The Ministry of Finance of Ukraine approved General tax advice on some issues arising from application of transfer pricing rule by the representative office of non-resident in Ukraine.
This document addresses two issues:
1) is the representative office of non-resident that provides only support and preparatory work for such non-resident obliged to present reports on controlled transactions in the case the funds, received from the non-resident for household needs or for transferring to an account of resident who provided services (performed works) to the non-resident, exceed 10M UAH (minus indirect taxes) for the tax (reporting) year?
According to the explanations presented by the Ministry of Finance the transactions conducted by the representative office of the non-resident which is not permanent and given that these transactions are conducted in the framework of preparatory and support activity for such non-resident are not recognized as controlled for the purposes of art.39 of the Tax Code of Ukraine (hereinafter – TCU). So, there is no need to submit reports on the controlled operations;
2) Are the funds received from non-resident for permanent representation household needs (remunerations. etc.), tax and charge payments or for transferring to an account of resident who provided services (performed works) to the non-resident taken into account when determining cost criterion of business transactions volume for the application of transferring pricing?
The document established that as the funds received from non-resident for household needs of permanent representation or for transferring to the account of resident who provided services (performed works) to the non-resident are the business transactions for transferring pricing then, according to subitem 39.2.1.7 TCU these funds are fully taken into account for determining cost criterion of business transactions volume for the application of transferring pricing.
Let us remind, that general tax consultations are the instruments that allow to significantly cut down the grounds for administrative and legal disputes between the taxpayers and the controlling authorities as it eliminates the possibility of ambiguous interpretation of certain rules of tax law. The Ministry of Finance provides them in compliance with requirements laid down in Law of Ukraine “On Amendments to the Tax Code of Ukraine regarding Improvement of Investment Climate in Ukraine” No. 1797 of April 15, 2017.
The State Fiscal Service of Ukraine in its individual tax consultation “On the correction of a mistake made by a company in an excise invoice, drawn up to distribute the volumes of fuel residues recorded by taxpayers in the system of electronic administration of the sale of fuel, between excise warehouses / excise warehouses mobile, where such volumes of residual fuel are stored as of July1, 2019” No. 3845/6/99-99-12-03-03-15/ІПК of August 16, 2019 explained: excise tax invoice (ETI) indicators may be corrected by adjustment calculations (AC) to the invoice registered in the Unified register of excise tax invoices (URETI), if after fuel and ethanol sale the part or full amount of fuel or ethanol is returned to the person who sold it. Or if the need occurs to correct the mistakes made during ETI preparation.
Amount of fuel that is recorded in the system of electronic administration of the sale of fuel is divided between the excise warehouses/ excise warehouses mobile through AC preparation and registration. In addition, fuel sale transactions as determined be the TCU are not conducted. That means that there is no actual delivery (dispatch, shipping) of fuel.
Accordingly, the ETI indicators cannot be corrected through AC prepared for division of fuel residues registered by the taxpayers in the SEASF between the excise warehouses/excise warehouses mobile where such amounts of residues are actually stored as of July 1, 2019 (hereinafter – distributing ETI).
Information on terms and procedure for corrections of mistakes made by payers in the distributing ETI, namely, by ETI preparation by the person who indicated as fuel receiver in the distributing ETC and its registration in the URETI, was published on the official web-site of the State Fiscal Service of Ukraine (hereinafter – SFSU) on August 2, 2019:
- sfs.gov.ua → Home → News;
- sfs.gov.ua → Home → Notifications.
The correction of inappropriate data in the distributing ETI may be made only after registration of the second copy of the distributing ETI.
Thus, the invalid data presented in the distributing ETI, the second copy not registered in the URETI, cannot be corrected.
The Supreme Court of Ukraine in its judgement of June 26, 2019 on case 808/1641/16 declared that the minor defect in the primary documents can not be considered as the ground for deprivation of the taxpayer of the right to the tax credit.
For the purpose of studying actual purchase of assets within the framework of the business activities it is necessary to determine the content of business transactions, contract terms, actual shipping order, shipping volume and content, purpose of purchase, terms of payments, properly study the primary documents on business transactions, find out whether the primary documents reveal the content of the transactions of assets purchase and assess such evidences both collectively and discretely and together with other evidences in the case.
The reality requires to investigate whether the respective assets are actually received form the contract partner indicated in the primary documents and in accordance with the provided terms. To perform this task, one should establish the circumstances and manner in which the business relations between the complainant and contract partner are organized, persons involved in this process, interrogate respective persons as witnesses for finding out the nature and terms of disputed transactions conduct.
If the goods actually purchased by the taxpayer, are entered in the books then the defects in the primary documents, in case the information they specify gives the opportunity to identify the business entities and business transactions, cannot be used as a ground for deprivation of the taxpayer of the right to the tax credit.
Unjustified tax benefit is characterized by the absence of actual business transaction conduct, conduct of transactions without business purpose and transactions accounting irrespective of their economic content, coordination of actions between customer and supplier for simulation of condition for budgetary reimbursement.
The Ministry of Social Policy of Ukraine in its letter “Concerning application of Law of Ukraine “On Vacations” No. 1115/0/206-19 of July 25, 2019 has considered such workplace situation. An employee fell ill during his vacation. What should we do in such case with continuous vacation period of 14 calendar days?
According to i.7 p.2 art.11 pf Law of Ukraine “On Vacations” No. 504/96-ВР of November 15, 1996 (hereinafter – Law) the annual vacation should be postponed to another period or extended upon the employee’s temporary disability to work, certified according to established procedure.
The rule on extension or postpone applies only to the annual vacations and additional vacations for employees with children that are granted under art. 19 of the Law.
In accordance with subitem 1.1 of Instructions on the procedure for issuing documents certifying temporary disability of citizens, approved by Order of the Ministry of Health of Ukraine (hereinafter – MHU) No. 455 of November 13, 2001, the temporary disability to work must be certified by a temporary disability leave. The temporary disability leave must comply with the approved form and prepared according to requirements of Instruction for filling in temporary disability leave, approved by joint order of MHU, Ministry of Labor, Short-term disability fund,
Social Insurance Fund from Occupational Accidents and Diseases No. 532/274/136-ос/1406 of November 3, 2004.
In case the annual vacation is postponed for the new period it is agreed between the employee and employer. If the reason for the postpone of the vacation for another period occurred during the vacation, then the unused part of the annual vacation is granted after the expiration of the reasons that interrupted it or in case the parties agreed to postpone the vacation for another period under requirement of art. 12 of Law.
So, the issue concerning extension and postpone of the unused vacation must be addressed as agreed between the employee and employer.
The unused part of the vacation is granted to the employee immediately after the recovery or is postponed to another period by the respective order issued by the employee based on temporary disability leave of the employee and his application. The changes must be also made to the vacation schedule.
The requirement to grant the main continuous part of the annual vacation no less than 14 calendar days is met at the stage of vacation granting. Thus, social authorities deem that in the case mentioned in the letter when the employee uses 4 calendar days of postponed annual vacation in July and the rest of 10 calendar days of the annual vacation in September that does not violate the requirements of p. 1 art. 12 of the Law.
