Taxes
VAT
The Ministry of Finance of Ukraine by Order “On approval of Amendments to the Regulations on registration of value added tax payers” No. 629 of October 21, 2020 has approved amendments to the Regulations on registration of value added tax payers.
The document was developed in order to bring Order of the Ministry of Finance No. 1130 of November 14, 2014 in accordance with Art. 183, 184 of Chapter V of the Tax Code as amended by the 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-IX of January 16, 2020.
The Order has amended the Regulations on Registration of Value Added Tax payers, according to which:
- newly created business entities during the registration of business can declare their desire and be registered as VAT payers without submitting a registration application of the VAT payer on form No. 1-VAT (hereinafter – the Application);
- the Application is submitted to the supervisory authority exclusively in electronic form (for both mandatory and voluntary registration). There is no other way to submit the Application;
- new deadline is set for filing the Application in case of voluntary registration of a person as a VAT payer, as well as in case of transfer of a person from the simplified taxation system, which does not provide for VAT payment, to other taxes and fees established by the Tax Code, or changes by the single taxpayer of the third group of the single tax rate of 5% to the rate of 3% - not later than 10 calendar days before the start of the tax period from which such persons will be considered VAT payers (instead of 20 calendar days before the start of the tax period );
- simplified (shortened) procedures for VAT re-registration. In particular, re-registration is not provided in case of change of location (residence) by the business entity, and re-registration in connection with change of name (except transformation) (surname, name and father’s name) of the VAT payer, which is included in the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations (hereinafter – the Unified State Register), is carried out by the controlling body without submitting the Application on the basis of information from the Unified State Register;
- registration of VAT payers is automatically canceled on the basis of information from the Unified State Register on termination (liquidation) of a person or on the basis of data from the register of single tax payers on application by a person of a simplified taxation system that does not provide VAT.
The Order will enter into force on the day of its official publication.
Unified Social Contribution
The Ministry of Finance of Ukraine has made changes to the Procedure for forming and submitting by insurers a report on the amounts of the accrued single contribution to the obligatory state social insurance (hereinafter – the Procedure). The document enters into force on the first day of the month following the month of its official publication.
The following items of new Procedure should be paid attention to.
1. In case of termination or deregistration in the bodies of revenues and fees, the insured is obliged to submit the Report on SSC for the last reporting period before the date of state registration of termination, in which:
- state registration of termination of the insured or business activity was carried out;
- independent professional activity was terminated according to the data of the register of insured persons;
- the payer has lost the status of a member of the farm, has acquired the status of a person subject to insurance on other grounds, is exempt from paying the single social contribution (hereinafter – SSC).
In other cases, insurers, which are not covered by the Law of Ukraine “On State Registration of Legal Entities, Individuals Entrepreneurs and Public organizations”, are required to submit the Report on SSC before the date of submission of the application to the body of revenues and fees for deregistration, which received an application for deregistration.
Together with the Report on SSC for the last reporting period, the insurers are obliged to submit reports for previous reporting periods, if they were not submitted.
The amendments to the Procedure also stipulate for which reporting periods and within which deadlines the Report on SSC is submitted, indicating the type of form as “liquidation”.
2. It is specified that Table 5 of the Report on SSC is submitted if during the reporting period:
- the person was transferred from one structural unit to another, transferred to another permanent position or job with the same insurer;
- the person is appointed to a new position by the same insurer.
3. Table 5 of the Report on SSC is set out in a new wording. There is a new column “Professional job title”. And column 17 was set out in the new wording “Document is the basis for the beginning, end of employment or civil relations, transfer to another position, work and leave.”
4. In Table 1 of the Report on SSC, line 2 has been updated with the title “enterprises, institutions and organizations, sole proprietors, including those who have chosen the simplified taxation system, working persons with disabilities (8.41%)”, which gives the opportunity for sole proprietors to enter information about the accrued salary of employees with disabilities.
5. New items have appeared in the Table of correspondence of the codes of the categories of insured persons and the codes of the accrual base and the amounts of SSC.
Other Taxes and Fees
The State Tax Service of Ukraine has reminded that from January 1, 2021, a single tax account will be introduced. To switch to a single account, you need to take three simple steps.
The first is to submit a “Notice of use of a single account” (hereinafter – the Notice) under form J/F 1307001 through the User Account.
The second is to receive a receipt for inclusion in the Register of payers who use a single account.
The third is to provide the servicing bank with settlement documents indicating the details of the single account for the total amount without determining or with determining the recipients.
Payers who have not submitted the Notification under form J/F 1307001 continue to pay payments directly to budget/non-budget accounts.
Please note that you can refuse to use a single account from January 1 of the following calendar year.
Accounting and Reporting
The State Tax Service of Ukraine through the Office of Large Taxpayers has explained that in a situation where a business entity within the inventory of 2020 has decided to write off receivables, it should act as follows.
In accordance with paragraph “a” of item 14.1.11 of the Tax Code of Ukraine (hereinafter – the Tax Code) in the wording effective from May 23, 2020, bad debt is a debt that corresponds, in particular, to such a feature as debt on liabilities for which the statute of limitations has expired.
According to Art. 256 of the Civil Code of Ukraine (hereinafter – the Civil Code) statute of limitations is the period within which a person may apply to the court to protect their civil rights or interests. The general statute of limitations is set at three years (Article 257 of the Civil Code).
Paragraph “a” of item 14.1.11 of the Tax Code does not establish any additional conditions for the recognition of debts on liabilities for which the the statute of limitations has expired as bad. This rule of the Tax Code does not stipulate the need for the taxpayer-creditor to take any measures to recover the debt, in particular in court, to declare the debtor bankrupt, and so on.
Therefore, the exclusive and sufficient criterion for recognizing the debt as uncollectible in accordance with paragraph “a” of item 14.1.11 of the Tax Code is the expiration of the statute of limitations on such debt, regardless of whether the creditor went to court to recover it or not.
If the debt meets the criteria specified in paragraph “a” item 14.1.11 of the Tax Code, the taxpayer should not check the compliance of such debt to other criteria provided for in item 14.1.11 of the Tax Code.
At the same time, it should be noted that in accordance with item 14.1.257 of the Tax Code the amount of debt of one taxpayer to another, which is not collected after the expiration of the statute of limitations, is a non-repayable financial assistance.
Control and Responsibility
The Ministry of Finance of Ukraine has presented the Concept of electronic audit (e-audit) for taxpayers. Its introduction involves three waves covering the period from 2023 to 2027.
The purpose of the concept is to move to qualitatively new level of control and verification work.
Electronic audit of taxpayers is conducted using standard audit file (SAF-T). in such form the information is submitted to the controlling body. After receiving the file, the software performs data analysis according to the established risk criteria. Then, before the audit, the received information may be clarified or explained. Due to this the taxpayers can personally correct identified errors applying reduced sanctions. Then the results are subject to tax audit.
It is expected, that a systematic analysis of information submitted by the taxpayer to the controlling body will create addition opportunities to identify typical violations in the tax field to resolve them as quickly as possible. Automation of tax audit will not only speed up the work, but also reduce the impact of human factor, as well as improve the quality of tax control. E-audit can reduce the burden on the taxpayers and controlling body.
The presentation of the Concept can be found on the Ministry of Finance website.
Financial Markets
The National Bank of Ukraine by Resolution of the Board “On Amendments to Certain Legal Acts of the National Bank of Ukraine” No. 150 of November 30, 2020 has revised certain requirements for assessing the financial condition of debtors – local authorities when calculating the amount of credit risk.
In particular, banks can determine the class of the borrower of the municipality – the issuer of securities on the basis of its credit rating. In the absence of such a rating on hryvnia securities, banks have the right to determine the class of the borrower on the basis of the credit rating of Ukraine on an international scale, reduced by one level.
At the same time, the lower limit of the range of the credit risk calculation component, which reflects the level of losses due to the borrower's default (LGD), for government and municipal securities was reduced to 0.6.
The regulator has also increased the values of the ratios with which municipal bonds are accepted as collateral when calculating credit risk.
Such changes will contribute to more active credit support by banks to local authorities, development of regional infrastructure projects and the securities market in general and are a continuation of the steps taken by the National Bank to restore lending and support the economy.
In addition, until January 1, 2022, banks have extended the permission not to apply the requirement for the existence of a collateral insurance contract when determining the acceptability of collateral.
The resolution came into force on December 2, 2020.
Labor and Salaries
The State Employment Center has explained the peculiarities of regulating part-time work.
Quarantine restrictions have led to additional demand for non-standard working conditions, in particular, part-time employment. As you know, part-time employment is the employment of an employee on working hours, which is less than the norm provided by law, and can be established under a contract between employee and employer with wages in proportion to time worked or depending on production (paragraph 11 of Part 1 of Art. 1 of the Law of Ukraine “On Employment”).
Working in such conditions is seen as a way to reconcile work and family responsibilities or as an alternative to downsizing in times of economic hardship. The legislation allows reducing the length of the working day, working week, as well as the working day and working week at the same time. Part-time work should be distinguished from shorter working hours.
Article 56 of the Labor Code of Ukraine (hereinafter – the Labor Code) states that part-time work does not entail any restrictions on the labor rights of employees, including the reduction of the duration of their annual basic leave. Knowledge of your mutual rights and responsibilities by the parties to the employment relationship will help to avoid misunderstandings when using part-time work.
Part-time work affects the implementation of certain labor rights
In the case of part-time work, wages are paid in proportion to the time worked or depending on production. If the employment contract is concluded on a part-time basis, as well as if the employee does not fully comply with the monthly (hourly) labor rate, the minimum wage is paid in proportion to the work done (Article 31 of the Law of Ukraine “On Remuneration”). Attention should also be paid to the rules governing the calculation of average earnings in order to provide paid leave. If the size of the official salary is less than the size of the minimum wage, the average salary will be calculated on the basis of the established size of the minimum wage at the time of calculation. In the case of concluding an employment contract on a part-time basis, the calculation is made from the minimum wage calculated in proportion to the terms of the employment contract (paragraph 4 of Procedure for calculating the average wage, approved by the Cabinet of Ministers of Ukraine No. 100 of February 8, 1995). All those who work part-time are entitled to leave, as are those who are employed full-time. However, some exceptions to the rules governing rest time still exist. The length of service entitling to additional annual leave must include the time of actual work with harmful, difficult conditions or with a special nature of work, if the employee is employed in these conditions for at least half of the working day established for employees of this industry, shop, profession or positions (Part 2 of Article 82 of the Labor Code). For part-time employees, the norm provided for in Art. 53 of the Labor Code, does not apply, i.e. the duration of their work on the eve of holidays and non-working days is not reduced.
The necessity to follow the procedure for establishing part-time work
Part-time work may be introduced upon hiring or subsequently by agreement of the parties to the employment contract or at the initiative of the employer. Part-time work can be set for a certain period (for a certain period) or without a time limit, which must be specified in the order of transfer to part-time work.
To establish part-time work, the employee may apply in writing to the employer, indicating the extent to which s/he wishes to reduce the duration of working time (in days or hours). The employer on its own initiative has the right to establish part-time regime for employees, provided that the company, institution, organization implements changes in the organization of production and labor, and in accordance with the procedure provided for in Part 3 of Art. 32 of the Labor Code.
The employee must be notified of a change in significant working conditions (establishment or cancellation of part-time work) no later than two months. The elected body of the primary trade union organization at the enterprise, institution, organization has the right together with the owner or authorized body to decide on working hours and rest time (Article 247 of the Labor Code). If the reduction of the number of working hours was forced (in particular, during the quarantine period), the employees have the right to receive partial unemployment benefits in the manner prescribed by the Law of Ukraine “On Employment”.
Registration of a part-time employee in the case of actual full-time work is the basis for prosecution in the form of a fine of 10 times the minimum wage established by law at the time of the violation, for each employee (Article 265 of the Labor Code). It does not matter for how many hours the reduction of working hours was issued.
There is a feature of combining part-time work with some modes of work
It is necessary to pay attention to features in case of a combination of part-time work with modes of the extended duration of working day. According to decision of the Plenum of the Supreme Court of Ukraine “On the practice of application by courts of legislation on remuneration of labor” No. 13 of December 24, 1999 overtime part-time work is not considered overtime and paid in a single amount, but within the statutory established full-time work. At the same time, part-time work is not recommended to be used simultaneously with other non-standard forms of labor organization. In particular, a non-standard working day does not apply to part-time employees.
The preemptive right of certain individuals to establish part-time work
The legislation does not limit the number of persons entitled to work part-time. Experts emphasize that the employer is obliged to establish part-time work at the request of the following employees: (1) pregnant (Article 56 of the Labor Code); (2) a woman who has a child under the age of 14 or a child with a disability, including one under her care (Article 56 of the Labor Code); (3) a woman caring for a sick family member in accordance with a medical opinion (Article 56 of the Labor Code); (4) a father who raises children without a mother (in particular, in the case of a long stay of the mother in a medical institution) (Article 186 of the Labor Code); (5) guardians (trustees) (Article 1861 of the Labor Code); (6) one of the foster parents, one of the mentors (Article 1861 of the Labor Code); (7) women on childcare leave. This right also applies to the child's father, other relatives who actually care for the child during their stay on childcare leave (Article 18 of the Law of Ukraine “On Leave”); (8) persons with disabilities regardless of the disability group (Article 172 of the Labor Code); 9) elderly people (Article 13 of the Law of Ukraine “On Basic Principles of Social Protection of Labor Veterans and Other Elderly Citizens in Ukraine”. For women with children, working hours usually may not be lower than 4 hours a day.
It is the responsibility of employers to pay a single minimum contribution
Officials of the State Tax Service of Ukraine explain that the employer is obliged to accrue a single contribution to the obligatory state social insurance for the main job of the employee in the amount not less than the minimum wage. This follows from the rules of Part 5 of Art. 8 of the Law of Ukraine “On collection and accounting of a single contribution to the obligatory state social insurance”: if the basis for accrual of a single contribution does not exceed the minimum wage set by law for the month for which income is received, the single contribution is calculated as the product from the minimum wage established by law for the month for which the income (profit) is received, and the single contribution rate.
The Other Things
The President of Ukraine has signed Decree No. 582/2020 “On the Council for the Promotion of Small Business Development” and approved its provisions.
According to the document, this advisory body under the President of Ukraine is created to facilitate constructive cooperation between public authorities and small businesses and their public associations.
Volodymyr Zelenskyi has appointed Yuliia Svyrydenko, Deputy Head of the Office of the President of Ukraine, as the Chairman of the Council for the Promotion of Small Business Development. She must make proposals on the staff of the Small Business Council within five days,
The first meeting of the Council took place in the Office of the President of Ukraine.
The head of the Office of the Head of State Andrii Yermak took part in it. He introduced his new deputy, Yuliia Svyrydenko, who will coordinate the work of the newly created Council.
Andrii Yermak called on the participants to organize the work of the body as soon as possible and to work out proposals and prepare solutions to the problems of small business as soon as possible. These proposals will be submitted to the National Reform Council under the President of Ukraine for consideration.
Andrii Yermak stressed that an effective dialogue with entrepreneurs should be built to correct mistakes and work out constructive solutions.
Yuliia Svyrydenko, Deputy Head of the Office of the President and Chairman of the Council for the Promotion of Small Business Development, noted that the staff of the Council was being finalized and would be approved soon.
According to Yuliia Svyrydenko, there are about 1.8 million small entrepreneurs in Ukraine, so it is extremely important to hear their real problems and help solve them.
