects with significant investments.
The total amount of funds exempt from taxation is taken into account in the total amount of state support for an investment project with significant investments provided by a special investment agreement.
The implementation of these laws will help attract strategic investors to Ukraine, increase the country's investment attractiveness, and increase the competitiveness of the Ukrainian economy through the introduction of state support for large investment projects, in particular by providing tax incentives.
Accounting and Reporting
The State Tax Service of Ukraine through the Office of Large Taxpayers has reminded that Law of Ukraine “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” No. 466-ІХ of January 16, 2020 (hereinafter – Law No. 466-IX) amendments were made to the Tax Code in terms of disclosure and submission of financial statements.
The amendments to paragraph 46.2 of the Tax Code stipulate that income taxpayers who, in accordance with Law of Ukraine “On Accounting and Financial Reporting in Ukraine” No. 996-XIV of July 16, 1999 (hereinafter – Law No. 996) are obliged to disclose the annual financial statements and the annual consolidated financial statements together with the auditor's report, submit to the controlling body the annual financial statements, which are subject to disclosure together with the auditor's report no later than June 10 of the year following the reporting year.
The procedure for submission and disclosure of financial statements together with the auditor's report is governed by Art. 14 of Law No. 996.
In accordance with paragraph 3 of this article, depending on the category of the entity, the financial statements together with the auditor's report must be submitted by:
- public interest entities (except for large enterprises that are not issuers of securities), public joint stock companies, natural monopolies in the national market and economic entities operating in extractive industries – not later than 30 April of the year following the reporting period, must publish the annual financial statements and annual consolidated financial statements together with the auditor's report on its website (in full) and otherwise in cases specified by law;
- large enterprises that are not issuers of securities, and medium-sized enterprises – no later than June 1 of the year following the reporting period, must publish annual financial statements together with the auditor's report on its website (in full);
- other financial institutions belonging to micro and small enterprises – no later than June 1 of the year following the reporting period, must publish annual financial statements together with the auditor's report on its own website (in full).
Given that the amendments came into force on May 23, 2020, for the first time the rule of this item on the mandatory submission of annual financial statements together with the auditor's report no later than June 10 of the year following the reporting year applies in 2021 for the reporting year 2020.
In case of non-submission (late submission) of the annual financial statements together with the auditor's report, which is subject to disclosure, the liability provided for in item 120.1 of the Tax Code is applied for the submission of tax returns (calculations).
Control and Responsibility
The Cabinet of Ministers of Ukraine has changed the conditions of entry into Ukraine. From now on, foreigners must have a negative PCR test for COVID-19, made in no more than 72 hours, to cross the border.
In order to prevent the spread of acute respiratory disease COVID-19 caused by the coronavirus SARS-CoV-2 on the territory of Ukraine, the Cabinet of Ministers Resolution of March 22, 2021 No. 230 amended Resolution No. 1236 of December 9, 2020.
In particular, according to the changes, in order to enter Ukraine, the foreigners, in addition to the compulsory insurance policy, as defined earlier, must have a negative test result for COVID-19. It must be made by the polymerase chain reaction method, which is carried out no more than 72 hours before crossing the state border.
In the absence of a policy (certificate) of insurance or a negative test result on COVID-19, employees of the State Tax Service of Ukraine (hereinafter – STSU) will deny foreigners and stateless persons to cross the state border.
It should be noted that the resolution clearly defines the category of persons who are exceptions.
In addition, changes were made to the crossing of entry points to the temporarily occupied territories in Donetsk and Luhansk regions, the Autonomous Republic of Crimea and the city of Sevastopol and the departure of foreigners and stateless persons from them. In particular, it is determined that the insurance policy (certificate) is not required for foreigners, stateless persons permanently residing in Ukraine, employees of representative offices of official international missions, organizations accredited in Ukraine.
The norm for the Ministry of Health to compile a list of states with a significant spread of COVID-19, which affected the self-isolation of individuals, is also excluded.
It is currently determined that, among others, citizens of Ukraine who cross the state border are subject to self-isolation, except for some categories, including those who have a negative result of testing for COVID-19 by PCR, which was conducted in no more than 48 hours to crossing the state border.
Changes have been made to the entry through the checkpoints of entry and exit of persons arriving from the temporarily occupied territories in Donetsk and Luhansk regions, the Autonomous Republic of Crimea and the city of Sevastopol. In particular, citizens of Ukraine wishing to be vaccinated against COVID-19 in the territory where public authorities exercise their powers in full will be allowed without self-isolation, provided that an invitation to vaccination with a unique identifier is presented.
Citizens of Ukraine who are subject to self-isolation in connection with crossing the state border, and persons who are subject to self-isolation in connection with crossing checkpoints of entry into the temporarily occupied territories in Donetsk and Luhansk regions, Crimea and Sevastopol and departure of them, are obliged to install and activate the mobile application of the “At home” (“Vdoma”) system. If it is impossible to install a mobile application, they are subject to observation.
In addition, the amendments empower the officials of the State Border Guard Service to check the installation of a mobile application by citizens.
Transfer Pricing
The Ministry of Finance of Ukraine, as part of the implementation of the provisions of step 13 of the Plan to Combat the Base Erosion and Profit Shifting (BEPS Action Plan), has introduced a three-tier transfer pricing reporting structure that includes transfer pricing documentation (Local file), global transfer pricing (Master file) and Country-by-Country Report.
Transfer pricing documentation (Local File) is a set of documents or a single document compiled in any form, which must contain information in accordance with the requirements of paragraphs 39.4.6 of the Tax Code of Ukraine (hereinafter – the Tax Code).
Global transfer pricing documentation (Master File) is a set of documents or a single document, drawn up in any form, which must contain information in accordance with the requirements of paragraph 39.4.7 of the Tax Code.
Country-by-Country Report is a report submitted by taxpayers if the total consolidated income of the international group of companies, which includes the taxpayer, for the financial year preceding the reporting year, calculated in accordance with accounting standards applied by the parent company of the international group (and in the absence of information – in accordance with international accounting standards), exceeds the equivalent of 750 million euros and in the presence of one of the circumstances specified in paragraph 39.4.10 of the Tax Code.
Country-by-Country Report of the international group of companies contains information on each jurisdiction in which the member of the international group of companies is registered or in which the international group of companies carries out the activity according to requirements of paragraph 39.4.11 of the Tax Code.
In addition, the Ministry of Finance approved the form and procedure for filing a notice of participation in an international group of companies, the form and procedure for filing a notice of a forward, futures or commodity contract, and updated the form and procedure for reporting controlled transactions.
The introduction of this reporting structure will provide comprehensive information on the activities of international groups of companies in relation to specific jurisdictions, as well as an effective analysis of the scope, structure of transactions and specifics of international groups of companies for transfer pricing control.
The Ministry of Finance reminds of the norms of Art. 39 of the Tax Code regarding:
- submission by taxpayers of Country-by-Country Reports of an international group of companies – applied for the first time for the financial year ending in 2021, but not earlier than the year in which the competent authorities concluded a Мultilateral Сompetent Authority Agreement on the Exchange of Country-by-Country Reports);
- request of regulatory authorities to taxpayers to submit global transfer pricing documentation (master file) – applied for the first time for the financial year ending in 2021;
- submission by taxpayers of a notice of participation in an international group of companies – applied for the first time in 2021 for 2020.
Labor and Salaries
The State Labor Service of Ukraine has clarified the situation related to forcing an employee to dismiss. A representative of the company, a single mother, asked the State Labor Service to clarify the compulsion to dismiss. The applicant complained that her position was not being reduced, but she was forced to apply for dismissal by the consent of the parties and was not even offered another position.
The right to work is one of the priority social rights enshrined in the Constitution of Ukraine. Everyone has the right to work, which includes the opportunity to earn a living by work freely chosen or agreed to (p. 1 Art. 43of the Constitution of Ukraine).
Forcing an employee to dismiss is illegal, as the Constitution of Ukraine guarantees every citizen protection from illegal dismissal (p. 6 of Art. 43). This guarantee is provided by fixing a number of requirements for the termination of the employment contract.
It is possible to terminate an employment relationship only if there are legal grounds for it. The list of such grounds is enshrined in the Labor Code of Ukraine (Art. 36, 38–41, 43, 45) (hereinafter –
In particular, in accordance with the provisions of Art. 36 of the Labor Code of Ukraine (hereinafter – the Labor Code) the grounds for termination of the employment contract are:
- consent of the parties;
- expiration of the employment contract, except in cases where the employment relationship actually continues and neither party has demanded their termination;
- conscription or entry of an employee or owner – sole proprietor for military service, referral to alternative (non-military) service, except in cases where the employee retains a job, position in accordance with p. 3 and 4 of Art. 119 of this Code;
- termination of the employment contract on the initiative of the employee (Articles 38, 39), on the initiative of the owner or authorized body (Articles 40, 41) or at the request of a trade union or other body authorized to represent the labor collective (Article 45);
- transfer of an employee with his/her consent to another enterprise, institution, organization or transfer to an elected position;
- refusal of the employee to transfer to work in another area together with the enterprise, institution, organization, as well as refusal to continue working due to changes in significant working conditions;
- entry into force of a court judgment sentencing an employee (except in cases of release from serving a probation sentence) to imprisonment or to another punishment that excludes the possibility of continuing this work;
- grounds provided for in the contract;
- grounds provided by other laws.
According to the provisions of p. 2 of Art. 40 of the Labor Code dismissal on the grounds specified in items 1, 2 and 6 of this article (namely: changes in the organization of production and labor, including liquidation, reorganization, bankruptcy or reorganization of the enterprise, reduction of the number of employees; which prevent the continuation of work; reinstatement of an employee who previously performed this work) is allowed if it is impossible to transfer the employee with his/her consent to another job.
In accordance with the requirements of p. 3 of Art. 184 of the Labor Code the dismissal of pregnant women and women with children under three years (up to six years – p. 6 of Art. 179), single mothers in the presence of a child under 14 years or a child with a disability at the initiative of the owner or authorized body is not allowed, except in cases of complete liquidation of the enterprise, institution, organization, when dismissal with compulsory employment is allowed. For the period of seeking for employment, they retain the average salary, but not more than three months from the date of termination of the fixed-term employment contract.
Thus, coercion to dismiss is an illegal action of the employer, which is related to the violation of labor legislation.
In accordance with the provisions of Art. 265 of the Labor Code, the officials of public authorities and local governments, enterprises, institutions and organizations guilty of violating labor legislation are liable in accordance with applicable law.
The Other Things
The Ministry of Digital Transformation of Ukraine has informed that it is enough for Ukrainians to have a phone with a digital ID for any life situation that requires one. Biometric passport and ID-card in “Diia” (“Action”) from August 23, 2021 at the legislative level will be a complete analogue of paper and plastic, and Ukraine will become an innovator in the use of digital documents.
The Verkhovna Rada adopted the Law of Ukraine “On the Unified State Demographic Register and Documents Proving Citizenship of Ukraine, Identity or Special Status” (Draft No. 4355) on digital IDs.
“Ukraine is the first country in the world to launch digital IDs and legally equal them to ordinary documents. “Diia” users will no longer face situations where a digital passport is not accepted. This is not just an important event in the history of modern Ukraine and a big step towards the introduction of the “paperless” regime. This is a unique global case that we can and should be proud of,” says Deputy Prime Minister - Minister of Digital Transformation Mykhailo Fedorov.
The Ministry of Digital Transformation has launched digital ID in the “Diia” mobile application in April last year. Digital IDs are much safer and more comfortable than paper ones. Now they can be used by about 20 million Ukrainians – more than 5.5 million of them have an ID card and another 18 million are holders of biometric passports. Since its launch, their use has been an experimental project and regulated by a relevant resolution of the Cabinet of Ministers of Ukraine.
“The Draft will provide the opportunity to use electronic documents in a mobile application on a par with ordinary passports. This is the first step towards the introduction of a paperless regime in Ukraine – when public authorities will not have the right to demand paper documents, if the information is already in the registers. You will be able to choose which passport you use today,” added Mykhailo Kriachko, Chairman of the Committee on Digital Transformation.
Digital passports can be presented on the territory of Ukraine for identification and confirmation of citizenship, except in cases of crossing the state border, entering and leaving the temporarily occupied territory of Ukraine. The approved Draft also defines the terminology, in particular the use of e-passports.
Ukrainians can already use digital passports in most life situations. They are accepted by еру Administrative services centers for the provision of public services, government agencies and courts. Digital passports can be used to receive items in the mail, to confirm age in supermarkets, in banks – to confirm identity and cash transactions, as well as to open a bank account online. With digital passports you can also travel around Ukraine by plane and train, check into a hotel and more.
Digital documents in the smartphone are also used in Poland and South Korea. Similar projects are being implemented in the UK, Finland and the USA. Estonian citizens use a digital ID card, with which they can receive public services online, manage bank accounts, and vote online. However, Ukraine is the first country in the world where digital passports in smartphones have legally gained the same force as paper and plastic documents.
In September 2021, Ukraine will begin entering the “paperless” regime – public authorities will not have the right to require paper documents if the necessary information is already in the registers. And the adoption of the law on digital passports is one of the most important steps towards this, because the passport is the main document for obtaining public services. It will also launch a large-scale digitalization of business and government and simplify internal processes for launching new digital products.
The Draft was developed with the assistance of the EGAP Program, funded by the Government of Switzerland and implemented by the Eastern Europe Foundation, SURGe with the support of the Government of Canada.
