Law of Ukraine “On Amendments to the Tax Code of Ukraine on Improving Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation” No. 466-IX of January 16, 2020 (hereinafter – Law No. 466) amends the corporate income tax. Let us consider, how the approach to determining fixed assets is changing, and how to report now.
Fixed assets
From now on the fixed assets will also include the tangible assets assigned by the taxpayer for use in business activity of the taxpayer the value of which exceeds UAH 20 000 (previously – UAH 6 000) (subitem 14.1.138 of the Tax Code of Ukraine; hereinafter – Tax Code).
This indicates that from May 23, 2020 the number of assets (the term of use of which is more than a year), which are recognized not as fixed assets, but as low-value non-current assets has increased. That is, they will be depreciated using the “100%”, “50×50” or straight-line method (which is quite rare). Usually the companies use “100%” method for low-value non-current assets depreciation accrual. That is, the entire value of the commissioned facility falls directly to the cost, rather than being stretched over the useful life of the facility. In addition, low-value non-current assets do not participate in depreciation tax differences.
Thus, a large cohort of assets “falls out” of the depreciation tax differences of high-income and low-income organizations-volunteers.
At the same time, such innovation applies only to new fixed assets, if those that are put into operation after May 23, 2020. Old fixed assets are not affected by the change in the cost criterion.
In order to avoid discrepancies between accounting and tax accounting data and to avoid tax differences, we advise income tax payers to increase the separation of assets into fixed assets and low-value assets in accounting to the level of UAH 20,000. Those companies that do not do this may have problems calculating tax differences. We will have to increase the financial result for depreciation of new assets worth less than UAH 20,000, but there will be nothing to reduce the financial result, as there will be no tax depreciation on assets worth less than UAH 20,000.
Reporting
Law No. 466 sets out in a new version the rules for filing an income tax return. According to these provisions the procedure for filing income tax statements by taxpayers who are required to disclose annual financial statements and annual consolidated financial statements together with the auditor's report. Namely, the procedure for reporting by entities of public interest, public joint-stock companies, natural monopolies in the national market and business entities operating in the extractive industries, as well as large companies, medium and other financial institutions owned by to micro-enterprises and small enterprises will be changed (Article 14 of Law of Ukraine “On Accounting and Financial Reporting in Ukraine” No. 996-XIV of July 16, 1999).
Such enterprises are required to file income tax statements in two stages (item 46.2 of the Tax Code):
Stage I – submit to the tax authorities in the general terms for filing the income tax return for the relevant tax (reporting) period together with the financial statements, namely with the statement of financial position (balance sheet) and statement of profit and loss and other comprehensive income (statement of financial performance), which have been prepared before the audit of financial statements by the auditor;
Stage II – submit to the tax authorities no later than June 10 of the year following the reporting year, the entire package of annual financial statements, which is subject to disclosure together with the audit report. That is, they submit financial statements that have already been audited. There is no need to submit auditor’s report.
For non-submission of audited statements, if disclosed with the audit report, the tax authorities will impose penalties on companies for failure to submit regular statements.
If the company discloses statements that differ from those filed with the return, and these changes have affected the payment of income tax, it must submit an adjustment calculations to the annual tax return no later than June 10 of the year following the reporting year.
All companies that are not required to disclose financial statements (small and micro enterprises) are not required to submit separate audited financial statements by June 10.
The updated rules for the submission of financial statements, which are disclosed with the auditor’s report, will be applied only during the reporting for 2020. And they concern submission of only the annual return. Submission of quarterly return does not require the submission of financial statements with the auditor’s report. Quarterly financial statements that have not been audited must be submitted quarterly.
Agronomic statements
Law No. 466 intends to re-grant the farmers – income tax payers the right to report for a specific annual reporting period that begins on July 1 of the last reporting period and end June 30 of the current reporting period. Previously, the farmers couldn’t report this way, as to choose such period they had to be agricultural enterprises in the sense of the invalid Art. 209 pf the Tax Code. Now this article is excluded from subitem 137.4.1 pf the Tax Code. So, the farmers can report for the whole specific year.
