Taxes
VAT
The President of Ukraine signed the Law of Ukraine “On Amendments to the Tax Code of Ukraine regarding Certain Issues of Taxation of Value Added Taxes on Exports of Oils outside Ukraine’s Customs Territory”. The Law will come into force on the day following the day of its publication.
The exemption stipulates that the exemption from VAT of export transactions in the customs export regime from September 1, 2018 to 31 December 2021 of soybeans and from January 1, 2020 to December 31, 2021 – rape seeds, will not be applied to agricultural enterprises - producers of the indicated oilseeds crops grown on agricultural land owned by such producers, for permanent use or for lease (sublease), emphyteusis.
Consequently, the VAT return will be received only by the commodity producer, who exports soybeans and rapeseed independently.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure for assigning to the tax credit the VAT amount indicated in the tax invoice, the registration of which in the URTI was suspended, but subsequently was registered in the URTI” of 23.08.2018, No. 3682/6/99-99-15-03-02-15/ІПК gives an answer to the question when it is possible to form the tax credit on VAT on the basis of such a tax invoice.
The reason for the inclusion of VAT amounts by the VAT payer-buyer to the tax credit and consequently, the reflection in the VAT returns are the following:
- a tax invoice, duly prepared and registered in the URTI;
- a customs declaration duly prepared;
- other documents stipulated in para.201.11 of TCU.
The VAT amounts indicated in the tax invoices, the registration of which was suspended in the URTI, after the termination of the procedure of such suspension, can be classified as a tax credit:
- in the case of their timely registration in the URTI – during 1095 calendar days from the date of such tax invoices/adjustment calculations to such tax invoices;
- in case of their untimely registration in the URTI – during 1095 calendar days from the date of such fiscal invoice/adjustment calculations to such tax invoices, but not earlier than the date of such registration.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On VAT Taxation” of 17.08.2018, No. 3575/6/99-99-15-03-02-15/ІПК reminds that the return of tangible assets under a financial lease agreement is considered to be the supply of goods. Consequently, for a lessee who returns a financial lease agreement, such a transfer is equated for the purposes of VAT taxation before the lessor sells such an asset back to the lessor. Accordingly, the lessee – the VAT payer is obliged to calculate tax liabilities with VAT. But what, then, will be the basis for charging VAT obligations?
According to the rules of the TCU, the financial lease object, the return of which to be carried out, belongs the category of fixed assets, that is, it is a non-current asset.
Consequently, if the lessee – the VAT payer returns the financial lease object to the lessor - the VAT payer, the lessee – the VAT payer is required to calculate tax liabilities at a rate of 20% based on the tax base determined in accordance with paragraph 188.1 of TCU but not lower than book value (residual) value according to accounting records, which has developed at the beginning of the reporting (tax) period during which such transactions are carried out.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure for Taxing the VAT transactions of the Health Care Establishment for the Supply of Health Services to the Insured Person Payable by the Insurance Company” of 13.08.2018, No. 3524/6/99-99-15-03-02-15/ІПК reported that the transaction of the health care services supply to be the subject to VAT.
At the same time, as noted by the representatives of the fiscal department, the health care institution, which supplies such services, on the date that occurred earlier (or receipt the insurance payment for the payment of the cost of services or the actual provision thereof):
- defines VAT liabilities based on the contract value of services;
- makes and register a tax invoice in the URTI for such a transaction to the insured person.
If the mentioned above services relate to the “privileged” categories (para.197.1.5 of TCU), then the medical institution that supplies such services does not determine the VAT liability, but is required to draw up and register a tax invoice for the transaction on insured person.
The tax authorities also reminded that the insurance company’s payment of insurance payments to be not the subject to VAT.
The State Fiscal Service of Ukraine in the category 101.16 “ZIR” reported: if the VAT payer makes an adjustment calculation (AC) to the tax invoice (TI), which was drawn up and registered in the Unified Register of Tax Invoices in the form valid on the date of such registration, which did not intend the indication of the rate code, the privilege code, then in the AC:
- in line by which the line of TI (zeroing) is reversed, column 11 “rate code” and column 12 “privilege code” is not filled, since the TI form at that time did not foresee the indication in the table part of the TI rate code, the privilege code;
- it is added a new line with the indication of the new sequential number, which was not in the TI adjusted. In the line in column 11 it is indicated the rate code, in column 12 it is indicated the privilege code, which are valid on the date of adjustment.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Value Added Tax” of 20.07.2018, No. 3204/6/99-99-15-03-02-15/ІПК reminded that the “reducing” adjustment calculation made by the supplier of goods/services to the tax invoice drawn up on the recipient - VAT payer, is subject to registration by the recipient (buyer) of the goods/services in the URTI. For this, the supplier sends a compiled adjustment calculation to the recipient.
According to para.201.10 of the Tax Code Ukraine (hereinafter – TCU), registration of such adjustment calculation in the URTI should be made within 15 calendar days from the day such adjustment is received by the recipient (buyer).
It raises the question: how is the date of receipt by the buyer of the adjustment calculation to reduction of the amount of compensation for the value of goods/services?
The TCU does not provide for a mechanism for fixing the date of receipt by the buyer of such an adjustment calculation. Therefore, in order to avoid mistakes in drawing up tax reports and avoiding mistakes in the calculation in the CEA of VAT of indicator “ΣПеревищ”, registration of adjustments calculation to reduction of the amount of compensation for the value of goods/services is advised by the representatives of the fiscal department to carry out taking into account the terms defined in paras.15-16 of para. 201.10 of TCU.
Therefore, registration in the URTI should be carried out:
- for “reducing” adjustment calculations made of 1 to 15 calendar days (inclusive) of the calendar month, in which they were drawn up;
- for “reducing” adjustments calculations drawn up from 16 to the last calendar day (inclusive) of the calendar month – up to 15 calendar days (inclusive) of the calendar month following the month in which they were drawn up.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On VAT Taxation” of 01.08.2018, No. 3354/6/99-99-15-03-02-15/ ІПК considered the need for adjusting the tax credit specified in the transaction for receiving services from a non-resident in the customs territory of Ukraine in case of cancellation of bad debts for such received and non-paid services.
The date of the occurrence of tax liabilities for the provision of services by non-residents, the place of which is the customs territory of Ukraine, is the date of writing off funds from the bank account of the taxpayer for payment of services or the date of execution of a document certifying the fact of the non-resident’s supply of services, depending on which from events occurred earlier (para. 187.8 of TCU).
At the same time, the date of occurrence of the right of the taxpayer to assign the amount of tax to the tax credit for transactions for the supply of services by a non-resident in the customs territory of Ukraine is the date of making the tax invoice for such transactions, provided that such a tax invoice is registered in the Unified Register of Tax Invoices (para. 198.2 of TCU).
Consequently, a tax credit, formed on the basis of a tax invoice registered in the URTI, drawn up by the taxpayer for the transaction for receiving services from a non-resident, is not subject to adjustment in deciding to cancel bad debts owed for such received and non-paid services. The tax liabilities accrued by a taxpayer when receiving services from a non-resident and included in the VAT tax declaration for the relevant reporting period, and the write-off of bad debts for such received and non-paid services are also not subject to adjustment.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure for the Application of Penalties” of 13.08.2018, No. 3523/6/99-99-15-03-02-15/ ІПК reminded that the fine to be imposed for violation of the deadline for registration of the tax invoice and/or the adjustment calculation in the Unified Register of Tax Invoices (URTI). At the same time, if the tax invoice is not prepared totally and is not registered, the amount of fine will be 50% of the VAT amount of such a tax invoice.
However, this rule does not apply to the tax invoice which are not provided to the recipient (buyer) and are prepared for the supply of goods/services for transactions exempted or taxed at a zero rate.
Both conditions (are not given to the buyer and prepared for exempted transactions and transactions at a rate of 0%) must be executed simultaneously.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Adjustment of VAT Obligations” of 06.08.2018, No. 3446/6/99-99-12-02-01-15/ІПК considered the situation when the taxpayer in connection with the cancellation of his/her registration as a VAT payer, increased tax liabilities to the amount of conditional sale of the balance of unrealized assets. Subsequently, the Supreme Administrative Court of Ukraine adopted a Resolution in the case and canceled the cancellation of registration of the VAT taxpayer, invalidated and canceled the Act on the cancellation of registration of the taxpayer.
In this regard, the taxpayer raised a question about the mechanism of VAT refund by increasing the tax credit, which was reduced due to the implementation of conditional sale, or by adjusting tax liabilities based on the calculation of the adjustment to the tax invoice, prepared in connection with the implementation of conditional sale.
The consultation clarifies that the taxpayer has already taken advantage of his/her right to tax credit, that is why it will not be possible to re-create a tax credit for one transaction, since this is not provided for by the rules of the TCU.
Also, it will not be possible to reduce tax liabilities accrued when the taxpayer independently determines the conditional sale of goods (assets), as the current tax legislation does not provide for the possibility of registering a tax invoice prepared by the taxpayer for the conditional sale of assets in the URTI, the adjustment calculation to it also cannot be registered in URTI.
Corporate Income Tax
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Imposing the VAT and the Income Tax on Medical Supplies” of 09.08.2018, No. 3483/6/99-99-15-03-02-15/ІПК considered the situation regarding VAT taxation and the income tax of transactions for the writing off of the medical supplies.
When the writing-off of inventories (including goods (products) of medical purpose) in connection with their recognition as unfit for use, such commodity-material values cannot be used within the economic activity of the company.
Since the VAT payer carries out a transaction for the writing off of inventories (including goods (articles) of medical purpose), then they begin to be used in transactions that are not economic activities of such a taxpayer.
As it was indicated in the application of the payer to the SFSU, the goods (products) of medical purpose at the time of their purchase by the payer were exempted from taxation.
Taking this into consideration, if the inventories (including goods (products) of medical purpose) are purchased without the inclusion of VAT amounts in the tax credit, then tax liabilities at their writing off are not to be charged.
In the event of the liquidation of fixed assets used in business activities and subject to depreciation in tax accounting, the financial result before taxation increases by the amount of the residual value of such assets determined in accordance with the rules of accounting and is reduced by the amount of the residual value of these assets, determined in accordance with the provisions of Art. 138 of TCU.
When the liquidation of fixed assets that are not used in economic activities, the financial result before taxation increases (in accordance with para. 138.1 of TCU) on the amount of the residual value of such assets, determined by accounting, and decreases (in accordance with para. 138.2 of TCU) at the amount of the initial value of purchasing or manufacturing and expenses for their repair, reconstruction, modernization or other improvement of such assets, as determined by the accounting.
At the same time, the adjustment of the financial result before the taxation is not carried out on the value of tangible assets that are accounted for in inventories and not to be depreciated in accordance to para.138.1 and 138.2 of TCU.
Simplified Taxation System
The State Fiscal Service of Ukraine in the category of 108.01.02 “ZIR” considered the question whether the amount of guarantee payments returned to the auction participants to be included in the income of a legal entity – the payer of the unified tax. Therefore, according to sub-para.2 of para.292.1 of TCU, the income of payer of the unified tax for a legal entity is any income, including income of representative offices, branches of departments of such a legal entity, received during the tax (reporting) period in monetary form (cash and/or cashless); tangible or intangible form, as defined in para. 292.3 of the TCU.
According to para. 3.11 of the procedure for holding targeted auctions for the sale of property of a taxpayer, which is in the tax lien approved by the Order of the Ministry of Internal Affairs dated 22.05.2017, No. 518 (hereinafter – Procedure), an individual or a legal person who has expressed a desire to register as a participant in the auction, pays the registration fee, the size of which is set by the auction organizer and cannot exceed one non-taxable minimum of citizens’ income, and also makes a guarantee contribution in the amount of 10 percent of the initial price of the lot.
Target auction participants who were not recognized as the winners in accordance with para. 3.17 of the Procedure, the guarantee fee should be returned within five banking days from the day of signing the protocol of holding the target auction, by deducting the payments for bank transfers.
Therefore, the amount of guarantee fees paid for participation in the auction and to be returned to the auction participants after it, is not to be included in the income of the legal entity – the payer of the unified tax (stock exchange), since such contributions are not payment for goods (works, services).
PIT and War Tax
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Inclusion in Expenses of Business Trips Expenses” of 30.07.2018, No. 3313/6/99-99-15-02-02-15/ІПК reports: if the company is not financed by the budget, daily allowances for a foreign business trip are not imposed with the PIT, if their amount does not exceed 80 euros for each calendar day of such a business trip. The Tax Code of Ukraine does not set a ceiling for the cost of living abroad in a business trip.
In addition, the TCU norms do not provide for adjustment of the financial result to taxation to the amount of business trip expenses for the taxation of the income tax.
Accounting and Reporting
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the issues of determining the tax privilege, the need to compile and submit a report on the amount of tax benefits” of 23.08.2018, No. 3690/6/99-99-15-03-02-15/ІПК reminded that the company submitted a Report on the amount of tax benefits on transactions in the supply of goods and/or services subject to VAT, which are exempt or taxed at a zero rate.
The tax privileges are not determined under supply transactions that are not subject to VAT. Therefore, the taxpayer should not reflect such transactions in the benefit report.
Therefore, if the taxpayer conducts transactions that are not subject to VAT, and does not conduct other transactions exempt from VAT or are taxed at zero rate, it is not required to submit the privilege report.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure for Provision of Revised Financial Statements” of 16.08.2018, No. 3559/6/99-99-15-02-01-15/ІПК reported that companies could submit clarified financial statements for replacement of previously submitted based on the results of an audit to correct errors independently detected or for other reasons.
At the same time, the company must submit together with the clarified financial reporting the clarifying declaration for the relevant reporting period to the SFSU.
Confirmation of submission of financial reporting together with the declaration is “+” mark in the declaration in the “ФЗ12” box of the table “Availability of applications”.
The company places a mark in the boxes corresponding to the names of the forms of financial statements filed together with the declaration in the same table.
At the same time, it should be recalled: in case of correction of errors in the declaration, a company may not re-submit financial reporting, provided that the indicators of such reporting are not subject to correction.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Application of Specific Requirements to the Regulation on the Management of Cash Transactions in the National Currency in Ukraine, approved by the Resolution of the Board of the NBU dated December 29, 2017, No. 148” of 08.08.2018, No. 3459/ІПК/10-36-14-06-16 reported: in order to send cash to a bank, the issuing authority in the requisition “Issue” should indicate the surname, name, patronymic of the cashier or other employee of the company responsible for the cash withdrawal to the bank. They act in the same way if they issue funds for the expense.
When cash is generated from the box office of the cash register, it should be indicated the person from whom the cash was accepted in the Income cash order in the requisition “Accepted from”.
It is necessary to indicate the basis for the recognition of funds (source of origin, such as recognition of proceeds, provision of services under the contract, return of funds after a business trip, order of the head, receipt of cash from the bank, etc.) in the requesting “Grounds”.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Cash Funds Recognition in a Separate Subdivision and Completing of the Book of Record for Settlement Transactions” of 10.08.2018, No. 3512/6/99-99-14-05-01-15/ІПК reported: if the business entity used the version of the cash register that had the function and allowed to print a copy of the fiscal reporting receipt, then, in case of loss of the original of such a check, the business entity had the ability to print a copy of the reporting fiscal check and glue under the relevant section of the Book of Record for Settlement Transactions.
The current legislation does not contain prohibitions on using a copy of the fiscal reporting check.
If before the withdrawal of the fiscal reporting check on the cash register used by the company, there will be no “service issuance” transaction, then the cash remaining in the cash register box will be considered as not profitable (par.6 of sec. III of the Procedure No. 547).
Consequently, in order to avoid such a situation, it is necessary to perform “service issuance” transaction before the zeroing of the cash register, and the transaction “service record” after the “Z-report”.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the registration of the use of the accounting book of settlement transactions and the execution of a cash receipt note” of 02.08.2018, No. 3393/6/99-99-14-05-01-15/ІПК considered a number of issues, which related to the posting of cash in the course of passenger transportation.
On the cash recognition
Thus, cash registers and adjustment calculation do not apply when selling tickets with a printed series, number, nominal value on the road transport. In this case, Typical forms of tickets for passenger transportation and baggage transportation on public routes were approved by the order of the Ministry of Transport and Communications of Ukraine of 25.05.2006, No. 503.
In order to keep accounts for cash flow when providing passenger transport services by road on urban routes, an entity may use the accounting book of settlement transactions on a separate economic unit (bus, route taxi, etc.), which is filled in on the basis of settlement documents (tickets).
Acceptance of cash from the driver (bus, route taxi, etc.), is made by the cashier with a cash receipt for the total amount according to the entry in the accounting book of settlement transactions.
About registration of traffic tickets form
Since, at the moment, the special forms of books and the corresponding order of their filling are not set up for business entities engaged in the carriage of passengers and luggage in motor vehicles, then before the introduction of a new form for documenting the registration of tickets for travel by road and cash received from the carriage of passengers and luggage to business entities, the SFSU considers it possible to use the form of the accounting book of settlement transactions on the economic unit, carrying out in it records in a convenient way for the business entity, complying the legislative requirements.
Consequently, in order to keep accounting for the movement of cash in the provision of passenger transport services by road on urban routes, the business entity may use the accounting book of settlement transactions on a separate economic unit, which is to be filled in on the basis of settlement documents (tickets).
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Cash Recognition” of 26.07.2018, No.3288/6/99-99-14-05-01-15/ІПК clarified that on June 1, 2018, after making Amendments to the Regulations on the conduct of cash transactions in the national currency in Ukraine, approved by the Resolution of the Board of the NBU dated 29.12.2017, No. 148, the cash book should not be used if the separate units of enterprises that carried out cash settlements using cash register (the accounting book of settlement transactions), accounting of cash in the full amount of its actual receipts should be carried out on the basis of settlement documents by creating and printing fiscal reporting checks and their affixing to the relevant pages of the accounting book of settlement transactions (data entry settlement receipts in the accounting book of settlement transactions).
At the same time, it is noted in the advice that if collection is carried out by the cash collection service of the bank from the stores that are subdivisions of the business entity, then such transactions are not reflected in the cash book of the parent company.
The Ministry of Finance of Ukraine by its Order “On Approval of Amendments to the Procedure for Accounting for Taxpayers and Fees” of 27.06.2018, No. 589 amended the Procedure for Accounting for Taxpayers and Fees.
From now on, the notification on registration/de-registration of the taxpayer due to the change of location (residence) in the form No. 11- ОПП has been updated.
Form No. 11- ОПП is used to inform the taxpayer by the controlling authority about the change of location (residence) of the taxpayer, which is sent to the controlling authority at his/her place of residence (residence), at the new location (residence) of the taxpayer.
According to the form No.1- РПП marked “Information about the person responsible for keeping accounting and/or tax accounting”, the controlling authorities make the corresponding changes to the Unified Data Bank of legal entities or the Register of self-employed persons. The form No. 1- РПП was supplemented by corresponding position. When submitting an application in form No. 1- РПП with the indication “Information about the person responsible for accounting and/or tax accounting”, the data on the controlling authority, the EDRPOU code, the full name and the chief accountant of the permanent representative office of a non-resident in Ukraine are to be filled in.
According to the application form No. 1- OПП, or in the form No. 1- РПП marked “Changing the location associated with the change of administrative district, or inclusion/non-inclusion in the Register of payment purpose code”, or in the form No. 5- OПП marked “Change place of residence related to the change of administrative district” submitted by the taxpayer to the controlling authority at the new location, the procedure for the transfer of the taxpayer will be carried out.
Confirmation of the termination of independent professional activity is the information (extract) of the corresponding register, to which the information on state registration of such activity, on termination or suspension, or change of the organizational form of the corresponding activity from independent (individual) to another, is entered.
Control and Responsibility
The Cabinet of Ministers of Ukraine approved the Resolution “On Approval of the Medium-Term Strategy for State Debt Management for 2018-2020”.
In 2017 for the first time since 2011, the ratio of debt to GDP decreased and began to approach the “safe” value of 60%, as defined by the Budget Code of Ukraine. This was made possible by the improvement of macroeconomic indicators and the concerted actions of the authorities regarding fiscal consolidation and monetary policy and reform.
The strategy identified the task for the Ministry of Finance of Ukraine to decrease debt to 60% in 2018, 52% in 2019 and 49% in 2020.
The document contains an indicative action plan for the next two years, which envisages, in particular, the possibility of issuance of government domestic loan bonds in euros and other currencies with which the Ukrainian hryvnia does not have a high level of correlation, issue of government domestic loan bonds in hryvnias for international investors, expansion of cooperation with IFOs and governments of foreign countries on preferential financing.
Other measures planned under the Strategy are aimed at strengthening relations with investors, attracting international investors to the domestic market of Ukraine, as well as work to improve the rating of Ukraine as a borrower. The result of the actions to strengthen institutional capacity will be the creation of the Debt Management Agency in line with the best international practices.
The Ministry of Justice of Ukraine by its Order “On Approval of Changes to the Instruction on the Organization of Enforcement of Decisions” of 02.08.2018, No. 2522/5, which amended the Guidelines on the Organization of Enforcement of Decisions. From now on, the companies will report on alimony recovery on a monthly basis.
Alimony will be recovered by enforcement orders for the past, within the ten-year period preceding the submission of the enforcement order to the execution (now - within a three-year period).
Also, the Ministry of Justice determined the procedure for imposing a fine on the debtor by the state executor.
The Procedure comes into force from the day of its official publication, but not earlier than the day when the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Concerning the Creation of Economic Preconditions for Strengthening the Protection of the Children’s Rights to Proper Keeping” of 03.07.2018, No. 2475-VIII.
The State Fiscal Service of Ukraine in its Individual Tax Advice “On the practical application of certain norms of the current legislation” of 23.08.2018, No. 3719/6/99-99-14-03-03-15/ІПК reported that companies can settle in cash within one day by one or several payment documents with each other up to UAH 10 thousand inclusive. This also applies to payments made for goods purchased on production needs at the expense of cash received by means of an electronic payment instrument.
Trustees of companies that received cash from a corporate or personal card should use it for their intended purpose without posting in the cashier’s office. The specified trustees submit an advance report together with supporting documents. They must also submit cash receipts (ATM check, copy of the expense order, certificate of established forms, dataphone ticket, receipt of the trading terminal) and return the unused funds.
Labor and Salaries
The State Service of Ukraine on labor issues in its letter “On the clarification of the application of the application of paragraphs 3 and 8 of part two of Article 265 of the Labor Code” of 26.07.2018, No. 58920/4/4.3-ДП-18 reminded that the terms, periodicity of payment salary employees for the first half of the month (advance), as well as its size, prescribed in Art. 115 Labor Code and Art. 24 of the Law of Ukraine “On of Labor Payment” of 24.03.1995, No. 108/95-ВР.
But what amount of fines defined in Part 2 of Art. 265 of the Labor Code, will be applied if the employer pays an advance in amount less than half the tariff rate, or if he/she does not pay an advance, and pays a salary once a month?
The State Service provided an extended explanation of this issue.
1. In case of breach of the payment period of wage not more than for a month, employers are liable in the form of a fine in the amount of the minimum wage (para.8 part 2 of Art. 265 of the Labor Code), regardless of the frequency (1 to 2 or more times a year) of commission such a violation.
2. In the event of a breach finding of the payment periods of wages in more than one month, employers are liable in the form of a fine of three times the amount of the minimum wage (para. 3 of part 2 of Art. 265 of the Labor Code).
3. In the case of wages payment to employees and compensation of the loss of part of the wages in connection with the delay in the payment period, the grounds for the release of economic entities from liability for late and not full payment of salaries in accordance with Art. 265 of the Labor Code is not provided.
4. In case of payment of wages once a month (non-payment of advance payments), employers are liable in the form of a fine in the amount of the minimum wage (para. 8 of part 2 of Art. 265 of the Labor Code).
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Taxation of Different Kind of Income” of 22.08.2018, No. 3658/К/99-99-15-01-14/ІПК considers a request stating that a citizen of Ukraine has a single employer, located in Ukraine; in Belgium, the work is carried out in the direction of the company - a resident of Ukraine, whose staff member he/she is, in order to provide services under a relevant agreement between Ukrainian and Belgian enterprises.
If a resident of Ukraine (Belgium) is employed in Belgium (Ukraine), the remuneration received in this regard may be taxed in Belgium (Ukraine).
It should be noted that the word “may” in the context of para.1 of Art. 15 of the Convention between the Government of Ukraine and the Government of the Kingdom of Belgium for the avoidance of double taxation and prevention of tax evasion with respect to taxes on income and property (hereinafter – Convention) means the right of the State, where the employment actually carried out (that is, where the employee is physically present), to tax such rewards in accordance with the rules established by the current legislation of this state.
The remuneration received by the individual–resident of Ukraine in connection with an employment in Belgium, is taxable only in Ukraine, provided that all the conditions specified in para. 2 of Art. 15 of the Convention:
a) the recipient of the remuneration is in Belgium for a period or periods not exceeding in the aggregate 183 days for any period of twelve months commencing or ending in the relevant fiscal year;
b) the remuneration is paid by the employer or on behalf of the employer who is not a resident of Belgium;
c) the expenses for the payment of remuneration are not borne by the permanent representation or permanent base which the employer has in Belgium.
If at least one of the conditions of para.2 of Art.15 of Convention is not fulfilled, Belgium has the right to tax the remuneration of an employee of a Ukrainian company received for work actually carried out in Belgium in accordance with the rules established by the tax legislation of that country.
Consequently, in the case under consideration, the salary received from his/her employer by the resident of Ukraine – a hired employee of a Ukrainian company who actually carries on work in the Belgian territory and for which at least one of the conditions specified in paragraphs a), b), c) of para.2 of Art. 15 of the Convention is not fulfilled, may be taxed in Belgium, that is, Belgium has the right to tax such benefits in accordance with the rules established by the applicable law of that State.
The remuneration in the form of wages received by a hired employee – a resident of Belgium from a Ukrainian employer - resident of Ukraine – for work actually carried out in Belgium is taxable in Belgium in the manner prescribed by national law.
The Ministry of Social Policy of Ukraine in its letter “On the payment of labor at night or evening time on a holiday” of 11.07.2018, No. 1217/0/101-18/28 reported that according to Art. 107 of the Labor Code of Ukraine (hereinafter – Labor Code), payment for work on a holiday for employees whose work to be paid at hourly rates should be made in the amount of double hourly rate.
According to Article 108 of the Labor Code, work at night is paid at an increased rate set by the general, sectoral (territorial) agreements and a collective agreement, but not lower than 20 percent of the tariff rate (salary) for each hour of work at night.
In a particular case, at the company, which submitted a request to the ministry, a collective agreement set an additional payment for each hour of work:
- at night – in the amount of 40 percent of the hourly rate;
- in the evening – at a rate of 20 percent of the hourly rate.
The letter concludes that for work on a holiday day at night or in the evening, an additional payment is charged without doubling, on general grounds.
Consequently, the tariff rate for work at the weekend, both in the day and at night, is doubled, and additional payment for work at night (evening) time is charged at the rate of 40 (20) percent from the usual tariff rate, and not from double weekend rate.
The Ministry of Social Policy of Ukraine in its letter “On the Preservation of the Average Wage of the Employee when the Transfer to Another Permanent Lower Paid Work at His/her Initiative” of 11.07.2018, No. 275/0/22-18, considered a request for the average wage of an employee to be saved upon transfer to another constant lower paid work at his/her initiative.
The Ministry pointed out that when transferring an employee to another permanent lower paid work, the employee retains his/her previous average earnings within two weeks from the date of transfer (Part 1 of Art.114 of the Labor Code).
In addition, para.18 of the resolution of the Plenum of the Supreme Court of Ukraine dated December 24, 1999, No. 13 stipulates that the provisions of Article 114 of the Labor Code on the retraining of average earnings for an employee transferred to the lower paid work, within two weeks from the date of transfer is to be applied unless otherwise provided legislation, and even when the transfer was initiated by the worker him/herself.
Financial Markets
The National Bank of Ukraine by its Resolution “On Certain Issues of Establishing the Official Rate of Hryvnia to Foreign Currencies and Amendments to the Classifier of Foreign Currencies and Bank Metals” No. 80 dated July 19, 2018 confirmed adjustments to the method of calculating the official hryvnia exchange rate to the US dollar, updated the data sources used to calculate it and brought it closer to the time of its promulgation.
According to the decision concluded, the official exchange rate of hryvnia to the US dollar will be calculated based on information on all deals on the purchase and sale of US dollars under the terms “Tod”, “Tom” and “Spot”, which, on the day of the official exchange rate calculation, were concluded by banks in the Ukrainian Interbank Foreign Exchange Market (hereinafter – UIFEM) with other banks and with the National Bank of Ukraine, and information provided to the National Bank by trade and information systems up to 15-30 business days.
The new calculation technique provides for a two-stage system for cutting off transactions, the parameters of which for various reasons deviate from the parameters of the vast majority of transactions of the day, and, therefore, such transactions are not representative for their inclusion in the calculation of the official exchange rate of hryvnia to the US dollar. First, from the current range of transactions, all transactions are canceled, the rate of which deviates from the arithmetic mean for all transactions by more than 2%. Then it is cut off the transaction, the rate/volume of which deviates from the arithmetic average rate/volume by more than 2 standard deviations. The calculation of the official exchange rate of hryvnia to the dollar will be carried out as the weighted average under all transactions remaining after the cut off.
The official rate will be made public on the National Bank’s website to 16:00, i.e. 2 hours earlier than now.
The new principles for calculating the official hryvnia rate to the US dollar also provide for a stand-by mechanism for its calculation if the number of transactions to be taken into account for the calculation of the official hryvnia rate for any reason is less than or equal to 10% of the average daily value of the same indicator for the previous current month. Such a mechanism involves the carrying out by the National Bank of request for banks from 12.00 to 13.00 (through the function of TIC or telephone) to obtain quotations for the purchase/sale of $ 1 million and further calculation of the official rate as the usual average value of all received as a result of such a request for exchange rate quotations.
There is still no reserve mechanism for calculating the official hryvnia exchange rate to the US dollar.
The mechanism for calculating the official exchange rate of hryvnia to other currencies remained unchanged.
In addition to the official hryvnia rate to US dollar, the National Bank will also carry out a daily calculation of reference rate to US dollar. It will be calculated according to the same method as the official hryvnia rate to US dollar, however its calculation will be based on data on transactions concluded at the UIFEM to 12:00 and will be made public on the National Bank’s website to 12:30.
The introduction of a new method for calculating the official hryvnia rate to the US dollar approximates it to international standards for calculating similar indicators, and will allow the official exchange rate of hryvnia to the US dollar to be used not only for accounting purposes, but also as a benchmark for the currency market in the conclusion of agreements by market participants where foreign currency is used in the function of the reference asset.
Сorporate Relations
The Ministry of Justice of Ukraine in its letter “On the Procedure of State Registration and Activities of Limited Liability Companies and Additional Liability Companies in connection with the adoption of the Law of Ukraine dated 22.02.2018, No. 2275-VIII “On Limited Liability Companies” advised on issues the procedure of state registration and activities of LLC and ALC in connection with the adoption of the Law of Ukraine “On Limited Liability Companies” of 22.02.2018 No. 2275-VIII.
Thus, the list of information, which is to be necessarily specified in the statute of a limited liability company and an additional liability company, is established by Article 11 of Law No. 2275-VIII.
The Company Statute indicates the following: full and abbreviated (if any) name of the company; the authorities of the company’s management, their competence, the procedure for making decisions; the procedure for entering and leaving the company.
The Company Statute may contain other information that does not contradict the law. Such information may include provisions relating to:
- providing an additional term for repayment of debts in connection with the delay of deposit;
- procedure of the authorized capital increase at the expense of additional deposits;
- procedure of the realization of the preferential right of the company members, the distribution of the alienated share (part of the share) between the other company members, the refusal to exercise the preferential right of the company members;
- alienation of a share in the company authorized capital to other members of the company or third parties;
- payment and limitation of payment of dividends to the company members;
- audit of the financial statements of the company at the request of the participants, etc.
In addition, the administrative entity notes that the current legislation does not establish requirements for the form and content of applications for entry and exit from the company.
The National Securities and Stock Market Commission by its decision “On Approval of the Procedure for Registration of the Issue of Shares when Increase (Decrease) of the Share Capital of a Joint-Stock Company” of 21.06.2018, No. 426 approved the Procedure for registration of issue of shares when increase (decrease) in the size of the authorized capital of a joint-stock company.
In particular, with the additional issue of shares in case of increase of the authorized capital of the company with the attraction of additional contributions, it should be made the registration of issue of shares, registration of issue and approval of the prospectus, registration of the report on the results of the issue of shares. Registration of the issue and approval of the prospectus is carried out simultaneously.
When increasing the authorized capital of the company by means of directing the additional capital into the authorized capital in the part of the emission income (part thereof) and/or referring to the authorized capital of the profit (part thereof), registration of the issue of shares is carried out. The report on the results of the issue of shares will not be submitted to the registration authority for registration.
When reducing the authorized capital of a company by reducing the nominal value of shares or by canceling previously purchased or otherwise acquired shares by the company and reducing their total number, the registration of share issue is registered. The report on the results of the issue of shares should not be submitted to the registration authority for registration.
Registration of the issue of shares, registration of issue and approval of the prospectus, registration of the report on the results of the issue cannot be considered as a guarantee of their value.
The registration authority has the right to verify the information contained in the documents submitted. Before the expiration of the registration deadline, the registration authority may request the submission of additional documents confirming the data contained in the documents provided by the issuer for registration of the issue of shares, registration of issuance and approval of the prospectus, the report on the results of the issue of shares.
The silence procedure does not apply to the process of registration of issue of shares, registration of issuance and approval of the prospectus by the registration authority.
Сourt Rulings
The Supreme Court of Ukraine by its Resolution dated 22.05.2008 in the case No. К/9901/27053/18|815/2405/16 supports the conclusions of the courts of the previous instances that the false indication of the budget classification code in the payment order for the payment of the tax is not a ground to consider that the taxpayer did not pay the tax on time. A similar view was expressed by the SCU in its resolutions dated 16.06.2015 in the case No. 21-377а15 and dated 02.12.2015 in the case No. 826/6059/13-a.
In all decisions of the SCU insists that in order to confirm the fact of non-payment of the agreed amount of monetary obligation it must be established that in the period stipulated by para. 57.1 of the TCU, the taxpayer has not acted to transfer the agreed amount of monetary obligation to the state budget. Making a mistake when transferring the agreed amount of a monetary obligation to the state budget in the period established by para. 57.1 of the TCU should be qualified as an act, albeit erroneous. Consequently, actions which do not contain signs of inactivity of the taxpayer in the payment of the agreed amount of the monetary obligation cannot be the basis for the application of financial sanctions provided for in para. 126.1 of the TCU. Since such amounts are credited to the treasury account, then the erroneous indication of the current account in the payment order when paying the amount of the tax liability is not a sufficient legal basis for the conclusion that the amount of the required monetary obligation has not been paid into the period of time defined by the TCU, and hence for application of penal sanctions on the basis of para. 126.1 of the TCU.
The Other Things
The President of Ukraine signed the Law of Ukraine “On Amendments to the Tax Code of Ukraine and certain Laws of Ukraine on Promotion of the Establishment and Activities of Family Farming Companies”.
This legal act is aimed at obtaining the official status of the rural population, which operate on their own land. The legal act will allow legally sell their products and receive social protection and the right to a pension.
The document amends the Tax Code of Ukraine and the laws of Ukraine “On Farming Companies”, “On State Support to Agriculture in Ukraine”, “On the Collection and Accounting of the Unified Contribution to Mandatory State Social Insurance”, “On the State Registration of Legal Entities, Individuals – entrepreneurs and community groups”.
The amendments envisage assigning to the payers of the unified tax of the fourth group of individuals - entrepreneurs who organized the farm, provided that the set of certain criteria and identification of the peculiarities of their state registration/cancellation of registration, tax accounting and reporting, the payment of the unified tax, etc. are met. There is also the establishment of state assistance for the payment of the unified contribution to the mandatory state social insurance (from 10% to 90% of the minimum insurance premium) for each member of the farm for 10 years at the expense of the state budget of Ukraine through the mechanism of payment for the benefit of insured persons - members of the family farm of the unified contribution to the compulsory state social insurance.
The document also provides for the clarification of the statements on the establishment and operation of the family farming company without obtaining the status of a legal person.
The implementation of the Law will create conditions for the establishment of family farming companies and the privatization of entrepreneurship in the agrarian sector, which will positively affect the growth of revenues to local budgets from taxes and the creation of new jobs in the countryside.
