Taxes
VAT
The State Fiscal Service of Ukraine through the Office of Large Taxpayers informs that transactions on the export of goods under the customs regime of re-exportation are exempt from taxation, except for export transactions in accordance with para. 5 of part 1 of Art. 86 of the Customs Code of Ukraine, which are taxed at the rate specified in paras. 195.1.1 of the Tax Code of Ukraine (hereinafter – TCU) (para. 206.5 of the TCU).
The tax return form on value added tax (hereinafter – “Return”) and the Procedure for filling in and submitting the tax returns on value added tax (hereinafter – Procedure) approved by the Ministry of Finance Order No. 21 of January 28, 2016.
The following is reflected in the Return:
- transactions on the export of goods outside the customs territory of Ukraine – in line 2. In this case, para. 3 of sec. V of the Procedure provides for that in line 2 of the Return, the volumes of transactions for the export of goods outside the customs territory of Ukraine, which are taxed at zero rate on demand of para. 195.1.1 of TCU;
- transactions exempt from tax – in line 5. Para. 6 of sec. V of Procedure specifies that line 5 of the Return indicates, in particular, the volume of transactions for the supply of goods/services exempt from taxation under Art. 197 of TCU, temporarily exempt from taxation in accordance with sub-sec. 2 of sec. XX of TCU and dismissed under international treaties (agreements).
Consequently, transactions for the export of goods outside the customs territory of Ukraine in the customs regime of re-export, which are exempt from value added tax (hereinafter – VAT), should be reflected in line 2 of the VAT tax return.
PIT
State Fiscal Service of Ukraine answered the question of category 104.13 “ЗІР” “Does IE tax obligations apply according to general taxation system if income tax advances were undue?”
An individual entrepreneur (hereinafter – IE) is subject to penalties and fines in accordance with general taxation system for failure to pay or undue payment of total tax obligations, defined in annual property and income statement (hereinafter – tax statement).
Given that the final personal income tax assessment (hereinafter – PIT) for fiscal year is prepared by payer according to data laid down in annual tax statement including PIT payed during the year based on documentary confirmed payment, undue advance payments entail no penalties.
Other Taxes and Fees
The Cabinet of Ministers of Ukraine by its Resolution “On Amendments to the Decrees of the Cabinet of Ministers of Ukraine dated December 27, 2001 No. 1756 and December 23, 2004 No. 1716” of 12.06.2019, No. 496 approved the amendments made by the Ministry of Economic Development and Trade to the order and amounts of payment of fees for registration of intellectual property objects.
Thus, in particular, the Government increased the fees for preparing for the state registration of copyright and contracts relating to the rights of the author on the work, as well as the fees for actions related to the protection of rights to intellectual property.
The purpose of these amendments is to modernize the system of fees for registration and protection of intellectual property rights in accordance with the economic realities in Ukraine. In addition, such innovations will enhance the quality of services for protecting intellectual property rights in accordance with the modern requirements of Ukrainian business, as well as the needs for improving and modernizing the functioning of the intellectual property rights protection system in Ukraine and its subjects.
The government resolution is also intended to bring the level of fees for registration and protection of intellectual property rights in Ukraine to world and, in particular, European standards.
Accounting and Reporting
The State Fiscal Service of Ukraine in its Individual Tax Advice “On Accrual of Depreciation on Leased Fixed Assets” of 07.06.2019 No. 2598/6/99-99-15-02-02-15/ІПК assured that for the calculation of depreciation, in tax accounting costs for improvement (repair) of leased objects should be credited to a separate tax group 9 “Other fixed assets” with a minimum useful life of 12 years.
In order to determine the object of taxation, the lessee must, in particular, make the following adjustments:
- increase the financial result before tax to the amount of accrued depreciation of the cost of repairs of leased fixed assets (hereinafter – FA) in accordance with Accounting Standards or IFRS;
- reduce the financial result before tax to the amount of calculated depreciation of the cost of repairs of leased FA, determined in accordance with the provisions of Art. 138 of the Tax Code of Ukraine (hereinafter – TCU).
Tax accounting of repairs aimed at maintaining the object of lease in working condition, is fully focused on accounting. Sec. III of TCU do not provide for differences for such cases, except for general “non-profit – non-resident” restriction set forth by para. 140.5.4 of TCU.
Control and Responsibility
The Cabinet of Ministers of Ukraine by its Resolution “On Approval of the criteria for assessing the risk degree from conducting business activities in the field of medicinal products production, wholesale and retail trade in medicinal products, import of medicinal products (in addition to active pharmaceutical ingredients) and in the field of quality control of medicinal products and under which to be determined periodically the implementation of planned state supervision measures (control) by the State Service for Medicinal Products and Drug Control” of 05.06.2019 No. 465 approved criteria, under which to be assessed the risk of economic activities in manufacturing, wholesale and retail sale of medicines and their import.
It should be recalled that the frequency of scheduled inspections depends on these criteria. It’s about checking the State Service for Medicinal Products and Drug Control.
The criteria for assessing the risk degree from the relevant activities implementing will be:
- kind of economic activity carried out by the business entity;
- number of pharmacy establishments in such entity;
- type of medicine, the production of which is carried out by the entity;
- taxation system applied by the entity;
- availability of quality management system that meets the standards;
- presence of violations detected by the results of a previous state supervision measure;
- existence of a decision to impose a prohibition on the circulation of a medicinal product manufactured or imported by a business entity or a negative opinion on the quality of the medicinal product imported into Ukraine issued during the last three years;
- presence of a case of bringing officials to the administrative responsibility for violations in the field of medicines quality control over the last three years.
Depending on these criteria, business entities belong to one of three levels of risk – high, medium or insignificant. In this area referring to the corresponding sphere is carried out taking into account the sum of points calculated according to all criteria. If the activity of the subject is recognized with a high risk, then the planned inspection of the State Service for Medicinal Products and Drug Control may visit him/her no more than once every two years. With an average risk – no more than once every three years, with insignificant – no more than once every five years.
Let’s say the most points have the following activities, such as industrial production of drugs, their import or wholesale trade. Two points will be added by a stay in a simplified system, while the overall tax system is rated zero. Also, zero points will be those business entities that can boast a certificate of compliance with the conditions of production or distribution. The absence of facts of violations or fines of officials during the last three years will definitely postpone a planned inspection. But the presence of a critical or significant violation of the license requirements, as well as a decision to ban the circulation of medicines produced or imported by the relevant subject will add points.
Prior to the occurrence of this act, high-risk entities were automatically considered by all those involved in the manufacture of medicinal products, their wholesale and retail trade (the Cabinet of Ministers Resolution of 10.09.2008, No. 843). Therefore, pharmaceutical companies and pharmacies were to undergo scheduled inspections of the State Service for Medicinal Products and Drug Control no more than once a year. Controllers regularly visited were pharmaceutical giants as well as individual pharmacies. And even honest compliance with the requirements of the law did not save from annual inspections. At the moment, the scope of activity and the absence of violations are put forward.
Financial Market
National Bank of Ukraine has prepared instructions for its clients relating to introduction of International Bank Account Number – IBAN, which contains 29 alphanumeric characters, as of August 5, 2019. Starting November 1, 2019, the application of IBAN will be compulsory for the clients of all banks throughout Ukraine when transferring both national and international currency funds, including cross-border transfers. That means that from November 1, 2019 all transfers will be possible only applying IBAN.
Due to this a regulator recommends the banks to bring this document information to the attention of their clients.
Thus, the banks’ clients:
- starting August 5, 2019 will be able to receive information from the bank on change of the current account in accordance to IBAN standard to notify their business partners and indicate this information in payment documents.
At the same time the change of current account due to IBAN standard entails no amendments to the provisions of the agreement (bank account/payment and cash management/bank deposit agreements, etc.)
- starting August 5, 2019 till October 31, 2019 the information on “Bank Code” and “Account” may be filled out in fund transfer documents, any variation possible.
In fund transfer documents when filling out ordering customer/beneficiary information the clients may indicate ordering customer/beneficiary account number and bank code or only ordering customer/beneficiary account number in accordance with IBAN standard. I case ordering customer/beneficiary account number is filled out in accordance with IBAN standard the place for “Ordering customer/beneficiary bank code” should be filled with zero;
- as of November 1, 2019, “Account” information of payment document must indicate ordering customer/beneficiary account number only in accordance with IBAN standard.
At the same tine Ukrainian banks will:
- starting August 5, 2019:
- open accounts (current, deposit), escrow accounts according to IBAN standard requirements;
- provide formation of client’s bank statement since its opening and opening balance sum according to current account till its change in conformity with IBAN standards (“account history”) including subsequent approval of transactions on any date after change of client’s current account to IBAN account;
- implement documents on seizure of cash/mandatory debit/collection of financial means regardless of account number, indicated in those documents (current account prior to its change under IBAN standard/IBAN standard);
- from August 5, 2019 to October 31, 2019:
- accept for implementation funds transfer documents/credit funds to the account of the beneficiary using information filled out be the ordering customer;
- inform the regulatory bodies on change of clients-economic entities current accounts in accordance with IBAN standard;
- submit (without clients’ applications) list of accounts in accordance with IBAN standard to the Pension fund of Ukraine bodies/social security bodies.
Labor and Salaries
The State Service of Ukraine on Labor explained how to calculate the compensation for unused days of annual leave in the case of dismissal when a maternity leave based on a salary or UAH 4 173, how such compensation should be taken into account when determining the additional payment to the minimum wage.
In order to calculate the amount of compensation for unused vacation, it is necessary to act in accordance with the Procedure for Calculating the Average Salary, approved by the Resolution of the Cabinet of Ministers of Ukraine of 08.02.1995, No. 100.
The periods of work included in the length of service for the provision of annual leave are indicated in Art. 9 of the Law of Ukraine “On Leaves” of 15.11.1996, No. 504/96-ВР.
The period of a maternity leave is not taken into account for the length of service, which gives the right to annual basic leave.
The calculation of the average wage for the payment of compensation for unused vacation is carried out in accordance with sub-para. 1 of para.2 of Procedure No.100 on the basis of payments for the last 12 months preceding the month of payment of compensation. At the same time, it is excluded from the accounting period, holidays and non-working days, as well as periods during which the employee did not work and his/her earnings to be not saved or was partially saved (sub-para. 6 of para.2 of Procedure No. 100). In particular, on this basis, it is excluded from the calculation period, maternity leave (according to medical indications – up to six, and in some cases provided for by law – up to 16 (18) years).
If for the entire account period there is a maternity leave for up to three years, there is no data on the salary calculated in the calculation period, then the average daily salary is calculated on the basis of the official (monthly) salary (tariff rate) established at the time of its calculation (sub-para. 3 of para. 4 of Procedure No. 100). In this case, without taking into account various surcharges, allowances, bonuses, etc. (the letter of the Ministry of Social Policy of 08.04.2016 No. 383/13/84-16).
That is, there is no reason to use the minimum wage for calculating the average wage (from January 1, 2019, it amounts to UAH 4 173). The amount of compensation for unused vacation is not the salary paid by the employer to the worker for the work performed by him/her. Consequently, the amount of compensation for unused vacation days is not taken into account as a salary for comparison with the minimum wage.
This means that the amount of compensation for unused vacation should not be “reached” to the level of minimum wage, if it is accrued in a smaller amount.
Summary of Court Rulings
The Supreme Court of Ukraine in its judgment of May 24, 2019 on the case No. 816/4537/14/ held that tax payer, when choosing partners for agreement conclusion, must be careful as further implementation of such agreements, receipt of income and right to have certain preferences, in particular the formation of tax credit from value-added tax (hereinafter – VAT), depend on it.
The absence of real nature of respective transactions may be evident due to existence of such circumstances: impossibility to conduct specified transactions by a tax payer considering time, location of property or material resource level, economically vital for goods production, work and service delivery, failure to fulfill entrepreneurial activities by a person indicated as manufacturer, absence of conditions a ta[ payer needs to achieve results of respective entrepreneurial, economic activity due to absence of administrative or technical staff, fixed assets, business assets, storage facilities, vehicles, conduct of transactions in goods and materials, which have not been manufactured or could not be manufactured in amount specified by the tax payer in the accounting documents.
Thus, confirming conduct of business transactions an entity must have respective original documents which must be in proper form, contain all necessary information, be signed by authorized persons and, together with the established circumstances of the case, in particular concerning possibility of entities to conduct appropriate transactions considering time, location of property or material and human resources level, economically vital to meet the requirements of the agreement specified by the agreements, must attest real conduct of business transaction that constitutes grounds for preparation of tax accounting by the payer.
