DeVisu | Legislation Overview (July 2015)

Legislation Overview (July 2015)

Taxes

VAT

The Verkhovna Rada of Ukraine passed the bill № 2173а of 30.06.2015), which amended the system of electronic VAT administration.

The bill provides for:

1. All input VAT on registered tax invoices in URTI should be included in the tax credit.

2. The registration period of tax invoices in URTI was extended to 365 days. If a taxpayer did not include the VAT amount into the credit tax in the relevant reporting period on the basis of received tax invoices registered in URTI, the taxpayer reserved the right within 365 calendar days from the date of the tax invoice preparation.

3. It was clarified that when the proportion including of the VAT amount in the tax credit (art.199 of the TCU), the VAT payer should prepare not later than the last day of the reporting (tax) period and register in URTI consolidated tax invoice for the total amount of the share paid (accrued) tax when purchasing or manufacture of goods / services, noncurrent assets, which corresponds to share of their use in non-taxable transactions.

4. According to art.209 of the TCU, accounts in electronic tax administration system are additionally opened for payers of special tax treatments. These accounts are intended for funds transfer to their special accounts opened in banks and / or in the Treasury.

5. Tax home of a vendor and a type of civil law contract are excluded from the list of mandatory requisites of tax invoice. It is specified that the violation of the filling procedure of mandatory requisites of tax invoice does not give the right to the tax credit.

6. Rules of preparation of consolidated tax invoice and tax invoice, issued on the basis of daily transactions, are added in para. 201.4 of the TCU.

7. In order to ensure the correct formation from 01.07.2015 of tax index amount, on which the taxpayer has a right to register the tax invoices and / or the adjustment calculations in URTI, “zeroing” of such index is provided for as on 01.07.2015 and inclusion in it:

average monthly amount of tax amounts declared by the payer to be paid to the budget and repaid over the past 12 reporting months / 4 quarters (the so called “overdraft”);
overpaid and / or paid by mistake amounts of monetary obligations from value-added tax as on 01.07.2015;
outstanding amount of negative value as on 01.07.2015;

balance on an electronic account of a payer.

8. It is offered not to apply the registration deadlines in URTI for tax invoices, issuing date of which falls within the period of 1 July to 31 August 2015 inclusive. And also to set the following registration dates:

the tax invoices, prepared from 1 to 15 days (inclusive) of the month in the mentioned above period, are to be registered in URTI up to 32 day (inclusive) of the month when they were prepared;
the tax invoices, prepared from 16 to the last day (inclusive) of the month in the mentioned above period are to be registered in URTI up to 15 day (inclusive) of the month following the month when they were prepared.

The bill № 2173a of 30.06.2015 comes into force only after it is signed by the President of Ukraine, and published in official publications.

The Income Tax

The Ministry of Finance of Ukraine united the budget classification codes of corporate income tax (see Order of the Ministry of Finance of Ukraine “On Amendments to the budget classification” of 20.07.15, № 651). Now, income tax and advance payment of this tax are to be accounted under one budget classification code. Appropriate amendments were made to the Classification of budget revenues, approved by the Ministry of Finance of Ukraine of 14.01.11, № 11.

At the same time advance payments of corporate income tax, which accounted under relevant classification codes of budget revenues, should be accounted for appropriate classification codes of budget revenues for corporate income tax accounting.

The Ministry of Finance believes that this step automatically unites all overpayments of income tax in personal cards of taxpayers, and takes them into account when payment of current liabilities of this tax. And this allows to avoid withdrawal of current assets of taxpayers and to avoid cases of tax overpayment into budget.

The State Fiscal Service of Ukraine reported that the state unitary enterprises - agricultural commodity producers, unified tax taxpayers of group IV, when payment of the state dividends, should pay advance payment on income tax (see letter of the SFSU “On submission of tax reports on income tax for half-year periods of 2015” of 29.07.15, № 27719/7/99-99-19-02-01-17).

If they fail to pay the advance on income tax, when dividends payment, the penalty is applied to them according to Art.123 of the TCU (25% tax debt or 50% when repeat violation during 1095 days under this article) as well as the fine according to Art.129 of the TCU.

The State Fiscal Service of Ukraine in its Letter “On submission of tax reports on income tax for half-year periods of 2015” of 29.07.15, № 27719/7/99-99-19-02-01-17 specified, due to fact that a new form of declaration on income tax was not approved today, a declaration for the first half of 2015 was recommended to be prepared and submitted under current forms (to those income tax payers, who are required to report for six months).

However, controllers suggest using a declaration project placed on the website of the SFS of Ukraine (http://sfs.gov.ua) to determine the amount of subject of taxation and tax liabilities.

The controllers suggest submitting such a “project” declaration as an addition to the current declaration forms.

Single tax

The State Fiscal Service of Ukraine explained: individuals-entrepreneurs the single tax payers, who during the reporting period did not receive income and did not have subjects of taxation, to be liable to declaring and obliged to submit a tax declaration of single tax payer - individual-entrepreneur (see Category 107.08 of public information and reference resource).

Reasonable basis of this is: if other sections of the Tax Code of Ukraine (hereinafter − TCU) determine a special procedure for administration of certain taxes, duties, payments – the rules defined in another section are used (para.40.1 of the TCU). And according to para.49.18 of the TCU, individuals-entrepreneurs – single tax payers of I and II groups should submit declarations within 60 calendar days following the last calendar day of the reporting (tax) year, single tax payers of III group - within 40 calendar days following the last calendar day of the reporting (tax) quarter (six months).

In addition, income determination is conducted for purposes of imposition of single tax and to entitle business entity to be registered as a single tax payer and / or be on simplified tax system.

The Ministry of Finance Ukraine approved new forms of declarations of single tax payers by its Order “On approval of forms for tax declarations of a single tax payer” of 19.06.15, № 578:

entrepreneurs of I - III groups;
legal entities of III group;
legal entities of IV group.

It should be recalled that this year there were significantly changes in the simplified tax system. In particular, the number of groups of single tax payers is reduced, and the former payers of fixed agricultural tax became single tax payers in fact. These and other changes caused the approval of updated forms of single tax payers declarations.

Other taxes and fees

The State Fiscal Service of Ukraine in its letter of 22.04.15, № 1842/99-99-17-04-02-18 “On Payment for Land by individual-entrepreneur, which has temporary structure” explained: if the entrepreneur has a passport of pegging to temporary structures (kiosks, tents, etc.), he/she should also has land title document:

certificate of title or usage of land plot; or
rent contract.

Payment for the land is calculated according to these documents.

The basis for land tax assessment is the data of State Land Cadastre. They are a set of data and documents about the location and the legal regime of land plots, their evaluation, land classification, quantitative and qualitative characteristics, the distribution among land owners and land users (paras. 4.1.42, para.286.1 of the Tax Code of Ukraine).

The passport of pegging is grounds for placement of temporary structure. The customer should apply to the Authority for Urban Planning and Architecture to register it. In this case he/she is required to provide the layout plan of temporary structure indicating land plot area under the land use documents.

Therefore an entrepreneur should obtain documents on land use before the completing the passport of pegging. Introduction in the passport of data on land plot size without these documents leads to the cancellation of the passport.

The State Fiscal Service of Ukraine in its letter “On consideration of the appeal [concerning the preferential payment for the land plot, where the garage is] of 21.04.15, № 3709/В/99-99-17-04-02-14 clarified: garage-building cooperatives (hereinafter − GBC) should pay the land tax on general grounds. In this case, the owners of garages should compensate the tax to owner of the land – the cooperative.

The preference under Art.281 of the Tax Code of Ukraine (hereinafter − TCU) applies to owners of the land plots or land users-individuals. It does not apply to the GBC, which is a legal entity, even if garage owners - members of the cooperative belong to the privileged category, which is exempt from the land tax.

According to Art.281 of the TCU, the following are exempted from the land tax:

disabled people of first and second groups;
individuals, who have three or more children aged under 18 years;
pensioners (by age);
war veterans and people for whom the force of the Law of Ukraine “On Status of War Veterans, guarantees of their social protection” is applied;
individuals recognized by the law affected by the Chernobyl catastrophe.

The exemption applies to a land plot under each type of use within limits. In particular, not more than 0.01 hectares for the construction of individual garages.

That is, if individual has a land plot in the property provided for the construction of the individual garage, and this plot is certified by the certificate on the property right, only in this case the individual has the land tax privileges under Art.281 of the TCU.

The Verkhovna Rada of Ukraine approved the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine regarding payment of court fee” of 22.05.15, № 484-VIII, which would come into force on 1 September of this year. The Parliament changed the rules of collection and sizes of court fee by this Law. In particular, different sizes of court fees for legal entities and individuals were established in Civil Cases. In this case the fee upper limit is abolished for legal entities-claimants in a civil dispute. Therefore a legal entity by submission a civil claim should pay 1.5% of the claim but not less than one minimum wage, and individual (including individual-entrepreneur) - 1% of the claim, but not less than 0.4 of minimum wage and not more than 5 minimum wages.

In addition, the list of claimants, who are exempted from court fees, is shorted and reasons for its return are specified.

Temporarily Occupied Territories

The State Fiscal Service of Ukraine explained: VAT should not be collected upon alienation of real property situated in the territory of FEZ “Crimea”. Under these transactions, the resident – VAT payer does not have VAT unit regardless of whether the buyer is a resident or non-resident (paras.186.2-186.4 of the TCU). This statement is given in letter of the SFSU “On VAT taxation of transactions with alienation of immovable property situated in the territory of FEZ “Crimea” of 28.05.15, № 11250/6/99-99-19-03-02-15.

But the seller is obliged to charge liability for goods / services, noncurrent assets, when their purchasing (manufacture) the tax credit was fixed, if they are used in non-taxable transactions (para.198.5 of the TCU). The tax base is determined under para.189.1 of the TCU.

The place of real estate delivery (including those under construction) and services related to real estate is the actual location of objects at the moment of their delivery (para.186.1 of the TCU).

According to the state financial control, FEZ “Crimea” is outside the customs territory of Ukraine. However, taxmen based on Art.9 of the Customs Code of Ukraine (hereinafter - CCU), according to which for the purposes of applying of para. V and IX of the CCU territories of free customs zones are considered to be being outside Ukraine.

A free customs zone was established within FEZ “Crimea”. In its functional type, it is simultaneously free custom zone of commercial, service and industrial types according to Art.430 of the CCU (para. 3.2 of the Law of Ukraine “On establishing of free economic zone “Crimea” and on peculiarities of the economic activity in the temporarily occupied territory of Ukraine” of 12.08.14, № 1636-VII).

Control and Responsibility

The Supreme Court of Ukraine in its Resolution “On recognition of illegal and repeal of a tax assessment notice” of 16.06.15 in case № 21-377а15 explained: wrong determination of budget classification code in payment order when tax liabilities payment should not be considered to be sufficient legal basis for the imposition of sanctions for violation of terms of monetary obligation payment.

This is because the mistakes during timely transfer of agreed amount of monetary obligation to the state budget should be considered as an action (albeit mistaken). Accordingly, it is not considered to be the payer inactivity and the lack of action on the obligation payment belongs to the basis for application of punitive sanctions.

Labour and Salaries

The Cabinet of Ministers of Ukraine approved in a new version by its Resolution of 26.06.2015, № 439 the Procedure for calculating the average wage (income, financial support) to calculate the payments under compulsory state social insurance, approved by Resolution of 26.09.2001, № 1266 (hereinafter – the Procedure № 1266).

The amendments came into effect from 04.07.2015. Thus, for today the calculation period for the calculation of the average wage for insured events that occur from 04.07.2015 is 12 calendar months (it was − 6). In addition, now the periods of unpaid vacations (without reference to the legal grounds for providing such vacations) are related to non-worked time for a valid reason.

The calendar days (but non-working days like it used to be) of temporary disability, maternity leave and other insured events (para. 2 of the Procedure № 1266) are the subjects to payment. Average daily wage is applied to all insurance payments, including if the employee works part-time and when recording of working time is in hours.

The amount of maternity and sickness benefits and the payment of the first five days of temporary disability at the expense of employer are to be calculated by multiplying the average daily wage for calendar day on percentage of payment depending on the length of pensionable service (when it is applied) and on the number of calendar days payable according to the documented temporary disability leave. The holidays and days off are not rejected when such a calculation.

At work on a part-time basis and at primary place of employment, the calculation period and the average wage are determined separately under each place of work. Total wage, from which the payments are calculated, under months of calculation period for the primary employment and the place (s) on a part-time basis cannot exceed the maximum value of accruing base of the Unified social contribution − as of today it is UAH 20706.

The wage (income, financial support) to calculate the average wage for payment of temporary disability days and maternity leave should be determined on the basis of information, the data from which are entered in Table 6 of Form № Д4, and for insurance events on unemployment and due to work accident and occupational health problem, the information is to be taken from the Register of insured individuals (paras.31, 32 of the Procedure № 1266).

The first 5 days of temporary disability are paid in the same manner and in the same size as the other days of temporary disability.

The Ministry of Social Policy of Ukraine explained how to apply part 2 of Art.26 of the Law of Ukraine “On Compulsory State Social Insurance” of 23.09.99, № 1105-XIV, if part-time was established for female worker. According to above norm the amount of maternity benefits per month should not exceed the maximum value of accrual base of Unified Contribution and cannot be lower than the minimum wage established at the time of the insured event. This rule does not include clarifications to determine the amount in full or part-time employment. Therefore determined minimum and maximum by the employment do not depend on a full or part-time established for female worker (see Letter of the Ministry of Social Policy of Ukraine “On the application of the provision of part two of Article 26 of the Law of Ukraine “On Compulsory State Social Insurance” of 08.05.15, № 6811/0/14-15/18).

The State Fiscal Service of Ukraine believes that the employer should not provide a notification of employment a worker via mail. The mail letters are not mentioned in the Resolution of the CMU “On the procedure of notification to the state fiscal service and its territorial authorities on the employee acceptance to work” of 17.06.15, № 413 (see Zir.minrd.gov.ua).

Instead, it can be done in the following ways:

by means of electronic communication using digital signature of responsible persons in accordance with legislative requirements in the field of electronic documents and electronic signatures;
in hard copies together with a copy in electronic form;
in hard copies if labor contracts signed with not more than five people.

The National Bank of Ukraine in its letter “On the possibility to use the information on payment of money for payment of funds to people that are not in staffing of company for purposes that are different from wage payments” of 15.04.15, № 50-01015/25117 explained: money (for purposes other than wages) could be given to people, which are not in staffing of company, under statements of expenditure (payroll money list) (ch.3 of para.3.5 of Regulations on the Conduct of cash transactions in the national currency in Ukraine, approved by the NBU Board dated 15.12.04, № 637, hereinafter − Regulations).

Time period for issuing of cash under statements of expenditure should be approved by manager and chief accountant (or person authorized by the manager) (para. 3.8 Regulations).

Regulations also provide for issuing of cash to employees, who don’t work at the company, by cash payment vouchers that are issued separately per person.

The amount of such compensation − 50% of the NBU discount rate at the date of interest accrual for loans using, but not higher than the sizes provided for by the loan agreements, under loans attracted in the past and current years, which interests for their use are accrued and paid in current year.

Accounting and Reporting

The State Fiscal Service of Ukraine clarified under what conditions non-profit institutions, including the palace of children creativity could sell the tickets for concerts and entertainment events without cash register using (see the letter of SFS of Ukraine “On the use of cash register” of 11.02.15, № 2725/6/99-99-19-02-02-15).

There is no need in cash register if payments in cash offices of companies, institutions and organizations of all forms of ownership, except enterprises of trade and public catering, are made with registration of cash receipt and cash payment vouchers and the issuance of appropriate receipts, signed and affixed with the seal (if available).

The State Fiscal Service of Ukraine in its letter “On changes in mandatory requisites of tax invoice” of 29.07.15, № 27651/7/99-99-19-03-02-17 said that taxpayers, when the preparation of tax invoice / adjustment calculation, to be entitled not to fill in the requisite details, which were not mandatory according to para.201.1 of the TCU, in title part of tax invoice, from the effective date of the Law of 29.07.15, № 643, viz. form 29.07.15. Namely:

location (tax address of the seller);
location (tax address of the buyer);
phone number (both seller and buyer);
type of civil law contract, its number and date;
form of performed settlements.

In other words, the absence of data in these tax invoice / adjustment calculations does not affect the recognition of tax credit, of course, if there are no other reasons for this.

In this case tabular part of tax invoice / adjustment calculations that defines the description and nomenclature of goods should be filled in unchanged before the approval of their new forms.

Financial Markets

The National Bank of Ukraine noted that different kinds of freelancers (programmers, copywriters, translators, designers, photographers, illustrators, etc.), which provide their services to non-residents via Internet and receive fees in foreign currency, for the purposes of exchange controls are not required to submit to the bank contracts with such non-residents, signed by both parties, their translation, Completion Certificates signed by parties, etc. (see the NBU letter “On monitoring of transactions of residents providing export of services to non-residents via Internet” of 07.07.15, № 22-01012/46746).

According to the explanation of NBU, to legalize the foreign exchange earnings the Executive just should have public offering on agreement (offer), and also render an invoice to the customer, put his/her signature on it and stamp (if available). This document is for the purposes of exchange control and is considered to be the document. The customer also confirms the fact of services performance by his/her payment, which replaces the act of provided services. Moreover the bank requires an invoice translation at its sole discretion.

The National Bank of Ukraine clarified the procedure for conducting of currency transactions by legal entities that had tax debt, which arose as a result of changes this year of the procedure (algorithm) of entrance of advances on income tax during the payment of dividends on account of payment of monthly advances (see Resolution of NBU “On Amendments to certain normative and legal acts of the National bank of Ukraine” of 03.07.15, № 427).

The mentioned above customers, instead of the Tax Clearance Certificate from the national tax inspectorate, may provide to the bank the relevant letter from tax agency on the availability of customer debt, which arose precisely because of this situation. The period between the date of information submission to the bank and the date of issuance of this letter should not exceed 10 calendar days.

Transfer Pricing

The Cabinet of Ministers of Ukraine deleted the Republic of Austria from the list of countries, transactions with which are became the subject of controllability under paras.39.2.1.2 of the Tax Code of Ukraine (hereinafter − TCU) (see the TCU Resolution “On Amendments in annex to the Resolution of the Cabinet of Ministers of Ukraine dated 14 May 2015, № 449” of 01.07.15, № 677-р (comes into force from 01.08.15).

The Government approved this decision based on note verbale received from Diplomatic representation of the Austrian Republic in Ukraine dated 18.06.15 with comments about discrepancy of the law of the country on corporate tax rates in Austria, the disclosure of ownership structure of legal entities (paras. 39.2.1.2 of the TCU ). It should be reminded that in May of this year the Government approved a list of countries (territories), the transactions with residents of which are controlled for the purposes of transfer pricing. Then the Austrian Republic was added to the list.

The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Tax Code of Ukraine (concerning the transfer pricing)” № 1861, which adjusted the procedure of transfer pricing application.

The amendments include the following changes:

transfer pricing rules would not be applied when the VAT taxation;
the ceiling volume of controlled transactions with a counterparty is increased from UAH 20 million to UAH 50 million. The taxpayers should report about the controlled transactions when they reach this volume;
the Cabinet of Ministers should determine the list of products that quoted on the stock exchange, and the comparable uncontrolled price method is used for taxation of incomes from these sales.

Also, the conditions are increased to recognize the business transactions with counterparties, mentioned in paragraphs 39.2.1.1 - 39.2.1.3, 39.2.1.5 of the TCU, as controlled. Now, such business transactions are recognized as controlled, if simultaneously:

annual accounting income of the taxpayer exceeds UAH 50 million (previously – UAH 20 million);
volume of business transactions of the taxpayer with each such counterparty exceeds UAH 5 million for the corresponding fiscal (reporting) year (previously − UAH 1 million, or 3% of annual income).

In addition, the penalty for failure to declare the controlled transactions is decreased − from 5% to 1% of the amount of not declared controlled transactions in the report.

The State Fiscal Service of Ukraine explained when the sanctions for failure to submit the documentation on tax request provided for by para.120.3 of the TCU, should be applied to the taxpayer that operates controlled transactions (see letter of the SFSU “On the tax control over transfer pricing” of 07.07.15, № 24525/7/99-99-22-01-02-17).

1. If the taxpayer did not provide a response to the request in accordance with paragraphs 39.4.4 of the TCU. Since required documents should be submitted in any form, the violation is only the absence of answers to tax authorities within a month.

2. The tax officers could send a request to the payer to provide additional documents. If the answer to further request (which one should provide within 10 calendar days inclusive of the date of receipt) does not contain required information for controllers – the payer is to be imposed a fine.

It should be noted that the punitive sanctions provided in 2015 are to be applied for the failure to submit the documentation on controlled transactions in 2013 – 2014.

The State Fiscal Service of Ukraine in its letter “On use of stock exchange prices as information sources about market prices for the purpose of transfer pricing” of 18.06.15, № 12823/6/99-99-19-02-02-15 noted that information on prices that emerged on the stock exchange and stock exchange quotation could be taken as a source of information to determine market prices for products for the purposes of transfer pricing. In fact the stock exchange data provide an opportunity to compare commercial and financial terms of transactions.

Securities

The State Fiscal Service of Ukraine explained: the unified tax payers are not entitled to use the bills as a form of settlement. Fiscals remind that the unified tax payers of first - third groups should make payments for shipped goods (works and services) only in monetary form cash and / or cashless (see para.291.6 of the TCU) (see Letter of SFS of Ukraine “On the bills settlements of entrepreneurs - unified tax payers” of 04.06.15, № 5267/Д/99-99-17-02-02-14).

At the same time controllers recognize transactions on bills issuance as a financial intermediation (ch.3, Art. 333 of the CCU). The tax authorities insist that this is because the money liabilities under this contract are terminated when the issuance of a bill under the contract, and liabilities on a bill payment arise (see Art. 4 of the Law of Ukraine “On circulation of bills in Ukraine” of 05.04.01, № 2374-III). And business entities, which carry out activity in financial intermediation using bills, could not be unified tax payers.

The other things

The Ministry of Justice of Ukraine in its letter “On provision of information from the State Register of Rights to Immovable Property” of 01.07.15, № 19.2/46 explained that apartment building co-owners could receive the summary of information from the State Register of Rights to Immovable Property.

They are entitled to receive such information on the grounds of enforcement of rights and performance of duties of Condominiums on its maintenance and management.

In this information should be noted data of item of immovable property, except personal data of entities of property rights to immovable property (details of the document of identity, the registration number of the taxpayer registration card).

It should be reminded that earlier the cost of obtaining of this information was UAH 170.

The Verkhovna Rada of Ukraine adopted the Law, which provided access to some State registers – the Unified State Register of transport vehicles and the State Register of Rights to Real Estate and their Encumbrances, the State Land Cadastre. The information they include is freely available now.

The Laws of the Code of Ukraine on Administrative Offences “On Road Traffic”, “On the State Registration of Rights to Real Estate and their Encumbrances”, “On the State Land Cadastre” and “On Prevention of Corruption” are amended by the bill № 2423.

The Supreme Court of Ukraine explained: if there are labor relations between the parties of agreement on remuneration, and such agreement is concluded due to existence of labor relations, − the mentioned agreement does not belong to transactions within the meaning of the civil law (see the SCU Resolution “On rescission of contract” of 24.06.15 in the case № 6-530цс15).

Accordingly, it is not subject to the general requirements on transaction validity and it cannot be annulled on the grounds provided for by the Civil Code of Ukraine.

It is substantiated by the fact that the subject of the employment agreement (contract) is work (labor function) of the person, which is the subject of labor relations. Therefore, the civil law on conditions of validity of the transaction and the legal consequences of the invalidity of the transaction are not to be applied to regulate social relations arising in connection with the employment agreement (contract).

In addition, the establishment by the company, the organization within their powers and at their own expenses in the employment agreement or other additional agreements, compared to legislation, labor or social and welfare benefits for employees (i.e. improve their situation) cannot be the reason to recognize these conditions invalid.

The Ministry of Agrarian Policy and Food of Ukraine approved the form of documents required to obtain partial compensation of interest rates on bank loans (in the national currency) by economic entities of the agro-industrial complex (see Order of the Ministry of Agrarian Policy of Ukraine “On Approval of forms of documents and providing information on financial support measures in agro-industrial complex through credit cost reduction” of 01.07.15, № 253 (enters into force after its official publication).

In particular: applications for participation in the competition to obtain compensation of interest rates on attracted loans, certificate of compensation of interest rates of attracted loans at the expenses of the state budget etc.

It should be reminded that compensation should be provided on competitive principles to legal entities − subjects of agro-industrial complex under signed loan agreements on condition that the amount of interest for using credits and the amount of payment for granting other banking services related to this loan do not exceed 30% per annum.