Legislation overview (November 2018)

Taxes

VAT

The Cabinet of Ministers of Ukraine by its Resolution “On Amendments to paragraph 3 of the Procedure for Suspension of the Registration of a Tax Invoice/ Adjustments Calculation in the Unified Register of Tax Invoices” of October 24, 2018, No. 936 made amendments to paragraph 3 of the Procedure for Suspension of the Registration of a Tax Invoice/Adjustment Calculation in the Unified Tax Register of Tax Invoices.

According to the document:

1. Monitoring is not subject to TI/AC, if the volume of supply indicated by the tax payer in tax invoices registered in the URTI in the current month, taking into account TI/AC submitted for registration in the URTI, is less than UAH 500 thousand, and the manager - the official of such a taxpayer is a person who occupies a similar position in less than 3 taxpayers. This criterion will work provided that the volume of supply of goods/services specified by the taxpayer in such TI/AC in the current month does not exceed UAH 50 thousand per one buyer - taxpayer. Please note that in order to determine the amount of supply, AC, which the registration period are different from the period of their completion, will not be taken into account.

2. AC compiled in case of reduction of the amount of compensation of the value of goods/services to their supplier, are not checked in accordance with the features specified in para. 3 of the Procedure for suspension the registration of TI/AC.

3.The size of the calculated indicators used by the SFSU when the monitoring the tax invoices is changed: at the same time, the values of D and P indicators have the following dimensions: D> 0.05, P

D - the estimated value, which is equal to S/T;

S - the total paid amounts for the last 12 calendar months preceding the month in which TI/AC is drawn up, the sums of the Unified Social Contribution and taxes and duties (except for the amount of VAT paid upon importation of goods into the customs territory of Ukraine) by the taxpayer and its separate subdivisions;

T is the total amount of goods /services supplied in the customs territory of Ukraine, taxable at rates of 0, 20 and 7 percent indicated by the taxpayer in TI/AC registered in the Register for the last 12 calendar months preceding the month in which TI/AC;

P is the amount of VAT indicated by the taxpayer in TI/AC registered in the Register in the reporting (tax) period, taking into account the file submitted for registration in TI/AC Register;

Pm is the largest monthly amount of VAT indicated in IT/AC registered by the taxpayer in the Register for the last 12 calendar months preceding the month in which IT/AC is drawn up.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the formation of a tax credit by a buyer - a budgetary institution when the purchase of goods/services, payment for which is carried out at the expense of budget funds from the State Treasury account” of 08.10.2018, No. 4316/6/99-99-15-03-02-15/ІПК stated that para.187.7 of TCU specified a special procedure for the establishment of tax liabilities in the case of the supply of goods/services with payment from the budget, and the date of the occurrence of the right to a tax credit from the taxpayer who paid for goods purchased at the expense of the budget funds, cannot be determined before the date of payment.

Representatives of the fiscal department stressed that since the supplier of goods/services, payment for which is carried out at the expense of budgetary funds, the date of occurrence of tax liabilities is the date of crediting of such funds on his/her bank account, then the tax invoice, drawn up by the date of shipment of goods, is considered false and it cannot be the basis for the formation of a tax credit by the buyer - a budgetary institution.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure of taxation of VAT transactions of the taxpayer - resident on supply to non-resident of engineering services in the field of chemical technology” of 06.11.2018 No. 4718/6/99-99-15-03-02-15/ІПК reviewed the working situation.

The main activity of the taxpayer is activity in the field of engineering, geology and geodesy, provision of technical consulting services in these areas (Classifier of economic activities code 71.12). Engineering services in the field of chemical technology that the payer plans to provide include among others:

• study of the possibility of synthesis;
• development of ways of synthesis and obtaining samples of compounds with the optional provision of these compounds to the client for further research in the customer’s territory;
• computer molecular modeling and virtual screening;
• consultations and research on medical chemistry;
• optimization of ice compounds;
• design of the libraries of the compounds;
• research on pharmacological screening of chemical compounds, bioanalytical studies of physical and chemical properties of compounds;
• pharmacokinetic and toxicological studies of chemical compounds.

Should the VAT be accrued in the case of supply of such services to a non-resident?

For the purposes of taxation, engineering services are limited by the list specified in paras. 14.1.85 of TCU, regardless of the wider definition of this term in other legal acts.

It should be recalled, according to sub-para. 14.1.85 of TCU, engineering – services provision (works performing) with drawing up technical specifications, project proposals, research and feasibility surveys, performance engineering and exploration works on construction sites, development of technical documentation, projecting and engineering study of objects of engineering and technology, providing advice and supervision during installation and commissioning, as well as providing advices related to such services (works).

If supply by the VAT payer of engineering services that meet the definition given by sub-para. 14.1.85 of TCU, is carried out to a non-resident, so such transaction does not fall under the definition of the object of taxation, since the place of supply of such services is considered to be the place of delivery of them outside the customs territory of Ukraine (para. 185.1 and para. 186.2 - 186.4 of TCU).

In this case, if purchased and/or produced goods/services by the taxpayer, non-current assets are subsequently fully used in non-taxable VAT transactions (including transactions that are not subject to VAT), then such a taxpayer is obliged to calculate tax liabilities with VAT in accordance with para. 198.5 of TCU.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the formation of a tax credit on transactions for the purchase of waste paper of commodity item 4707 according to the UKT FEA” of 02.11.2018 No. No. 4683/6/99-99-15-03-02-15/ІПК explained that in the course of transactions for the supply of waste paper of commodity item 4707 according to the UKT FEA, which are exempted from VAT taxation on the basis of para. 23 of subsection 2 of section XX of TCU, the VAT payer supplier should prepare tax invoice marked “Without VAT”, which is subject to mandatory registration in the URTI. At the same time, the supplier of such transactions does not determine the VAT liability and does not pay to the budget. Recipient of waste paper purchases such goods without VAT.

If the taxpayer when the supply of goods/services, supply transactions of which are exempt from VAT, accrued VAT at a tax rate of 20%, then, in order to correct the mistake made, he/she should make adjustment calculation, indicating with the “-” sign the amount of the transaction to which the rate of 20% was applied. Such adjustment calculation is subject to registration by the recipient (buyer) of such goods/services in the URTI.

At the same time, the taxpayer should make a new tax invoice for the VAT exempt transaction, indicating in such a tax invoice the date of preparing corresponding to the date of the occurrence of the first event for such a transaction, and is obliged to register such an invoice in the URTI.

It is also noted that the exemption from VAT taxation of waste paper supplies in the event of compliance with the conditions listed in para.23 of subsection 2 of section XX of TCU, is applicable without the possibility to refuse from its application.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Procedure for Formation of a Tax Credit” of dated 02.10.2018, No. 4269/6/99-99-15-03-02-15/ІПК stated that the name of the buyer in the tax invoice should correspond to the wording in statutory documents and should not contain other data.

Errors in mandatory requisites that do not prevent the transaction being identified, its content, period, parties, and the amount of tax liabilities may not be the reason not to accept the tax invoices in electronic form.

The buyer can reflect the tax credit on the basis of a tax invoice in which the errors to be made in the mandatory requisites, if: such a tax invoice was registered in the Unified Register of Tax Invoices; errors do not interfere with the confirmation of the content of the transaction, the period, the parties and the amount of VAT in connection with the acquisition of such goods/services.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the procedure for VAT taxation” of 13.11.2018, No. 4803/6/99-99-15-03-02-15/ІПК informed that tax authorities may cancel the registration by the tax payer if there are such confirmation documents (information):

• court orders to liquidate a bankrupt company,
• message from the state registrar
• information from the Unified State Register on making a record of bankruptcy termination.

It is not provided such a reason for canceling registration of the VAT payer, as the adoption by the Economic Court of the resolution on the recognition of the debtor company as a bankrupt and the opening of the liquidation procedure.

Therefore, from the moment of opening of the liquidation procedure and before its completion, the debtor company remains the VAT payer.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Value Added Tax” of 12.11.2018, No. 4793/6/99-99-15-03-02-15/ІПК reminded that the transaction of transfer of material assets for safekeeping was not the subject to VAT.

However, if after the expiration of such storage, as specified in the contract, the custodian does not return the material asset to the taxpayer, such material assets are considered to be delivered, and the transaction for their supply is subject to VAT, based on the tax base determined in accordance with para. 188.1 of TCU.

At the same time, tax liabilities for such material assets are not accrued on the basis of para. 198.5 of TCU.

The State Fiscal Service of Ukraine by its letter “On certain peculiarities of drafting and registration of tax invoices and adjustment calculations to tax invoices” of 27.11.2018 р. № 36942/7/99-99-15-03-02-17 clarified the updating of tax forms invoice/adjustment calculation of the correction and the procedure of their completion, approved by the order of the Ministry of Finance dated September 17, 2018, No. 763 (hereinafter - Order No. 763).

Representatives of the fiscal department, considered:

• amendments made to the forms of the tax invoice and the adjustment calculation;
• amendments in the procedure for filling in the tax invoice and the adjustment calculation (the peculiarities of filling in the boxes in the upper left of the tax invoice/the adjustment calculation, the details of tax invoice/ the adjustment calculation “Taxpayer’s tax number or series (if any) and passport number” (supplier/buyer), as well as peculiarities of filling in the tax invoice/ the adjustment calculation “The Amount of Value Added Tax”);
• peculiarities of making the adjustment calculations to the tax invoice (in the case of correction of errors in the details of the head of the tax invoice and correcting the error in the ITN of the recipient (buyer);
• indication in the adjustment calculation of the cause of the adjustment;
• indication in the adjustment calculation of the adjustment group;
• peculiarities of making the adjustment calculations to the tax invoices “excessively made” registered in the URTI.

At the same time, tax officials identified transitional issues, namely:

• as of 01.12.2018, the registration of tax invoices and adjustment calculations in the URTI is carried out in accordance with the form approved by the Order No. 763, regardless of the date of making such tax invoices and adjustment calculations;
• tax invoices and adjustments calculations that were submitted for registration before 01.12.2018 and which registration was suspended, in the future (in case of making the corresponding decision) to be registered in the URTI in the form in which such documents were submitted to the URTI;
• in the adjustment calculations made from 01.12.2018 to the tax invoices registered in the URTI by 01.12.2018, in the box “Before the consolidated tax invoice” instead of “X” mark, which is indicated in the tax invoice, it is indicated the corresponding code of signs from 1 to 4 (“X” mark should not be indicated);
• in the adjustments calculation made to the tax invoices registered in the URTI as of 01.12.2018, the code of sign indicated in the box “To the consolidated tax invoice” must correspond to the code of the sign “Consolidated tax invoice”, which is indicated in the consolidated tax invoice, to which the adjustment calculation is made;
• in the box “Not subject to the provision of the recipient (buyer) on the grounds” in accordance with para. 8 of the Order No. 763 when the preparation of tax invoices, the peculiarities of which are set forth in paras. 10-15 of the procedure No. 1307, the “X” mark is indicated and the type of reasons (the value from “01” to “15”) is indicated; for tax invoices made before 01.03.2017, such values may be from “01” to “17”);
• in the adjustment calculation made to the tax invoices, which filled in the box “Not subject to delivery to the recipient (buyer) on the grounds”, this box should also be filled in, and the type of reason should correspond to the type of reason stated in the tax invoice to which the adjustment calculation is made, regardless of the date of making such a tax invoice (before 01.03.2017 or after the specified date). For example, in the adjustment calculation made to the tax invoice dated 20.01.2017, which type of reason is “16”, the type of cause “16” should also be indicated, despite its absence in the list of types of reasons;
• when preparing the adjustment calculation of tax invoice, prepared and registered in the URTI before 01.12.2018, the line 14 of section B of the adjustment calculation “Value Added Tax” should not be filled in the lines to which the relevant figures of the tax invoice are transferred with the sign “-“ (indicated as “0”), at the same time, in the new (added) lines of such adjustment calculation, line 14 of section B is to be filled in case of availability of the tax amount (line 11 of section B of the adjustment calculation “7” or “20”).

Сorporate Income Tax

The State Fiscal Service of Ukraine in its Individual Tax Advice “On Determining the Object of Taxation of the Income Tax in the Implementation of Certain Business Transactions” of 08.11.2018, No. 4730/6/99-99-15-02-02-15/ІПК reported: if a company made a decision to make a write-down of a provision for impairment of inventories in accordance with Accounting Standards or IFRS, then a difference arises in accordance with para. 139.1 of the TCU for adjusting the financial result before tax.

In accordance with this paragraph the financial result:

• increases by the amount of expenses for the creation of provision in accordance with the rules of accounting;

• decreases:

• by the amount of the use of established provision costs incurred in accordance with the rules of accounting;

• by the amount of adjustment (decrease) of provision, on which the financial result was increased before taxation, calculated in accordance with the rules of accounting.

Unified Tax

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Unified Tax for Legal Entities” of 30.10.2018, No. 4633/6/99-99-12-02-03-15/ІПК answered the question whether the unified tax to be imposed on the transaction for receiving a temporary free use of fixed assets by the unified tax payer of the third group from the resident taxpayer (individual) under the loan agreement.

The taxpayers reminded that the amount of the unified tax payer’s income includes the value of the goods (works, services) received free of charge during the reporting period (para. 292.3 of TCU).

The goods (works, services) received free of charge are considered those which are provided to the payer of the unified tax in accordance with written donation contracts and other written agreements concluded in accordance with the law, which do not provide monetary or other compensation for the value of such goods (works, services) or their return, as well as the goods transferred to the payer of the unified tax on custody and used by such a unified tax payer.

Art. 827 of TCU stipulates that under a loan agreement one party (the lender) transfers free of charge or undertakes to transfer to the other party (user) a thing for use within the established term.

Consequently, if the loan agreement defines the term of the free of charge use of the fixed assets received, and such a period does not exceed the period of their depreciation, the value of such fixed assets is not included in the income taxed by the unified tax.

Excise Tax

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the taxation of excise tax on transactions for the sale of certain goods and operations for the provision of certain services using excisable goods” of 06.11.2018, No. 4709/6/99-99-15-03-03-15/ІПК considered an interesting working situation.

The company completes and sells to end-users sets that include excise and non-excise goods, as well as provides services for organizing events, catering, etc., including using excisable goods.

Since the company sells sets to an end-user to include excise goods, such transactions are subject to excise tax on the sale of excisable goods.

If the company pours alcoholic beverages to final consumers during the organization of events, in particular catering, and includes the cost of such drinks to the cost of services, there is also the implementation of excisable goods. The basis of taxation of excise tax is the value of excisable goods sold as part of the service.

Accounting and Reporting

The Cabinet of Ministers of Ukraine by its Resolution “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated December 27, 2010 No. 1233” of 31.10.2018, No. 891, consolidated the decision to cancel the obligation for business entities to prepare a separate report on the amount of tax benefits and submit it to the controlling body from the year 2020.

Instead, the accounting of the amounts of tax benefits received by business entities will be carried out by the controlling bodies on the basis of information available in tax declarations submitted by such entities.

Information on the amount of tax benefits in the tax reporting must contain the following data:

• the code of the benefit for each type of tax benefit, the name of benefits according to the benefits guide, the form and procedure of which are approved by the SFSU;
• the amount of tax (duty) not paid to the budget in connection with the receipt of tax privilege (tax-free funds);
• the period of using the tax benefit in the reporting period - the number, month, year of the beginning and end of the use of benefits. In case when the period of use of tax benefits is established before the beginning of the reporting period and continues after its expiration, such term coincides with the date of beginning and end of the specified period;
• the amount of tax benefit that used for the targeted purpose, - the amount of benefits of payments under the benefits guide, if the targeted use of tax benefits.

State Fiscal Service of Ukraine in its Individual Tax Advice “On some issues of payment transactions by an individual - entrepreneur when tourism activity” of 08.10.2018, No. 4307/К/99-99-13-01-02-14/ІПК considered registration of payment transactions by an individual - an entrepreneur in the realization of tourism activity, namely, the possibility of using the receipt of PO-D2.

In accordance with para. 11 of sec. II of Regulations on the conduct cash transactions in local currency in Ukraine, approved by the NBU Board dated 29.12.2017, No.148, cash received to cash registers, should be recognized on the day of receipt of cash in the full amount.

Settlement document is a document of the established form and content (cash check, trade receipt, settlement receipt, etc.), confirming the fact of the sale (return) of goods, provision of services, receipt (return) of funds, purchase and sale of foreign currency, printed in cases provided by the law, and registered in the established manner by the registrar of settlement transactions or manually filled in.

The receipt on the form No. PO-D2 was approved by order of the Ukrainian Union of associations, enterprises and organizations of consumer services of population dated 29.09.95, No. 8 “On Approval of Forms of Harsh Accountability Documents and Guidelines on their Use”, to which the SFSU sent the subject that raised that question.

However, even though the general service provision agreement applies to travel services, the tourist service is not domestic. Domestic services to the population are listed in para. 291.7 of TCU.

In addition, the receipt on the form No. PO-D2 is intended for registration of services provided in the presence of the customer. But that cannot be said about travel services, which obviously will be provided later than the contract is executed.

Consequently, the receipt form No. PO-D2 when making settlements for travel services is not applicable.

The State Fiscal Service of Ukraine in category 119.11 “ZIR” gave an answer to the question whether it was necessary to submit a message in the form of 20-ОПП with the updated information if there was a renaming of the name of the city, the street, etc.

In the event of a change in the information about the object of taxation, in particular its location, the taxpayer submits to the controlling authority, at the main place of the account, a message in form 20-OПП with updated information about the object of taxation.

In section 3 of the notification under the form No. 20-OПП the new location of such an object is indicated.

In case of amendments to the title documents (certificates of ownership right, certificates of the right to inheritance, contracts of sale, contracts of mines, donations, etc.) in connection with the renaming of the streets on which the property is located, and the introduction Changes to the State Register of Real Property Rights in respect of real estate in connection with the change of the name or renaming of the street, the taxpayer submits a message in the form No. 20-ОПП within 10 calendar days from the date of the introduction of changes to this register.

For business entities subject to the Law of Ukraine “On the use of payment processing registrars in the field of trade, public catering and services”, which are used by the cash registers, if the name of the city, street, etc. has been renamed, where the taxation object is located (economic unit) where cash register is applied, the notification under the form No. 20-OПП is submitted in order to avoid discrepancies between the information about the location of this economic unit.

The State Fiscal Service of Ukraine in the category 107.04 “ZIR” described how the income of individual entrepreneur of the unified tax of the second - the fourth groups should be determined to understand the need for the use of cash register.

Individuals - entrepreneurs – the unified tax payers of the second - the fourth groups that carry out settlement transactions in cash and/or in non-cash form (with the use of payment cards, checks, tokens, etc.) when selling goods (services provision) in the field of trade, catering and services, in order to determine the necessity of application of cash registers should independently determine excess of the amount of income over UAH 1 000 000.

It should be taken into account the amount of income for the current reporting tax year. The amount of income for the purpose of applying the criterion (over UAH 1 000 000) is determined taking into account all income that according to Art. 292 of TCU are included in the income of the unified tax payer - an individual entrepreneur.

In the case of realization of technically complicated household goods subject to warranty repair, the unified tax payers, regardless of the income amount, are obliged to apply the cash registers with the printing of the corresponding settlement documents.

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the forms of the waybills for goods recognition at the place of sale of 12.11. 2018, No. 4792/6/99-99-14-05-01-15/ІПК reported that the business entities, who carried out settlement transactions when the sale of goods (services provision) in the field of trade, catering and services, were obliged to keep a record of inventory at the warehouses and/or at the place of their sale in accordance of the procedure established by law, to sell only those goods (services) that to be reflected in that accounting.

However, such requirements of para.12 of Art. 3 of the Law on cash register does not apply to the payers of the unified tax which are not registered as VAT payers.

The basis for the posting of goods at the place of sale of goods is the invoice of the standard form No. M-11, which was approved by the order of the Ministry of Statistics of 21.06.1996, No. 193. In addition, for the registration of the receipt of goods of the company of retail trade can use both the standard forms of primary documentation, and forms of documents developed at the company and provided by an order (or other regulatory documents) on the accounting policy.

Therefore, if the form of the waybill is approved by an order (or other regulatory documents) on the accounting policy of the company, then para.12 of Art. 3 of Law No. 265 in the sense of this Law is not violated.

Control and Responsibility

The Ministry of Justice of Ukraine by its Order “On Amendments to the Requirements for the Writing of the Name of a Legal Entity, its Separate Subdivision, Public Formation that has no Legal Status, Except Organization of a Trade Union” of 17.10.2018, No. 3236/5 showed in a new wording the Requirements for writing the name of a legal entity, its separate subdivision, a public formation that did not have the status of a legal entity, except the organization of a trade union.

Thus, the following is used for the naming of the legal entity:

• letters of the Ukrainian alphabet - when writing the name in Ukrainian;
• letters of the Latin alphabet - when writing the name in English;
• punctuation and symbols: quotes, dot, comma, colon, parenthesis, apostrophe, hyphen, dash, slash, exclamation mark, question mark, number, plus sign, equation sign, asterisk, at sign (@), ampersand (&);
• Arabic and Roman numerals.

Financial Services Market

The National Bank of Ukraine by its Resolution “On Approval of Amendments to the Regulation on the Implementation by the Banks of Financial Monitoring” of 01.11.2018, No. 116 amended the Regulations on the implementation by banks of financial monitoring and gave individuals the opportunity to receive remotely not only administrative but also banking services (for example, opening an account). To this end, the mechanism of remote identification of customers of banks through the BankID System of the NBU is being implemented.

This mechanism provides that for the first time the identification of an individual should be carried out in the presence of one of the participating banks, and after that, this individual will be able to order services and services on the website of any company or bank connected to the BankID System of the NBU. Its identification will be conducted remotely at the level of the banks in which it is serviced (bank-to-bank). This, for example, will enable banks’ clients to remotely open accounts without necessity to visit the bank’s branches.

At the same time, for the provision of banking services, the mandatory conditions are the fulfillment of the requirements of financial monitoring, namely: verification of identification data received from different sources (EDS/qualified digital signature, BankID System of the NBU, copies of documents downloaded to the site of the service provider and signed by client’s EDS).

Responsibility for the proper implementation of the identification and study of the client in accordance with international standards and legislation of Ukraine falls on both bank which made identification and the bank using the information received through the BankID System.

From its part, the bank is obligated to ensure proper risk management in its activities in order to prevent the use of the services it provides for the legalization of criminal incomes and the financing of terrorism.

In addition, the National Bank improved the procedure for approval of the responsible for the implementation of financial monitoring of bank employees.

Сontrolled Transactions

The Ministry of Finance of Ukraine by its Order “On approval of the General Tax Advice on the application of the provisions of sub-paras. 140.5.4, 140.5.6 of item 140.5 of Article 140 of the Tax Code of Ukraine regarding the determination of the tax (reporting) period for adjusting the financial result before taxation” of 14.11. 2018, No. 887 approved the General Tax Advice on the application of the provisions of sub-paras. 140.5.4, 140.5.6 of TCU regarding the determination of the tax (reporting) period for adjusting the financial result before taxation.

In order to comply with the requirements of the third and fourth items of paras. 140.5.4 of TCU, the taxpayer should determine whether the transaction is being controlled. In case if a transaction cannot be identified as a controlled one, the taxpayer must:

• to execute the procedure for confirming the amount of expenses at the prices determined by the arm’s length principle in accordance with Art. 39 of TCU, and if the purchase price of goods, including non-current assets, works and services exceeds their price determined by the arm’s length principle, adjust the financial result before tax to the size of the difference between the acquisition value and the value determined on the basis from the price level determined by the arm’s length principle or
• adjust the financial result before tax by the amount 30% of goods value including non-current assets, works and services.

In order to fulfill the requirements of para. 140.5.6 of TCU, the taxpayer also needs to determine whether the transaction is controlled. In case if the transaction cannot be identified as controlled, the amount of costs should not be confirmed by the taxpayer at the prices determined by the arm’s length principle in accordance with the procedure established by Art. 39 of TCU, the taxpayer should make adjustments to the financial result before tax on the expenses amount for accrual exceeding the amount of royalties increased by 4% of net income from the sale of products (goods, works, services), according to the financial statements for the year that is preceded by the reporting one (except for business entities conducting activities in the field of television and radio in accordance with the Law of Ukraine “On Television and Radio Broadcasting”), and for banks - in the amount that exceeds 4% of income from operating activities (at VAT calculation) for the year preceding the reporting year.

For purposes of recognizing a transaction(s) as controlled, the taxpayer should use the accounting data for the relevant reporting (tax) year in which such business transactions were performed.

Consequently, since the valuation criteria for the recognition of a transaction(s) as controlled for the purposes of meeting the requirements of Art. 39 of TCU are calculated on the basis of the results of the tax (reporting) year, then adjusting the financial result before tax on transactions with non-residents, specified in para. 3 and 4 of paras. 140.5.4 and paras. 140.5.6 of TCU, carried out according to the results of the tax (reporting) year and are reflected in the tax invoice of the company income tax for the tax (reporting) year.

Military Situation

The Verkhovna Rada of Ukraine approved the decree of the President of Ukraine “On the Introduction of the Martial Law in Ukraine”.

It will be in effect in areas bordering Russia and unrecognized Prydnistrovia. The President read out a list of those areas: Vinnytsia, Luhansk, Mykolaiv, Odesa, Sumy, Kharkiv, Chernihiv, Kherson and internal waters of the Azov-Kerch water area.

The Martial law is introduced for 30 days.

Martial Law is a special legal regime, which provides for the provision of special powers to the state authorities necessary for the prevention of a threat. Temporary restriction of the rights and freedoms of citizens, as well as temporary limitation of legal interests of legal entities.

During the Martial Law regime, military and civilian authorities gain wider powers that allow them to use human and material resources for their needs. It means that authorities are all military command - from the General Staff to the management of individual units, as well as the entire power vertical - from the President and the Cabinet to the village councils. Decisions, respectively, can be taken at both the central and local levels.

Martial Law allows:

• to impose the labor duty for the defense work, the elimination of natural and man-made emergencies, and socially useful works;
• to use the capacities and labor resources of enterprises and organizations of all forms of ownership for the needs of defense, to change the mode of their work, working conditions.
• to exempt for temporary use the necessary property of ministries, central and local executive authorities, territorial communities, enterprises and citizens, including vehicles, structures, machines, mechanisms, equipment and other objects related to transport services, issuing the established sample documents on these;
• to establish protection of important objects of the national economy of Ukraine, which provide living activity of the population;
• to impose curfew (the prohibition of staying in a certain period of time on the streets and in other public places without special permits and certificates) and to establish a special regime of light-shattering;
• to establish a special regime of entry and exit, to restrict freedom of movement of citizens, foreigners and stateless persons, traffic;
• to check documents of citizens, and, if necessary, inspect things, transport, luggage and cargo, office premises and citizens’ homes;
• to raise the question of the prohibition of the activities of political parties and public organizations if they threaten the sovereignty, national security of Ukraine, its independence and territorial integrity, as well as the lives of citizens;
• to monitor the work of communications companies, printing companies, publishing houses, broadcasting organizations, cultural institutions and organizations, use local radio stations, television centers and printing houses for military needs and explanatory work among troops and population; regulate the work of amateur receiving and transmitting radio stations, the transmission of information through computer networks;
• to exempt firearms and ammunition, cold weapons, from the public, and from enterprises, institutions and organizations - training and military equipment, explosives, radioactive substances and materials, potent chemicals and poisonous substances;
• to prohibit conscripts and military persons from changing their place of residence without the knowledge of the military command;
• to establish a military apartment duty for individuals and legal persons for the accommodation of military personnel and the placement of military units and institutions;
• to establish the procedure for the use of storage facilities, buildings and other objects for the protection of the population, as well as to meet the needs of defense;
• to evacuate the population, companies, institutions, organizations and property values;
• to introduce standardized provision of the population with basic food and non-food products, medicines;
• to forcibly withdraw and dispose of property from legal entities and individuals for defense purposes.

The fundamental human rights such as the rights to life, respect for dignity, freedom and personal integrity, the right for equality before the law, and right to shelter should not be limited during martial law.

Legislation establishes that during the martial law, elections of the President, the Verkhovna Rada, and local self-government bodies cannot be held. Accordingly, during the term of the Martial Law, it is not possible to terminate the powers of the parliament or local councils beforehand. It is also impossible to amend the Constitution, to hold a referendum.

The authorities also can’t use the work of citizens during Martial Law free of charge – it should be paid for work for defense needs, as in peacetime. Property withdrawn during Martial Law, after the end of the martial law, must be returned to the owner. If the property has become unsuitable, compensation for losses must be recovered through the court.

Сcurrently there are no restrictions on economic activity throughout Ukraine. This is stated by the Ministry of Economic Development and Trade.

Business entities and citizens can conduct economic transactions in the normal mode.

At the same time, in connection with the decision on the introduction of martial law, the Government said that all state institutions responsible for implementing social policy would work in accordance with the usual schedule of work.

In this way, the provision of social assistance and all payments to the population in the regular mode will be provided without interruption. There will be no restrictions on the payment of social benefits and pensions.

The National Bank of Ukraine by its Resolution “On the peculiarities of functioning of the banking system of Ukraine in a special period” of 28.11.2018, No. 132 confirmed that during the martial law introduced for 30 days in 10 regions of Ukraine, the banking system would continue to operate in the normal mode.

If necessary the National Bank will adopt separate decisions regarding the order, scope and timing of the introduction of additional measures that determine the functioning of the banking system of Ukraine during a special period.

This document was created in connection with the adoption by the Verkhovna Rada of Ukraine of the Law of Ukraine “On Approval of the Decree of the President of Ukraine “On the Introduction of the Martial Law in Ukraine” and the fulfillment of the requirements of the Law of Ukraine “On the National Bank of Ukraine” and “On the Legal Status of the Martial Law”.

The Resolution will come into force on November 29, 2018.

The Other Things

The State Statistics Service of Ukraine in its letter “On the coding of activities on cryptocurrency “mining” in accordance with the Classification of Types of Economic Activities (CEA (Classifier of economic activities)-2010)” of 05.10.2018, No. 14.4-09/435-18 clarified that the experts of the Working Group of the statistical organization of the European Commission recommended to classify the activities of mining and realization of cryptocurrency by the code 64.19 “Other types of monetary intermediation”, trade (exchange) of cryptocurrencies – by the code 66.19 “Other supporting activities in the field of financial services, except insurance and pension provision” CEA.

At the same time, the State Statistics Committee also noted that СEA is a statistical tool for the organization of economic information. Code of the type of activity does not create rights or obligations for enterprises and organizations, does not cause any legal consequences for them. Any use of CEA for non-statistical purposes (administrative or regulatory) is carried out by the users individually according to their own rules, being responsible for this and appropriately explaining such use.

In its turn, the Administration of State Communication Service in its letter of 19.06.2018, No. 04/02/02-1909 clarified that, in accordance with the provisions of the CMU resolution dated 16.11.2016 No. 821 “Certain issues of licensing of economic activities for the provision of services in the field of cryptographic protection of information (in addition to electronic digital signature services) and technical protection of information according to the list determined by the Cabinet of Ministers of Ukraine”, the cryptocurrency mining does not apply to licensed types of services, and the Administration of the State Service of Communications did not consider the issue of the introduction of a license on this type of activity.