Taxes
VAT
The State Tax Service of Ukraine in individual tax consultation “On the necessary to calculate VAT obligations in the case of operations for temporary suspension of operation of production equipment due to absence of orders for production of certain type of products” No. 1195/6/99-00-07-03-02-06/ІПК of March 23, 2020, has clarified if there will be VAT consequences in case of temporary suspension of production equipment operation due to lack of orders for production of products.
According to the controllers, in this case the production equipment is not used in the operations listed in item 198.5 of the Tax Code. As before, such equipment continues to be in the status of intended for use in VAT taxable transactions within the taxpayer's business activities. Therefore, there is no need to accrue compensatory VAT liabilities.
Unified Social Contribution
The President of Ukraine signed the Law of Ukraine “On amendments to certain legislative acts of Ukraine on introduction of a unified tax and fees account, unified contribution to compulsory state social insurance”, and on April 17, 2020, it was published in “Voice of Ukraine” No. 67 published.
The Law provides for the creation of a unified account for the payment of taxes and fees provided for by the Tax Code of Ukraine (except for value added tax (hereinafter – VAT) and excise tax on the sale of fuel and ethanol, as well as customs payments), a unified social tax through the taxpayer account. According to the signed law, such account will be opened for the payer with his/her consent (wish) at the central level of the State Treasury Service.
The new law is expected to help simplify tax payments and help reduce the amount of money liabilities mismanaged or overpaid. According to lawmakers, the approved changes will increase the level of openness, transparency and confidence of taxpayers in government bodies.
The unified tax account will start operating in 2021.
Excise Tax
The State Fiscal Service of Ukraine through the Office of Large Taxpayers has informed that in accordance with the Law of Ukraine “On amendments to some legislative acts of Ukraine aimed at providing additional social and economic guarantees in connection with the spread of coronavirus disease (COVID-2019)” No. 540-IX of March 30, 2020 extends the maturity period of tax anticipation bills for fuel manufacturers or importers.
Maturity period of tax anticipation bills issued in accordance with item 229.8 of the Tax Code of Ukraine (hereinafter – Tax Code) for manufacturers or importers of jet fuel (codes according to UKT FEA 2710 12 70 00, 2710 19 21 00) and/or aviation gasoline (code according to from UKT FEA 2710 12 31 00), which is for the period from March 1, 2020 to May 31, 2020, continues to August 15, 2020 (inclusive).
In the case of confirmation up to August 15, 2020 (inclusive) by the importer or the manufacturer who issued the tax bill of the fact of the intended use of aviation gasoline or jet fuel, the payment of such tax anticipation bills must be carried out in accordance with the procedure stipulated in item 229.8 of the Tax Code:
- without payment of the amounts of excise tax indicated in such tax anticipation bills;
- without the application of the penalties set out in subitem 229.8.12 of the Tax Code.
If the tax anticipation bill is not repaid by August 15, 2020 (inclusive), the bill-holder, within five working days following the determined last day of the maturity period, protests such tax anticipation bill in default according to the law and within one working day from the date of protest appeals to the bank that made the bill avalization, with a protested tax bill. The avalizing bank is obliged to transfer the amount specified in the tax bill to the bill-holder no later than the business day, which comes after the date of the bill holder's appeal with the protested tax bill.
In the absence of confirmation until August 15, 2020 (inclusive) the intended use by the importer or manufacturer who issued the tax bill, of aviation gasoline or jet fuel, such importer or manufacturer is subject to fine of 50% of the amount of excise tax, calculated on the basis of volumes of aviation gasoline or jet fuel for which there is no confirmation of the intended use, and the excise tax rate set by the subitem 215.3.4 of the Tax Code applying increasing factor 10.
Accounting and Reporting
The State Tax Service of Ukraine in category 102.05 “ZIR” has answered the question “Are fixed assets received free of charge by the taxpayer subject to depreciation?”.
The procedure for calculating the depreciation of fixed assets (hereinafter – FA) or intangible assets for determining the object of taxation is given in item 138.3 of the Tax Code of Ukraine (hereinafter – Tax Code).
According to subitem 138.3.1 of the Tax Code the calculation of depreciation of fixed assets and intangible assets is carried out in accordance with national accounting standards (hereinafter – NAS) or International Financial Reporting Standards (hereinafter – IFRS), subject to the limitations set out in subitems 14.1.138 and 138.3.2–138.3.4 of the Tax Code. During this calculation, the methods of depreciation provided by NAS are used, except for the “production” method.
To calculate depreciation in accordance with the provisions of this item, the value of fixed assets and intangible assets must be determined without taking into account their revaluation (writedown, increase in the value) carried out in accordance with accounting provisions.
According to subitem 138.3.2 of the Tax Code the following are not subject to depreciation and are carried out at the expense of relevant sources:
- goodwill cost;
- cost of purchasing/self-manufacturing of non-productive fixed assets, non-productive intangible assets;
- expenses for repair, reconstruction, modernization or other improvements of non-productive fixed assets, non-productive intangible assets.
The terms “non-productive fixed assets”, “non-productive intangible assets” mean respectively fixed assets, intangible assets not intended for use in the business activities of the taxpayer.
In accordance with item 22 of Accounting standard 7 “Fixed assets” (hereinafter – AS), approved by Order of the Ministry of Finance No. 92 of April 27, 2000, the object of depreciation is the depreciable value (except for land, natural resources and capital investment value).
Item 4 of AS 7 establishes that depreciation refers to the systematic distribution of depreciable value of non-current assets over their useful life (operation).
Provisions of AS 7 and Methodological Recommendations for Accounting of Fixed Assets, approved by Order of the Ministry of Finance No. 561 of September 30, 2003, determined the reflection of the cost of fixed assets received free of charge and their depreciation.
Given the abovementioned, the tax accounting does not provide for restrictions on the depreciation of fixed assets received free of charge by the taxpayer, so such fixed assets that are intended for use in the taxpayer's business activities are subject to depreciation in accordance with item 138.3 of the VAT.
Control and Responsibility
The President of Ukraine has signed Law of Ukraine “On amendments to certain legislative acts of Ukraine aimed at providing additional social and economic guarantees in connection with the spread of coronavirus disease (COVID-19)” No. 540-IX, which has already entered into force.
Let’s consider the main innovations.
Single tax payer limits
Limits have increased for both individuals and legal entities:
Group 1 – 1 million UAH instead of 0.3;
Group 2 – 5 million UAH instead of 1.5;
Group 3 – 7 million UAH instead of 5.
Land tax and land lease
The previous “anti-crisis” law exempted from land tax and rent for state and communal land in March and April.
The new law retains the March privilege but forces to pay it for April. However, the April payment was delayed a little – it has to be paid by June 30.
Real estate tax
It is known that during the quarantine, non-residential real estate was exempt from tax for two months - March and April.
Now this privilege is limited – only March. You will have to pay for April. Moreover, due to a misunderstanding, the payment for April was not postponed but approached. It should now be submitted by June 30, 2020, not July 30.
Is it possible not to pay rent
It is possible, but this does not apply to all cases. The rent is not paid only if the property cannot be used for its intended purpose due to quarantine restrictions.
How to pay for idle period
Now idle period forced by quarantine is paid not on average earnings, but not below two-thirds of the tariff rate (Article 113 of the Labor Code).
Flexible mode and remote work
The Labor Code introduced rules on flexible working hours, as well as rules on remote working.
In the case of remote (home) work, a written employment contract (Article 24 of the Labor Code) will be mandatory. This rule does not apply to a worker who only occasionally works at home (Article 1 of the Convention on home work). In the current situation, a written contract s not necessary, and the employee can be transferred to remote work by order (Article 60 of the Labor Code).
Disclosure of statements and audit
The financial statements for 2019 should be disclosed together with the auditor’s opinion.
- enterprises of public interest, incl. large;
- PJSC;
- nationwide natural monopolists;
- “extractors”;
- medium enterprises;
- micro and small financial institutions.
The deadline for disclosure for different businesses varies: by April 30, June 1 (Part 3 of Article 14 of the Law on Accounting). However, the administrative penalty for the violation is equally large: from 17,000 to 34,000 UAH.
The statutory audit was not abolished but the fine was lifted. However, the financial statements together with the auditor's opinion must be made public within 90 days after the quarantine is over, and for the issuers of securities within 5 working days after the general meeting.
Medical benefit with VAT
Not only the importation, but also the supply of anti-virus goods according to the CMU list were exempted from VAT (paragraph 71 of the Transitional Provisions of the Tax Code). Last time, they forgot about domestic supply.
If purchased with VAT and sold at a discount, then the tax credit is saved.
The benefit is in force from March 17 and is valid until the end of the month of quarantine (i.e. until the end of April).
Charity
There are such tax exemptions.
1. For individuals, the entire amount of antivirus charity is covered by the PIT tax deduction (sub-item 1, item 11 of the Transitional Provisions of the Tax Code).
2. For high-income legal entities, the entire amount of antivirus charity transferred is included in the cost without tax adjustments (item 511, sub-paragraph 4 of the Transitional Provisions of the Tax Code). The low-income entities did not have such adjustments before.
3. For healthcare institutions, the amounts or value of goods obtained for tax purposes shall be excluded from income.
4. For non-governmental organizations and charitable organizations, VAT exemptions for medicines and charity are not included in the millionth criterion for VAT payer registration (item72 of subsection 2 of the Transitional Provisions of the Tax Code).
Extension of terms
Different terms do not expire during quarantine.
Here are some:
- action limitation period under the Civil Code;
- terms for administrative appeal of tax decisions (Article 56 of the Tax Code);
- terms for filing an application to court over an employment dispute (Article 233 of the Labor Code);
- many court cases concerning administrative disputes, including the terms of appeal to the administrative court (changes in the Administrative Court Procedure Code);
- procedural time limits for commercial litigation (changes in the Code of Commercial Procedure);
- limitation periods in disputes on recognition of paternity/motherhood under the Family Code, etc.
General meeting of participants/shareholders
The obvious problem with the general meeting is settled. JSCs may gather to discuss the 2019 performance within three months after the quarantine is over (paragraph 10 of the Final Provisions of the Law on JSC).
The LLC has 6 months for the annual general meeting (Article 31 of the Law on the LLC). But now this period has been extended to 3 months after quarantine.
The terms for disclosure of information to the issuers of securities was delayed (5 days after the general meeting).
Financial Markets
The National Bank of Ukraine has provided clarification on the identification of clients when transferring funds.
The regulator has reminded that since April 28, 2020, updated requirements have been established for the list of payer and receiver information to accompany the transfer of funds, but according to the National Bank it will not have a significant impact on the vast majority of funds transfer transactions.
The new requirements are introduced in conjunction with the entry into force of the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Financing Terrorism and Proliferation of Weapons of Mass Destruction” (hereinafter – the Law).
Several mass media have spread false information that the operation of payment systems will be suspended from April 28 this year. And, as a consequence, it would not be possible to conduct regular transactions- to pay for utilities, to make money transfers, to pay for goods/services. The National Bank stressed that this was not true.
The Law provides the following two basic requirements:
- carry out the identification and verification of the payer;
- accompany the transfer of funds with the necessary list of data concerning the payer and the receiver.
The updated requirements of the Law do not apply to:
- payment of housing and communal services, payment of taxes, fines, other mandatory fees and charges (regardless of the amount);
- payment of a loan in the amount of up to 30 thousand UAH;
- transfers for payment of goods and services made by the payer by means of a payment card (or other electronic payment method), if its number accompanies the transfer (regardless of the amount);
- all cash transfers within Ukraine in the amount of up to 5 thousand UAH;
- withdrawing funds from your own account.
The National Bank, in constant communication with the participants in the financial services market, sent the corresponding explanations to banks and non-bank financial institutions in letter No. 25-0006/18603 of April 13, 2020. The regulator advised them to analyze their internal procedures (processes) in advance and to bring them into compliance with the requirements of the Law, as well as to set up automated systems in such way as to ensure that transfers of funds were provided with the necessary information about the payer and payee.
The National Bank stressed that the payment for utilities is a low-risk transaction in accordance with the National Risk Assessment in the field of prevention and counteraction to the legalization (laundering) of proceeds of crime and terrorist financing. These transactions require minimal attention and simplified customer identification, verification and investigation measures. The requirements of Art. 14 of the Law on supporting the transfer of funds with payer and receiver information does not apply to utility payment operations.
Therefore, the introduction of new provisions of the Law while introducing remote identification mechanisms should significantly expand the tools of banks and non-banking financial institutions to remotely initiate and conduct these transactions.
Labor and Salaries
The Cabinet of Ministers of Ukraine has informed that social support for the unemployed in Ukraine is increasing. Thus, citizens who were resigned from their last job during the quarantine period (starting on March 12, 2020) on their own accord and registered with the State Employment Service will receive unemployment benefits from the first day of acquiring the status of unemployed. That is, during the quarantine period, the rule on deferring unemployment benefits for the resigned on own accord will not apply.
It is known that Law of Ukraine on Amendments to the Law of Ukraine “On the State Budget of Ukraine for 2020” No. 553-IX came into force on April 18, 2020.
This law amends the “Final Provisions” of the Law of Ukraine “On Compulsory State Social Insurance against Unemployment”. The amendments stipulate that during quarantine period the persons who have resigned from their jobs on their own accord will not be subject to the requirement to defer payment of unemployment benefits up to 90 days. However, the total duration of unemployment benefits for such persons may not exceed 270 calendar days.
If a person resignes from their previous on own accord during the quarantine period and has already registered with the employment service, no additional documentation is required. Assistance will be accrued automatically.
