Taxes
VAT
The State Tax Service of Ukraine in an individual tax consultation “On the possibility of applying VAT rate of 7 percent to transactions for the provision of temporary accommodation by the sanatorium” No. 1172/ІПК/99-00-21-03-02-06 of March 24, 2021 has reminded that the rate of value added tax (hereinafter – VAT) of 7% is applied only in a situation where the legal entity is a direct provider of temporary accommodation and has the status of a hotel or similar means of temporary accommodation (class 55.10 of group 55 KVED DK 009:2010) and in relation to the transaction of supplying the client with such services.
Therefore, the operations of the sanatorium for the supply of such services (including food (breakfast), provided that such food is part of the services of temporary accommodation and its cost is part of the cost of these services) are subject to VAT at a rate of 7%.
If meals (breakfasts) are not part of the services of temporary accommodation, the supply of these services should be considered as a separate transaction, which is subject to VAT in the generally established manner at a rate of 20%.
Sanatorium transactions for the supply of additional services (including) are subject to VAT in the generally established manner at a rate of 20%.
PIT and War Tax
The Ministry of Finance of Ukraine has approved the Generalized Tax Consultation (hereinafter – GTC) on the taxation of income of individuals received from the liquidation (termination) of a foreign legal entity or a foreign entity without the status of a legal entity.
The consultation provides answers to a number of questions, including personal income tax (hereinafter – PIT) and military levy from income from liquidation (termination) of a foreign legal entity or foreign entity without the status of a legal entity received by an individual for the reporting periods until December 31, 2020 (inclusive), until December 31, 2021 (inclusive) and starting from January 1, 2022.
The document clarifies that income in cash and/or other property form received as a result of liquidation (termination) of such companies in the period from January 1 to December 31, 2020 (inclusive) by a taxpayer – an individual belonging to the categories of persons defined by subitem 1 and 2 item 14 section 1 chapter XX of the Tax Code, are not included in the total monthly (annual) taxable income of such PIT payer for the 2020 reporting (tax) year.
Such income must be reflected in the Tax return on property and income for 2020 of the individual – the recipient of income, but is not subject to personal income tax.
At the same time, such income is subject to taxation by the military levy, and a natural person – the recipient of such income is not exempt on the basis of the specified Tax return from the accrual, withholding and payment (transfer) of the tax to the budget.
Clarification of these issues will eliminate the ambiguous interpretation of certain provisions of tax law, the control of which is entrusted to the controlling bodies.
Unified Social Contribution
The Ministry of Finance of Ukraine has published a revised draft order “On approval of the Procedure for crediting future payments of a single contribution to the obligatory state social insurance or refund of overpaid and/or erroneously paid funds”.
It is devloped to create an effective mechanism for returning to payers or transfer to the appropriate accounts of erroneously paid single contribution, in particular a clear delineation of responsibilities imposed on the structural units of the tax authority and funds of compulsory state social insurance, and determine the timing of these responsibilities.
The draft order was developed in accordance with the requirements of Art. 9, 11 chap. III of Law of Ukraine “On collection and accounting of a single contribution to the obligatory state social insurance” No. 2464-VI of July 8, 2010, item 22 of Resolution of the Cabinet of Ministers of Ukraine “On approval of the Single Account and compliance with Article 35 of the Tax Code of Ukraine by central executive bodies” No. 321 of April 29, 2020, as well as Order of the Ministry of Finance of Ukraine “On approval of Amendments to the Regulation on the movement of single contribution to compulsory state social insurance” No. 587 of September 25, 2020, registered with the Ministry of Justice Of Ukraine on October 15, 2020 under No. 1015/35298.
The draft was commented on by some executive bodies, based on which it was finalized. The analysis of regulatory impact has also been finalized.
Other Taxes and Fees
The State Tax Service of Ukraine has explained whether it is necessary to pay the transport tax in case of car theft.
According to subitem 267.1.1 of the Tax Code the payers of transport tax are individuals and legal entities, including non-residents, who have registered in Ukraine in accordance with applicable law their own cars, which in accordance with subitem 267.2.1 of the Tax Code are subject to taxation.
The object of taxation are cars, the year of manufacture of which has not exceeded five years (inclusive) and the average market value of which is more than 375 times the minimum salary established by law on January 1 of the tax (reporting) year (subitem 267.2.1 the Tax Code).
In accordance with subitme 267.3.1 the Tax Code, the tax base is a car that is subject to taxation in accordance with subitem 267.2.1 the Tax Code.
Subitem 267.6.8 of the Tax Code stipulates that in the case of illegal possession by a third party of a car, which in accordance with subitem 267.2.1 of the Tax Code is subject to taxation, transport tax for such a car is not paid from the month following the month the fact of illegal possession of a car takes place, if such a fact is confirmed by the relevant document on entering information about a criminal offense in the Unified Register of Pre-trial investigations issued by an authorized state body.
In the case of returning a car to its owner (legal owner), the tax for such a car is paid from the month in which the car is returned in accordance with the decision of the investigator, prosecutor or court decision.
The taxpayer is obliged to provide the supervisory authority with a copy of such resolution (decision) within 10 days of receipt.
Accounting and Reporting
The State Tax Service of Ukraine through the Office of Large Taxpayers has explained the peculiarities of filing a real estate tax declaration. When filling out the real estate tax declaration other than land, taxpayers sometimes make mistakes, in particular in sections 1 and 2 of the declaration, which leads to incorrect calculations of tax liabilities and may be a reason for the supervisory authorities’ unscheduled documentary inspection.
The tax authorities draw attention to the most common mistakes based on the results of the analysis of tax reporting on this tax.
Thus, when filling in the forms of Annexes 1 and 2 to the declaration, the payers incorrectly indicate or do not indicate at all the following mandatory data.
The area of the object of taxation
The total area of the object (objects) of residential real estate, which exceeds 300 square meters (for an apartment) and/or 500 square meters (for a house), has been declared, while the amount payable to the budget in column 15 of Annex 1 to the Declaration is “0”.
If the taxpayer owns an object (objects) of residential real estate, including its share, which is owned by a natural or legal person – a taxpayer, the total area of which exceeds 300 square meters (for an apartment) and/or 500 square meters (for a house), the amount of tax calculated in accordance with paragraphs “a” – “d” of subitem 266.7.1 of the Tax Code of Ukraine (hereinafter – Tax Code), increases by UAH 25,000 per year for each such residential real estate (its share) (266.7.11 of the Tax Code).
The size of the minimum salary
The amount of the minimum salary is indicated in accordance with the established on January 1 of the reporting year (as of January 1, 2021 – UAH 6,000).
Tax rate
The interest tax rate is determined by the decision of the local government, a list of which can be found on the official website of the relevant body.
Information on benefits
The benefit code, its amount should be indicated in accordance with the Benefit Handbook.
Incorrect filling in of information on benefits makes it impossible to analyze and summarize information on available benefits by region and in Ukraine as a whole.
It should be noted that Annexes 1 and 2 to the Declaration are filled in taking into account the notes contained in the approved form of tax reporting.
The current electronic form of the Real Estate Tax Declaration, other than land, can be found at the link on the official web portal of the State Tax Service of Ukraine (hereinafter – STSU).
In addition, the official web portal of the STSU contains electronic forms of documents for reporting on all taxes and fees.
Control and Responsibility
The Cabinet of Ministers of Ukraine established the Bureau of Economic Security (hereinafter – BES). The new body will receive the powers of the Security Service of Ukraine and the tax police in the fight against economic crimes.
According to Prime Minister Denys Shmyhal during a government meeting, the Bureau of Economic Security “will deal with all crimes in the economic sphere.”
Tasks of BEB
The Law “On the Bureau of Economic Security of Ukraine” was adopted by the Verkhovna Rada of Ukraine in January and entered into force on March 25, 2021.
The Security Service of Ukraine will lose its uncharacteristic functions of investigating crimes of corruption and organized crime in the field of management and economy. This will allow the agency to focus on tasks that are really directly related to the security of the state, with counterintelligence activities in the economic sphere.
How the BEB will operate
The Law stipulates that the director of BEB is appointed by the Cabinet of Ministers on the proposal of the Prime Minister based on the results of an open competition. The term of office is five years. Thus, the head will not be able to work more than two terms in a row.
The candidacy of the director is selected by the competition commission. It includes three people from the National Security and Defense Council, three from the Verkhovna Rada of Ukraine and the same number from the Cabinet of Ministers.
The state budget for this year provided UAH 587 million for the needs of the newly created department.
The Public Control Council will be created to monitor the activities of the Bureau, review the report of the director of BEB and provide its opinion.
Financial Markets
The National Bank of Ukraine plans to transfer Ukraine's payment infrastructure to the international standard ISO20022. Based on this standard, the NBU has already begun developing a new generation of interbank payment system – EPS. This was announced by the Chairman of the National Bank of Ukraine Kyrylo Shevchenko.
“By the end of 2022, we must not only modernize the EPS in accordance with this international standard, but also transfer its work to 24/7”, he wrote.
In addition, the National Bank is developing a state system of remote identification – the BankID System of the NBU, which is rapidly increasing the number of participants. Now 34 identifier banks are already connected to it. Online services using the BankID System of the NBU are available to 99% of payment card users on the market. The task of the NBU for 2021 is to make the BankID System available to every Ukrainian. After all, it simplifies access to public, commercial and financial services.
In addition, together with the Ministry of Finance, the National Bank has regulated the possibility of using the mobile application “Diia” for remote identification of customers and their receipt of financial services. It already works in the banking and non-banking markets.
Labor and Salaries
The State Labor Service of Ukraine has explained what should the employer do if the employee refuses to go on vacation.
The main legislative acts regulating the procedure for granting leave are the Labor Code of Ukraine (hereinafter – the Labor Code) and Law of Ukraine “On Leave” No. 504/96-ВР of November 15, 1996 (hereinafter – Law No. 504).
According to Art. 74 of the Labor Code and Art. 2 of Law No. 504 every citizen of Ukraine who works at an enterprise, institution, organization of any form of ownership, type of activity and industry affiliation or an individual is entitled to annual leave. Foreign citizens and stateless persons working in Ukraine also have this right on an equal footing with citizens of Ukraine.
This right is provided by:
- guaranteed granting of leave of a certain duration established by Law No. 504;
- retention for the period of leave of the workplace (position) and salary (aid);
- ban on replacing leave with monetary compensation, except as provided in Art. 24 of Law No. 504.
The employee’s unwillingness to use full-time annual leave and the demand to provide monetary compensation are taken into account in Art. 24 of the Law on Leave.
Part 4 of this article states that at the request of the employee, part of the annual leave is quite legitimate to replace with monetary compensation. However, the duration of the part of the annual leave actually used by the employee may not be less than 24 calendar days.
If the employee has unused annual basic leave of 24 calendar days each, he/she will be able to receive compensation only in case of dismissal. This requirement is due to the fact that the leave is granted to the employee primarily for rest and health promotion, so the law prohibits the employer to compensate the money for unpaid leave.
It should be noted that persons under the age of 18 are not allowed to replace all types of leave with monetary compensation.
The employee can receive compensation only for annual leave, which is provided for in paragraph 1 of Part 1 of Art. 4 of the Law of Ukraine “On Leave”, and additional social leave for children in accordance with Art. 19 of this Law.
Such leave includes:
- annual basic leave;
- annual additional leave for work with harmful and difficult working conditions;
- annual additional leave for the special nature of work;
- other annual additional leave provided by law;
- additional social leave for employees who have children or an adult child with a disability from childhood of subgroup A of group I.
The legislation does not provide for the payment of compensation for unused leave days of:
- additional study leave;
- creative vacations;
- vacations for preparation and participation in competitions;
- additional leave for employees with the status of persons classified in 1 or 2 categories of victims of the Chornobyl disaster,
- additional leave for combatants.
With regard to liability for the employer and officials, the provisions of Part 5 of Art. 80 of the Labor Code and Part 5 of Art. 11 of Law No.504 are of importance. In particular, the following rules:
- it is prohibited not to grant full annual leave for two consecutive years;
- it is prohibited not to provide annual leave during the working year to persons under 18 years of age and employees who are entitled to additional annual leave for work in harmful and difficult conditions or with a special nature of work.
What to do if an employee, for example, refuses to use for the second year in a row the right to rest granted by the Constitution (Article 45) and Law No. 504 (annual leave)? The employer, taking into account that the obligation to provide leave rests with him, must take measures in accordance with the law:
- issue an administrative document on granting leave. Inform the employee in writing about the start date of the leave in accordance with the schedule no later than two weeks before the scheduled leave date (Part 5 of Art. 79 of the Labor Code, Part 11 of Article 10 of Law of Ukraine No. 504);
- pay salary to the employee for the period of leave no later than three days before its beginning (Art. 115 of the Labor Code, Part 1 of Art. 21 of Law of Ukraine No. 504).
According to Art. 139 of the Labor Code, employees are obliged to timely and accurately carry out the orders of the employer. For non-compliance, the employee may be subject to disciplinary action.
The Other Things
The President of Ukraine has signed Law “On Amendments to Certain Legislative Acts of Ukraine Concerning Ensuring Equal Opportunities for Mothers and Fathers in Child Care” No. 1401-ІХ, which was adopted by the Verkhovna Rada on April 15, 2021.
The document is designed to provide equal opportunities for men and women to reconcile work with family responsibilities. In particular, legislative gaps restricting the right of a parent to children leave are eliminated.
Previously, such leave was granted to the child’s father, grandmother, grandfather or other relatives who actually care for the child, on the basis of a certificate from the place of work or education of the mother that she has returned to work before the expiration of her leave.
Thus, a discriminatory approach was established, according to which the right of a father or other relatives to children leave was derived from the mother’s right, ie only the mother could delegate the right to have a leave to others. Because of this, in cases where the child’s mother is, for example, a self-employed person or sole proprietor, the father also could not have childcare leave.
The law, signed by the Head of State, introduces a new type of leave – a one-time leave at the birth of a child lasting up to 14 calendar days, paid for by the employer.
Such leave will be granted to one person: the husband whose wife has given birth to a child; the child’s father, if he is not married to the child’s mother, but lives together; grandparents or other adult relatives of the child who actually cares for them.
The law also defines children leave until the child reaches the age of three as an equal right of each parent.
It also establishes the right of employees of both sexes who have children or an adult child with a childhood disability from subgroup A of group I, to additional leave.
This law will create the preconditions for strengthening the role of the father in the upbringing of children and the development of responsible parenthood in Ukraine.
