Legislative Review

Legislation overview (April 2019)

Taxes

VAT

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the procedure for VAT taxation of transactions for the supply of capital repairs for housing (housing facilities) and the subsequent supply of such housing” of 05.04.2019, No.1483/6/99-99-15-03-02-15/ІПК considered that situation. The payer of value added tax (hereinafter VAT) carries out major repairs of the dwelling (housing facilities) by the contractor organization. Is the transaction for the supply of capital repairs to a subcontracting organization be considered the first supply of housing for purposes of VAT registration?

For the purposes of VAT taxation, transaction for selling property rights to real estate for a seller is a transaction for the supply of real estate. According to paras. 197.1.14 of the Tax Code of Ukraine (hereinafter TCU) exempt from VAT the supply of housing (housing facilities) transactions, except for its first supply, unless otherwise provided by this sub-para.

The first supply of housing (housing facilities) means:

  • the first transfer of ready-made newly built dwelling (object of housing facilities) to the buyer’s property or delivery of services (including the cost of purchased materials at the expense of the artist) for the construction of such housing at the expense of the customer;
  • the first sale of a reconstructed or majorly renovated dwelling (housing facilities) to a buyer who is a person other than the owner of such an object at the time of its decommissioning (use) in connection with such a reconstruction or overhaul, or the supply of services (including the cost of purchased materials at the expense of the artist) for such reconstruction or overhaul at the expense of the customer.

Consequently, if the customer (housing owner) carries out major repairs of the dwelling (housing facilities) by the contractor’s organization, the operation of such a contracting organization (service provider) for the provision of capital repair services (housing stock) is the first supply of housing according to paras. 197.1.14 TCU.

Such a transaction is the subject to VAT and is subject to this tax at a rate of 20%.

Transactions for the sale of capital-repaired dwelling (housing facilities) to customers are exempt from VAT in accordance with paras. 197.1.14 of TCU.

PIT and War Tax

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the performance of the functions of a tax agent by the representation of a Ukrainian company located in the territory of another state, if the employees are foreign citizens” of 21.03.2019, No. 1138/10/26-15-13-06-12-ІПК described in detail the performance of the functions of the tax agent by the representation of a Ukrainian company located in the territory of another state, if the employees are foreign citizens.

Consequently, wages and other similar remuneration derived by a resident of a Contracting State in connection with an employment contract should be taxable only in that State if the employment is not carried out in the other contracting state. If the employment is carried out in this way, the remuneration received in this regard may be taxed in that other State.

Thus, the remuneration received by a resident of a Contracting State in respect of an employment exercised in the other Contracting State should be taxable only in the first-mentioned State if:

  • the recipient is in another state during a period or periods not exceeding in the aggregate 183 days during the relevant tax year;
  • the remuneration is paid by the employer or on behalf of the employer who is not a resident of another state;
  • the remuneration is not incurred by the permanent establishment or the fixed base that the employer has in another state.

Thus, if employees of a foreign representative office of a non-resident Ukrainian company receive a salary with a source of origin outside of Ukraine, then the legal entity does not act as a tax agent for them, does not withhold such income from the income tax and the war tax and, accordingly, does not reflect such income in the calculation on the form No. 1 DF.

Simplified Tax System

The State Fiscal Service of Ukraine in its Individual Tax Advice “On Practical Application of the Legislation on the Determination of the Income of a Payer of the Unified Tax of the Third Group” of 22.03.2019, No. 1170/6/99-99-13-02-03-15/ІПК, reports that the income of an individual entrepreneur is not included, in particular, the amount of money (advance, prepayment) returned to the buyer of the goods (works, services) – to the payer of the unified tax and/or returned by the payer of the unified tax to the buyer of the goods (works, services), if such a return is due to return of goods, break of contract or letter of application for a refund.

To determine the amount of income that gives the entity the right to register as the unified tax payer and/or to be in the simplified taxation system in the next tax (reporting) period, it is not included the income received as compensation by a court decision for any previous (reporting) periods.

Consequently, the money returned to the buyer of the goods (works, services) – to the payer of the single tax and/or returned by the payer of the single tax to the buyer of the goods (works, services), if such a return is due to return of the goods, termination of the contract or a letter of application for the return of funds, is not included to the income of individual – entrepreneur – the unified tax payer.

Other Taxes and Fees

The State Fiscal Service of Ukraine in its Individual Tax Advice “On the Basis for Collecting a Tourist Duty” of 17.04. 2019, No. 1654/6/99-99-12-02-03-15/ІПК considered the following situation. The hotel’s clients go to the hotel early and leave late. The question arises: how to collect a tourist tax in this case?

According to the Rules for the use of hotels and similar facilities for accommodation and provision of hotel services, approved by the order of the State Tourism Administration of Ukraine dated March 16, 2004, No. 19, the fee for the provision of hotel services is made on a single settlement hour – at 12:00 p.m. of the current day local time.

Thus, the countdown of the period of residence begins at 12:00 p. m. on the day of arrival (arrival) and lasts 24 hours before the settlement time set by the hotel.

If clients arrive by 12:00 p.m. on the day of arrival and depart after 12:00 p. m. on the day of departure, for the purpose of taxation, two days should be added to the number of residence days: one for exceeding the settlement hour during the check-in and departure from the place of residence.

Accounting and Reporting

The State Fiscal Service of Ukraine approved new State Register of cash registers. New State Register of cash registers includes 8 newest models of software/software and hardware complexes intended for registration of settlement transactions that participate in the pilot project.

It is these models that will be used by users-participants of the pilot project on the introduction of innovative technological solutions for registration of settlement transactions in the field of trade (including Internet commerce), catering, foreign currency purchase and sale, trade through automated sales of goods (services), provision of cash withdrawal services for further transfer, passenger transportation, etc.

List of the newest models of software and/or software and hardware complexes intended for registration of settlement transactions that participate in the pilot project, approved by the Ministry of Finance Order No. 121 dated March 26, 2019.

This list includes the latest models of seven domestic companies – participants in the pilot project and the system “E-Receipt”, developed by the State Fiscal Service of Ukraine (hereinafter – SFSU).

The basis of the system “E-Receipt” is the principle of mandatory online fiscal checks on the server of SFSU. This system is an alternative to traditional cash registers, as it can be used for registration of settlement transactions, is free for users.

The functional components of E-Receipt system allow the business entity-seller, using personal computers, tablets, smartphones, to register settlement transactions and transmit reporting information (checks, z-reports) to the SFSU, to the buyer – to view the information on the checks in electronic cabinet.

It integrates with other SFSU systems and accounting software of user.

The latest models included in the State Register of cash register are offered for use in the test mode for all business entities who have expressed interest in participating in the pilot project.

The project will continue until December 31, 2019. According to its results, the Ministry of Finance will decide on the latest models that will not be exempted from registration and, accordingly, will be recommended for industrial exploitation.

Control and Responsibility

The Verkhovna Rada of Ukraine approved the Law of Ukraine “On ensuring the functioning of the Ukrainian language as a state language”.

According to the law, Ukrainian language should be spoken in public space, in the state and municipal sectors, in transport, in catering establishments. Also, the state language should be the signatures and markings on the goods, as well as the description of services.

Ukrainian language must be used in the medical sphere, in the field of education, during theatrical performances, and also the films dubbing. The language of television, the Internet and print media is Ukrainian. The law also provides that more than 50% of titles of print media should be in the state language, and the Ukrainian version of the site should be downloaded automatically. In addition, it should be in terms of volume not less than foreign language.

Such requirements do not apply to private life and religious ceremonies.

It is provided not only the responsibility to the special commissioner for non-compliance with the law, but also the general administrative authority. However, the system of penalties and fines will take effect only in three years.

Fines for violating the language law:

  • in clerical work and law enforcement officers – from UAH 3 400 to 6 800;
  • in the field of culture, education, advertising – from UAH 3 400 to 6 800;
  • in print media – from UAH 6 800 to 8 500;
  • in the areas of public communication – from UAH 3 400 to 5 100;
  • on television or radio – from UAH 8 500 to 10 200;
  • in the provision of information in the service sector – from UAH 5 100 to 6 800;
  • for failure to comply with the legal requirements of the language inspector – from UAH 1 700 to 3 400;
  • for public humiliation or lack of respect of the official language – UAH 850

In other cases, a fine of UAH 3 400 to 5 100 is provided. However, if the violation occurred for the first time, it could be only the warning. If someone breaks the law for a second time in a year, then the fine will amount to UAH 8 500 – 11 900.

Financial Market

The National Bank of Ukraine with the purpose of urgent response to existing and potential threats to national interests, national security and territorial integrity of Ukraine by the Resolution “On Amendments to the Resolution of the Board of the National Bank of Ukraine dated October 1, 2015 No. 654” of 28.03.2019 No. 53 improved the mechanism implementation of sanctions. In particular, control over non-bank financial institutions and postal operators was introduced through submission of information to the National Bank on the following:

refusal to carry out the currency exchange transactions to persons specified in the sanctions lists, which are subject to “blocking of assets” and/or “suspension of financial transactions”;

refusal to carry out the transfer of funds without opening accounts on behalf of/in favor of persons specified in the sanction lists.

The Resolution came into force on March 30, 2019.

Labor and Salaries

The State Labor Service of Ukraine on its website reported that the labor relationship between the employer and the employee engaged in seasonal work is regulated by Art. 7 of the Code of Labor Law of Ukraine “Peculiarities of regulation of labor of certain categories of workers”, as well as the decree of the Presidium of the Verkhovna Rada of the USSR “On the working conditions of workers and employees engaged in seasonal works” of 24.09.1974, No. 310-IX in the part that is not contradicts the Constitution of Ukraine and the legislation of Ukraine.

According to this document, seasonal work is considered to be work that due to natural and climatic conditions can be fulfilled only during a certain period (season), but not more than six months.

A seasonal employment contract is a kind of fixed-term employment contract.

Seasonal work is considered to be included in the List of Seasonal Work and Seasonal Industries, approved by the Cabinet of Ministers of Ukraine dated 28.03.1997, No. 278, and their duration does not exceed six months.

Consequently, during the acceptance of seasonal work, an employment contract with an employee can be concluded for a term not exceeding the length of the season, that is, six months.

For the conclusion of a seasonal employment contract, the employer is obliged to warn the employee about the seasonal nature of the work, which is reflected in the order (appointment) of the recruitment, which states that this employee is taken precisely for seasonal work.

The employee must know: in the case of a seasonal contract, no probation period is established.

Employees engaged in seasonal works, after their completion, dismiss for a reason provided for in para. 2 of Art. 36 of the Code of Labor Law “Grounds for termination of an employment contract”, – expiration of the term. The day of dismissal is the last day of the seasonal work.

If, after the end of the seasonal work, the employee continues to work or if the duration of such work exceeds six months, an employment contract with him/her will be considered to be concluded for an indefinite period.

It is important to know: seasonal workers in the presence of conditions specified in Art. 39 of the Code of Labor Law “Termination of a fixed-term employment contract on the initiative of an employee”, have the right to terminate an employment contract on their own initiative ahead of schedule. At the same time, they must notify the employer in writing about their dismissing within three days.

Employer on his own initiative has the right to dismiss an employee engaged in seasonal work, before the expiration of the term of an employment contract in the event of:

  • termination of works in the company for a period of more than two weeks due to the nature of production or reduction of work;
  • due to absence of an employee at work for more than one month as a result of temporary disability.

The Other Things

The Cabinet of Ministers of Ukraine informed about the updated format of the Government program “Available Medicines”. In addition, the Government recalled that in the framework of the transformation of the healthcare sector in April 2017 a new principle for the provision of patients with medicines – the Governmental program “Available Medicines” was introduced. The Ministry of Health of Ukraine chose three areas of diseases, the treatment of which is a priority in the country and which is well treated on an ambulatory basis and developed and introduced a reimbursement model for them. Because of this, patients with chronic cardiovascular disease, type 2 diabetes and bronchial asthma receive effective prescription medicines free of charge or with small additional charge and are treated with constant medical attendance.

According to the Ministry of Health, during this time, patients with the specified list of diseases received medications for 35 million recipes in the amount of more than UAH 1.8 billion.

On February 1, 2019, the Ministry of Health approved an updated version of the medicine register of program “Available Medicines”.

The updated medicine register includes 258 medicines, 64 of which can be received by the patients free of charge, others with a small additional charge. The cheapest drug, 100% reimbursed by the state, costs UAH 4.76, the most expensive – UAH 898.22.

In addition, from April 1, 2019, the government program of reimbursement “Available medicines” goes into the administration of the National Health Service of Ukraine (NHSU). This will allow patients to receive medication in any drugstore in Ukraine that has an NHSU contract, regardless of where the recipe was issued. Therefore, the program will become more accessible to patients.

One more innovation, from April, medicines available under the program “Available medicines” can be obtained only by an electronic recipe issued by family doctors, physicians and pediatricians through the electronic health system. An electronic recipe can be issued only by the doctor with whom the patient signed a declaration. If a citizen does not choose his/her doctor, the declaration can be signed during the upcoming visit to the hospital and immediately receive an electronic recipe for the “Available Medicines” program.

According to the instruction of the Cabinet of Ministers of Ukraine, the State Service of Ukraine for Food Safety and Consumer Protection continues to monitor the application of state regulated prices for medicinal products within the framework of the Government program “Available medicines”.

During the first quarter of 2019, employees of the units of control over regulated prices of the main departments of the State Service of Ukraine for Food Safety and Consumer Protection in regions and in Kyiv processed information from 3 700 pharmacy establishments, analyzed over 724 thousand prices of medicines for compliance with the requirements of legislation in the area of pricing.

During a thorough analysis of information obtained from pharmacy establishments, the correct application by business entities of marginal wholesale prices, as well as marginal wholesale and retail allowances for medicines prices, the cost of which is subject to reimbursement from the budget, is controlled.

According to the results of the analysis, in case of detection of cases of overstatement by economic entities of the marginal wholesale and retail allowances, recommendations for elimination of violations are provided.

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