There were changes concerning the company income tax in the new year. In particular, in 2018, it is separately set the terms for submitting a tax return for taxpayers, who submit a declaration in an aggregate once a year. Such a tax return should be submitted within 60 calendar days following the last calendar day of the reporting (tax) year. Let’s review and comment on other innovations.
Bad Debt: What’s New?
One of the changes directly related to the income tax is the exception of the concept of “bad debt” of sub-para. 14.1.1 of para.14.1 of Art. 14 of the Tax Code of Ukraine (hereinafter − TCU) of para. “г” under which up to 01.01.2018 bad debt of individuals was recognized, forgiven by the creditor, except for the debts of persons related to such a creditor, and persons who are with such a creditor in labor relations, as well as persons who have been with such a lender in labor relations, and the period between the date of termination of the employment of such persons and the date of the forgiveness of their arrears does not exceed three years.
This means that if the creditor forgives the debt to the individual (whoever that person is), according to the tax law, the amount forgiven under any circumstances will not reduce the financial result before taxation. So, it is possible to make some conclusions:
- it is better not to borrow to the individual, if there is not insurance that the money will be returned;
- if the money has been already borrowed to the individual, then under any circumstances try to return the money.
Check on compliance with arm’s length principle
An essential addition to the procedure for conducting a planned documentary check of the taxpayer is the ability of the controlling authorities to verify compliance with the arm’s length principle in accordance with the requirements of sub-para. 140.5.4, sub-para. 140.5.6 of para. 140.5 of Art. 140 of TCU.
Starting from 01.01.2018, the controlling authorities received the right to carry out a full-fledged verification of the correctness of the calculation of the income tax, taking into account all the current provisions of sec. III of TCU.
Simplified conditions for acquiring non-profit status for religious organizations
Legislators paid special attention to religious organizations when making amendments to the TCU in 2018. Unlike other non-profit religious organizations for the non-profit status, it is only necessary to be formed and registered in accordance with the procedure established by the law regulating the activity of the non-profit organization, and comply with the requirements of sub-para. 133.4.2 of para. 133.4 of Art. 133 of TCU on the use of revenues (incomes) solely for the purpose of financing expenditures on maintenance, realization of goals and directions of activity determined by constituent documents, as well as for the conduct of non-profit (charitable) activities stipulated by law for religious organizations, including providing humanitarian assistance, charity work, and charity.
Fundamental changes in the definition of the subject to taxation of income tax
In 2017, the financial result before taxation was reduced by the amount of accrued income from equity participation:
- other payers of the company income tax;
- the unified tax payers of the fourth group;
- and on the amount of accrued income in the form of dividends payable in his/her favour from:
- other taxpayers of this tax (except for joint investment institutions and taxpayers income of which is exempt from taxation in accordance with the provisions of the Tax Code, in the amount of tax exempt income);
- the unified tax payers.
In 2018, the financial result before tax is reduced by the amount of accrued income from equity participation:
- other payers of the company income tax;
- the unified tax payers;
and the amount of accrued income in the form of dividends payable in favour of other taxpayers (except for joint investment institutions and taxpayers income of which is exempt from taxation in accordance with the provisions of the Tax Code, in the amount of tax exempt income).
In other words, in 2018 dividends accrued in favour of the taxpayers (legal entities) that are subject to payment from the unified tax payer will be taxed twice:
- for the first time: on the basis of the requirements of para. 297.4 of Art. 297 of TCU, according to which from 01.02.2017 dividends payable by the payers of the unified tax of the third group (legal entities) and the fourth group (agricultural producers) to the owners of corporate rights (founders), are taxed according to the rules established by para. 57.11 of Art. 57 of TCU. That is, the payer of the unified tax who has made a decision to pay dividends to the founders is obliged to pay advance contributions from the income tax at the rate applicable at the time of payment;
- for the second time: in the financial result before tax when determining the income tax by the participant of the legal entity-payer of the unified tax on the basis of the requirements of sub-para. 140.4.1 of para. 140.4 of Art. 140 of TCU.
