Taxes
VAT
The State Tax Service of Ukraine has considered the case when the company (VAT payer) sells gift certificates of various denominations (UAH 300, 500 and 1,000) to both end consumers and legal entities – VAT payers. In the future, such certificates allow their customers to purchase goods that are present on the shelves of the hypermarket.
That's what the tax authorities said about it.
For the transaction of sale (realisation) of a gift certificate to a legal entity (VAT payer) or end consumer (non-VAT payer), the company must recognize VAT liabilities. They should be recognized on the date of payment by the buyer of funds for a gift certificate to the company. This will be the “first event” according to paragraph 187.1 of the Tax Code of Ukraine (hereinafter – Tax Code).
In the future, the exchange of a gift certificate for goods for VAT purposes will be the “second event”, which does not lead to consequences in terms of determining the tax liability for VAT.
Therefore, on the date of VAT liability, the company is obliged to draw up a tax invoice (hereinafter – TI) for the buyer of the gift certificate (legal entity or end consumer) and register it in the Unified Register of Tax Invoices (hereinafter – URTI) within terms specified by the Tax Code.
According to the controllers, in this case, the tax invoice should indicate the code in accordance with the UKT FEA and the nomenclature of the gift certificate.
On the date of actual receipt by the buyer of goods in exchange for a gift certificate (“second event”), the nomenclature and product code in accordance with UKT FEA, specified in the TI, are corrected by calculating the adjustment to such tax invoice, which:
- with the sign “-” the indicators concerning the nomenclature and code according to UKT FEA of the gift certificate are specified. In column 1 of such adjustment calculation is obligatory to indicate the number in the order of the line of the adjusted TI (the nomenclature of which is canceled);
- with the sign “+” in separate lines the indicators of the nomenclature of the goods/services which are added (new commodity positions) of the goods/services which are actually got at the expense of such certificate are specified. In column 1 of the adjustment calculation, new sequential line numbers are assigned to such new commodity items, which were not in the adjusted TI.
In the calculation of adjustments to the TI, the code of the reason for adjustment “change of nomenclature” is indicated.
In addition, the controllers noted that in the case of sale (realisation) of gift certificates to end users - non-payers of VAT, the company may, under certain conditions, draw up a tax invoice on a daily basis. Of course, if the usual tax invoice has not been drawn up for these transactions.
The tax invoice, drawn up on a daily basis, should also indicate the code in accordance with the UKT FEA and the nomenclature of the gift certificate itself and make further adjustments.
In addition, if the company sells gift certificates to both end consumers (non-payers of VAT) and legal entities – VAT payers, then buyers – legal entities (VAT payers) should draw up separate tax invoices.
Corporate Income Tax
The State Tax Service of Ukraine (hereinafter – STSU) has explained the new rules of reporting on income tax.
The STSU published information letter No. 12, which considers the provisions of Law No. 466-IX “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” (hereinafter – Law No. 466).
This letter states that Law No. 466 has amended item 46.2 of Art. 46 of the Tax Code of Ukraine (hereinafter – Tax Code) on income tax reporting.
Given that these changes to item 46.2 of Art. 46 of the Tax Code entered into force on May 23, 2020, and the deadline for submission of declarations and financial statements for the reporting period (2019) has expired, then for the first time the rule of this item on mandatory submission of annual financial statements together with the audit report no later than June 10 of the year following the reporting year, is applied in 2021 following the results of 2020 reporting year.
That is, income taxpayers who, in accordance with the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” are required to publish annual financial statements and annual consolidated financial statements together with the auditor's report, submit to the supervisory authority:
- together with the tax return for the tax (reporting) period (2020) – a statement of financial position (balance sheet) and a statement of profit and loss and other comprehensive income (statement of financial performance), prepared before the audit of the financial statements by the auditor;
- together with the auditor's report no later than June 10, 2021 – the annual financial statements for 2020.
Item 46.2 of Article 46 of the Tax Code does not contain separate requirements for the actions of the taxpayer if the indicators published together with the audit report of the annual financial statements for 2020 change compared to the indicators of the statement of financial position (balance sheet) and income statement and other comprehensive income (statement of financial performance), which will be submitted together with the corporate income tax return for 2020, and such changes will affect the indicators of such annual return.
As a general rule of tax reporting in this case, income taxpayers who, in accordance with the Law “On Accounting and Financial Reporting in Ukraine” are required to disclose annual financial statements and annual consolidated financial statements together with the auditor's report, must submit a clarifying declaration to annual tax return for 2020 no later than June 10, 2021.
The tax authorities drew attention to the fact that item 49.4 of Art. 49 of the Tax Code of the Law No. 466 was supplemented with a new paragraph. According to it, the financial statements, statement of financial position (balance sheet), income statement and other comprehensive income (statement of financial performance), the submission of which to the supervisory authorities requires the above paragraph 46.2 of Art. 46 of the Tax Code, corporate income taxpayers and non-profit enterprises, institutions, organizations must submit in compliance with the laws “On electronic documents and electronic document management” and “On electronic trust services” (if such entities submit reports in soft copies).
Accounting and Reporting
The Ministry of Finance of Ukraine has published on its official website updated international accounting standards in the section “International Financial Reporting Standards”:
- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
- IAS 23 Borrowing Costs;
- IAS 40 Investment Property;
- IFRIC 16 Hedges of Net Investment in a Foreign Operation.
The Ministry of Finance has updated the official translation of these documents and now they take into account a number of existing improvements. The companies that prepare financial statements in accordance with International Financial Reporting Standards (hereinafter – IFRS) should carefully study the updated standards. After all, according to Art. 121 of the Law on Accounting in Ukraine for the preparation of financial statements in accordance with IFRS the international standards, which are set out in the state language and officially published on the website of the Ministry of Finance are applied.
The following points should be noted.
First, the term “significant” in the context of IAS 8 is to be understood as defined in item 7 of IAS 1 “Presentation of Financial Statements”.
Item 6 of IAS 8, which referred to the Conceptual Framework for the Preparation and Presentation of Financial Statements and assumed that users have relevant knowledge of business, economic activity and accounting and seek to study information with sufficient care, has also been removed. However, a similar provision is stated in item 7 of IAS 1. However, due to this year's update of the Conceptual Framework for Financial Reporting, it has lost its relevance.
Second, item14 of IAS 23 has added a provision that when determining the capitalization rate (the weighted average cost of borrowings for all borrowings of an entity that is outstanding during the period), the entity shall exclude from the calculation of borrowing costs, carried out specifically for the purpose of obtaining a qualifying asset until, to a significant extent, all measures necessary to prepare that asset for its intended use or sale are completed. The entity must apply those amendments to borrowing costs incurred at the beginning or after the beginning of the annual reporting period in which the entity first applies those amendments (items 28A, 29D of IAS 23).
The name of assets from qualified to qualifying and a number of other translation problems in Ukrainian have also been corrected.
Third, the revised IAS 40 expands, inter alia, item 53 on situations where it is not possible to measure the fair value of investment property reliably.
Fourth, IFRIC 16 has corrected the reference from IAS 39 to IFRS 9.
These are just a few changes. Accountants of IFRS reporting companies should carefully analyze the updated documents.
Control and Responsibility
The State Tax Service of Ukraine has explained what criteria it uses to select taxpayers for the inspection plan.
Experts of the fiscal department have noted that the main tasks of tax audits, transfer pricing and international taxation are to overcome risks in the audit system, identify not intermediaries but specific customers of minimization schemes, reduce administrative pressure on business.
Selection to the schedule of risk payers is carried out automatically by means of ITS “Tax block”, thanks to which only the most risky business entities are selected for control.
The plan-schedule of documentary scheduled inspections of taxpayers for 2020 was published on the official website of the State Tax Service of Ukraine (hereinafter – STS) on December 24, 2019.
By means of information systems of the State Tax Service of Ukraine, enterprises with high and medium risks have been selected for the 2020 schedule. High-risks were determined by the following criteria:
- availability of information from law enforcement agencies, structural subdivisions of the STS bodies on tax evasion and/or on relations with taxpayers;
- relationship with counterparties that are wanted or liquidated or declared bankrupt;
- availability of information on non-confirmation of the actual implementation of the acquisition transaction, etc.
Moderate risks were determined by the following criteria:
- accrual and payment of income on the basis of 157 (income paid to a self-employed person);
- inconsistency of the data of the reporting of the payment transactions recorder and volumes of supply specified in the declarations on the value added tax (hereinafter – VAT), and others.
In connection with the introduction of a moratorium on documentary and factual inspections of taxpayers, the tax authorities adjusted the schedule for 2020 on postponement of documentary scheduled inspections, which according to the schedule were to begin in the period from March 18 to the end of quarantine and were not started on the day of entry into force of the Law of Ukraine “On Amendments to the Tax Code of Ukraine and other laws of Ukraine to support taxpayers for the period of measures aimed at preventing the emergence and spread of coronavirus disease (COVID-19)” No. 533-IX of March 17, 2020.
The revised plan-schedule of documentary scheduled inspections of taxpayers for 2020 will be additionally published on the official website of the STS.
Labor and Salaries
The Ministry of Economic Development, Trade and Agriculture of Ukraine in letter “On the introduction of downtime in the case of self-isolation of employees 60+” No. 3512-06/28912-0712-07 of May 6, 2020 clarified whether it is possible to introduce downtime in the case of self-isolation of employees 60+.
It should be reminded that persons who have reached the age of 60 need self-isolation as part of anti-epidemic measures to combat COVID-19. This was previously provided for in “quarantine” resolution of the Cabinet of Ministers No. 211 of March 11, 2020, and later its successor – resolution No. 392 of May 20, 2020, which extended the quarantine until June 22, 2020.
Persons in need of self-isolation are obliged to be constantly in a place of self-isolation determined by them, refrain from contact with persons other than those with whom they live together.
Therefore, employers must ensure the transfer of employees, including those who need self-isolation:
- to remote work;
- provide annual paid leave with the consent of employees;
- or at the request of employees provide leave without pay in accordance with Art. 25 and 26 of the Law of Ukraine “On Leave” No. 504/96-ВР of November 15, 1996.
At the same time, the Ministry of Social Policy recommends not to consider absenteeism during the quarantine period caused by anti-epidemic measures, as a reason for bringing them to disciplinary responsibility, including dismissal.
However, the ministry does not rule out another option - in case of impossibility of remote work, there are also legal grounds to introduce a downtime.
In this case, the suspension of work should also be understood as the suspension of the ability to perform labor functions by a particular employee.
The current legislation does not directly regulate the procedure and conditions for the introduction of downtime. But the collective agreement of the enterprise (institution) establishes mutual obligations of the parties to regulate industrial, labor, socio-economic relations, in particular, the issue of salaries payment, working hours and leave (Article 13 of the Labor Code of Ukraine, hereinafter – Labor Code).
Therefore, the own time one can be introduced both for the whole enterprise (institution) and for individual structural subdivisions and employees.
Downtime which is not due to the fault of the employee, including for the period of quarantine, established by the Cabinet, paid at the rate of not less than 2/3 of the tariff rate set for the employee category (salary). This requirement is contained in Art. 113 of the Labor Code.
Summary of Court Rulings
The State Judicial Administration of Ukraine has reported that today there is a critical situation with the provision of justice due to the lack of adequate financial support of courts with current expenses for the administration of justice in 2020.
Budget allocations for these purposes at the beginning of this year are provided in the amount of only UAH 444.7 million, while cash expenditures in 2019 amounted to UAH 1, 159.9 million.
Given the increase in this amount of expenditures last year on the growth rate of court cases and the consumer price inflation index, the minimum need for current expenditures on litigation in 2020 will be UAH 1,276.3 million.
Accordingly, the deficit to ensure the administration of justice at the beginning of 2020 amounted to UAH 831.6 million.
In fact, to date, the courts have already used all their financial resources provided by the Law “On the State Budget of Ukraine for 2020” to purchase envelopes, stamps, video and audio discs, paper, consumables for office equipment, to pay for appropriate services to send mail correspondence (marking machines, video conferencing during the court hearing, Internet, telephony).
In connection with this, the courts are forced to suspend the sending of postal correspondence, which notifies the parties to court hearings (court summons, copies of procedural documents, etc.).
At the suggestion of the State Judicial Administration of Ukraine as a body that, in accordance with the Law “On the Judiciary and the Status of Judges” provides, in particular, financial support for courts, other bodies and institutions of the judiciary, the Ministry of Finance amended the annual budget allocations for 2020 within the budget allocations provided for under КПКВК 0501020 “Ensuring the administration of justice by local, appellate courts and the functioning of bodies and institutions of the justice system” in terms of redistribution of appropriations totaling UAH 200 million.
This will make it possible to partially solve the problem of the courts sending postal correspondence, through which the parties in the cases are notified of court hearings, the payment of fees to jurors, and so on.
The Other Things
The Cabinet of Ministers of Ukraine by order “On amendments to Order of the Cabinet of Ministers of Ukraine No. 143 of February 23, 2011” No. 582-р of May 27, 2020 made changes to its own order No. 143-р of February 23, 2011 “On states listed as offshore jurisdictions”.
Taking into account the Law of Ukraine "On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Proliferation of Weapons of Mass Destruction", the Government added Panama to the list of offshore jurisdictions.
This order was preceded by the decision of the EU Economic and Financial Affairs Council of February 18, 2002 to include Panama in its list of tax havens.
Currently, the list of offshore jurisdictions includes 42 countries and territories.
